Income tax notice u/s 143(1)(a)

Many salaried individuals’ like me make mistakes like omission, some end up entering wrong numbers while filing their IT returns. This leads to a receipt of income tax notice u/s 143 (1) by taxpayers. Such a notice is just intimation & not a tax demand & hence does not necessarily mean tax avoidance/fraud. Here is what you need to understand before moving ahead while dealing with the situation.

Notice or intimation u/s 143(1) is a computer generated record. The income tax department validates each tax return with its own record and this notice usually only point out apparent mistakes found out by the system. Further, section 143(1)(a) of Income Tax Act empowers tax authority to issue notice for demand based on the difference between tax payable and tax actually paid. You may have wrongly shown higher income but paid tax on actual income, leading to mismatch.

Taxpayer information is available with the tax authorities by way of Form 26AS, annual information report from banks and other financial institutions, etc. While filing the tax returns, many taxpayers often miss out reconciling such information available with the tax authorities with the information reported by them in the tax returns, which can lead to adjustments on the tax returns.

If there is an arithmetical error in the return or certain TDS has been disallowed to be claimed or something has been claimed which is not as per limits allowed or the taxpayer may not have disclosed certain income which is appearing in the statement of TDS like Form 26AS or Form 16 it may result in a notice or intimation u/s 143(1).  For example I forgot to mention the non-taxable part of my salary which includes, transport allowance, medical reimbursement & thus a taxable income mismatch occurred with my Form 16.

As per sec 143(1), the taxpayer has to respond to such adjustments within 30 days. If the taxpayer does not respond within such time limit, the tax department will process the tax return based on the proposed adjustments.

In case the taxpayer is able to identify the mistakes made while filing the return from the 143(1) intimation, and they can be rectified by filing a revised return, it needs to be done by logging into Income Tax department E-Filing website.

Step 1: Login to your account on the Income Tax department E-Filing website.

Step 2: Click on the E-Proceedings tab and select E-Assessment/Proceedings.

Step 3: Select Prima Facie adjustment u/s 143(1)(a)

However, if no mistakes have been made and the taxpayer does not agree with the adjustments made by CPC/computerized system, he can file an online rectification application u/s 154(1) intimating the correction of mistake appearing in the sec 143(1) intimation. In case the taxpayer is not satisfied with processing of his rectification return by CPC, he can also file online grievances or contact his assessing officer. In case of no satisfactory action from CPC/assessing officer, he can file complaint to income tax ombudsman.

However, if taxpayer agrees to the tax demand raised by income tax department after carrying out adjustments as above, taxpayer is required to pay such taxes. While paying tax on demand raised under this section, choose ‘Tax on regular assessment (400)’ under type of payment in the challan.

As the online tax return utility prepared by the tax department on an annual basis generally has new cross-checked features which seek to avoid input errors by taxpayers, we can expect less intimation under this provision going ahead.

Do you have to file income tax returns?

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Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 10 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata. He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’

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