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Explained: All about mistakes in return filing and responding to income tax notices

Usually, a taxpayer gets 30 days to respond to the notices issued by the income tax authorities

November 24, 2021 / 03:02 PM IST

Adequate care is needed while filing our income tax returns so as to avoid major hassles in the form of notices and penalties.

Some common mistakes often committed by taxpayers include filing returns using wrong forms, not reporting details of all bank accounts, incorrect declaring of sources of income, and failure to e-verify returns. You don’t need to be a tax expert to avoid such minor errors.

Minor errors, major hassles

Despite the return-filing exercise being an annual process, many tax-payers repeat certain mistakes every year. Not reporting exempt income – such as house rent allowance and leave travel allowance – is one of these. “Not verifying income tax returns filed or inadvertently forgetting to do so is another error. Likewise, not resolving the mismatch between Form 26AS and Form-16 in income and tax deductions,” says Sandeep Sehgal, Director-Tax and Regulatory, AKM Global.

Not tallying the two forms could land you in a soup. “In case the interest/dividends as reported in the 26AS are missed, then the tax office issues a notice throwing up an error. This may result in additional taxes and interest for the individual. Hence a review of 26AS and form 16 is essential,” explains Aarti Raote, Partner, Deloitte India.


Also read: Filing your income tax returns in the new portal? Here’s a simple step-by-step-guide

Dealing with income tax notices

In case of discrepancies in income tax returns filed by the taxpayer, tax notices will be sent to your registered e-mail ID. Alternatively, you can also access it through the official income tax return e-filing portal. “The ‘Pending Action’ section will display all the pending notices requiring action from the taxpayer,” says Sehgal.

At times, things could take a more serious turn. You might get a notice for an audit under section 143(2) or an audit under section 148. “The notices in such cases would identify the reasons for picking the case for audit and the request for information from the individual,” she explains.

Usually, a taxpayer gets 30 days to respond to the notices issued by the tax authorities. “You must reply to the intimations within 30 days from the date of receipt. However, the last date for a reply of notice is expressly mentioned in the notice as well,” adds Sehgal. If you need more time to collate the information, then you will have to file a request for adjournment.

Unlike earlier, you need not to respond to the notice by submitting documents with details, explanations and documents in support of your claims in the tax return to the tax office. “Most officers now accept an online response. Further, if the intimation/ notice has been issued by the Central Processing Centre (CPC), then the responses can be submitted online on the portal,” says Raote.

Never ignore income tax notices

In case you fail to respond to a notice for an audit, the officer will most likely resend the notice. “However, despite the reminders, if the individual does not respond to the notice, then the officer does have a right to complete the assessment suo-moto on the best judgement basis,” says Raote. In fact, the officer is also entitled to draw inferences from the details at hand. You could end up attracting penal action for not responding to the tax notice in time. “She shall be liable to pay by way of penalty, a sum of Rs 10,000, accordingly for each such failure. However, if such failure is made with show-cause notice, then it will be deemed that the taxpayer has nothing to say and an order shall be passed for the assessment by the officer,” adds Sehgal.

If the intimation issued under section 143 (1) contains a demand for additional tax payment, any delay on your part could result in the intimation being converted into a ‘notice of demand’ under section 156. “Accordingly, the taxpayer will have to pay the entire amount within the time mentioned in the notice. If the person to whom the section 156 tax notice for demand has been issued fails to pay the amount demanded within the time limit, then the taxpayer is liable for the prescribed penalties,” says Sehgal. That is, interest on the tax payable. So, you might have to shell out interest at the rate of 1 percent each month or part thereof after the expiry of the 30 days’ time provided in the tax notice. Besides, a penalty under section 221 may be imposed by the assessing officer on the taxpayer; however, it cannot be more than the amount demanded in the Demand Notice.

The only way to avoid these mistakes and also the unnecessary hassle of responding to tax notices and paying penalties is to be cautious and alert while filing your income tax returns. A better-safe-than-sorry approach is your best bet.
Ashwini Kumar Sharma
first published: Nov 24, 2021 10:43 am

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