There are many reasons for one to get a notice from the Income Tax department. Not filing income tax returns or not filing it on time is a primary one.
There are many reasons for one to get a notice from the Income Tax department.
There are many reasons for one to get a notice from the Income Tax department. Not filing income tax returns or not filing it on time is a primary one.
The Income Tax Department under the Central Board of Direct Taxes has extended the deadline for filing of Income Tax Return (ITR) by one month from July 31 to August 31, 2019. CBDT functions under the Department of Revenue of the Finance Ministry. The decision was taken amidst talks of delayed issuance of Form 16, which is generally handed out by employers in the second week of June. This year most of the employers distributed Form 16 in second or third week of July. Filing of ITR is an important exercise. But many taxpayers end up getting notices from the Income Tax Department for a number of reasons.
Archit Gupta, Founder and CEO, ClearTax, says reasons for getting income tax notice include not filing income tax returns, misreporting of income sources, claiming excessive losses or mismatch in TDS claim. Following pointers explain as to why a taxpayer may get income tax notice.
It is mandatory for the taxpayer to file the ITR as per the Section 139. The Income Tax Department may issue notice under Section 142 (1) of the Income Tax Act, 1961 in case he or she fails to do so before the due date or before the end of the assessment year, according to Rahul Singh, Assistant Manager, Taxmann.com. A taxpayer should keep in mind that for 2018-19 financial year, the assessment year will be 2019-20. If you do not file your tax returns within the due date i.e. August 31, 2019, a late fee up to Rs 5,000 will be levied on you under section 234F. “The late fee will be restricted to Rs 1,000 in case your taxable income does not exceed Rs 5 lakh in the FY 2018-19.” Gupta said.
In case the details mentioned in Form 26AS doesn’t match with the details furnished in the ITR, a notice for mismatch in details — either income or TDS — may be issued under section 143 (1). Form 26AS contains details of TDS and income on which TDS has been deducted. “If a taxpayer doesn’t mention such income in the ITR which is reported in Form 26AS or mentions lesser amount, the department may ask you to furnish reasons for this,” Singh added. Further in case of any mismatch in TDS claimed in ITR, notice may be issued under this section.
Notice for defective return is issued under Section 139 (9) of the Income Tax Act, 1961. “A tax return is termed defective if it has not been filed with all the necessary information or documents as required under the law. For example, suppose a taxpayer is required to furnish ITR Form-2 but he furnishes ITR Form-1. In this case, department will issue notice of defective return asking the taxpayer to rectify the defect within 15 days,” Singh said.
Statement of Financial Transaction (SFT) is a return to be furnished by specified persons wherein specified financial transactions shall be reported to the Income Tax Department. A few of financial transactions to be reported are:
1. Cash deposits in one or more current accounts of a person if aggregate amount is Rs 50 lakh or more in a financial year.
2. Cash payment in aggregate amount of Rs 10 lakh or more for purchase of bank drafts or pay orders or banker’s cheque.
Singh added, “If the taxpayer has entered into any of the specified financial transaction but didn’t file the ITR then Income Tax Department can issue notice asking for reason for non-furnishing of ITR. The notice may be issued even if a taxpayer filed ITR asking you to furnish the source of funds for entering into such financial transaction.”
Scrutiny Assessment is a thorough examination of the ITR filed by the assessee. It is done to ensure that the assessee has not understated the income or under-paid the tax. The Assessing Officer may issue notice under section 143 (2) requiring a taxpayer to provide all the relevant details which is necessary for processing of ITR.
It must be noted that scrutiny notice under section 143 (2) can be issued only if the ITR is filed.