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1. Tax Notices and Tax Assessment presented by : Abhay, Ayush, Tekeshwar

2. What is a "Notice"? Meaning: A formal letter or communication from the Income Tax Department asking for information, clarification, or action from you, the taxpayer. It is NOT: A fine or a penalty (initially). It is a request for dialogue. Official Name: Often called a "Notice u/s 139A" or "Notice u/s 143(2)", etc. The number refers to a section of the Income Tax Act, 1961.

3. Why Do You Get a Notice? (Common Reasons) You didn't file your Income Tax Return (ITR) when you should have. Mismatch in TDS: The TDS claimed by you doesn't match the TDS uploaded by your employer/bank. High-Value Transactions: You made a big transaction (buying property, large bank deposits) but it's not reflected in your ITR. Random Scrutiny: Your return was selected randomly for a detailed check. Incomplete Information: The officer needs more documents to support your claims (e.g., for deductions under 80C).

4. How to Check for Notices - Don't Wait for the Post! Always check online. A physical letter might get lost or delayed. Steps: Log in to the Income Tax e-Filing Portal: https://www.incometax.gov.in/iec/foportal/ Go to 'My Account' -> 'e-Proceeding' Click on 'View Notices'. You will see all notices sent to you. You can download the PDF. Important: Ensure your email ID and mobile number are updated on the portal to receive alerts.

5. Type 1: Intimation u/s 143(1) What it is: An automated message after your return is processed. It's not a scrutiny notice. Why you get it: The department's system found a small mathematical error or a mismatch in TDS. Example: You calculated tax of ₹45,200, but the system calculates it as ₹45,500. The intimation will show the difference of ₹300 as payable. Action: If you agree, pay the demand. If you disagree, you can file a response.

6. Type 2: Notice u/s 139(9) - Defective Return What it is: Your filed return is incomplete or has mistakes. Why you get it: Missing information, no digital signature, forgetting to attach a required form. Action: You must correct the defect and re-submit the return within the given time (usually 15 days).

7. Type 3: Notice u/s 143(2) - Scrutiny Notice What it is: This is a serious notice. Your return has been selected for a detailed review by a tax officer. Time Limit: Must be served within 3 months from the end of the financial year in which you filed the return. Action: You will need to submit supporting documents (bills, bank statements, proof of investment) to justify your income and deductions.

8. Type 4: Notice u/s 148 - Income Escaping Assessment What it is: The department believes you have earned income that you did not report in your original return. This is a very important notice. It often follows an investigation into high-value transactions. Action: You must file a fresh return declaring the previously missed income. It's highly advisable to take a CA's help here.

9. Type 5: Notice u/s 245 - Adjusting Refund Against Demand What it is: The department has an old outstanding tax demand from you. Now, you are due a refund. Action: The department will send this notice to inform you that they will adjust (subtract) the old demand from your new refund. Example: You have an old demand of ₹10,000. You are due a refund of ₹15,000. After adjustment, you will receive only ₹5,000.

10. Example 1 - The TDS Mismatch Situation: Raj, a salaried employee, filed his ITR showing TDS of ₹55,000 deducted by his company. His company, however, filed the TDS return late and only reported ₹50,000. Notice Received: Intimation u/s 143(1) showing a demand of tax on ₹5,000. Solution: Raj contacted his company's accounts department. The company filed a revised TDS return. Once processed, the demand was automatically dropped.

11. Example 2 - The High-Value Transaction Situation: Pushpa sold a piece of jewelry for ₹8 lakhs and deposited the cash in her bank. She did not mention this in her ITR as she thought it was tax-free. Notice Received: Notice u/s 148 for income escaping assessment. The Non-Filers Monitoring System (NMS) flagged the large cash deposit. Solution: With a CA's help, Pushpa calculated the capital gains on the sale, filed a revised return, and paid the due tax and interest.

12. Steps to Respond to a Notice Don't Panic. Read Carefully: Understand the section and the reason. Check the Deadline: Note the last date to respond. Gather Documents: Collect all relevant papers (Form 16, bank statements, investment proofs). Draft a Reply: Prepare a point-by-point response with attachments. Seek Professional Help: If the notice is complex (e.g., u/s 143(2) or 148), CONSULT A CHARTERED ACCOUNTANT. Submit on Time: Upload your response on the e-filing portal under 'e-Proceeding'.

13. Format of Tax notice

14. What is Assessment? Definition: The official process where the Income Tax Department examines your filed return to determine if you have paid the correct amount of tax. The Goal: To ensure the income you declared and the tax you computed are accurate, based on the laws. It's Like: A teacher grading your exam paper. You provide the answers (your ITR), and they check for mistakes.

15. Self-Assessment (u/s 140A) What it is: This is the assessment you do yourself when you calculate your own tax liability and pay any balance tax before filing your return. Why it's important: It's the first and most crucial step. The entire process is built on the numbers you declare. Example: You calculate your total income, apply deductions, compute your tax, subtract the TDS already paid, and pay the remaining ₹5,000 before submitting your ITR. This is self-assessment.

16. Type 1: Summary Assessment (u/s 143(1)) What it is: An automated, preliminary check done by the Central Processing Centre (CPC) computer. How it works: The system cross-verifies the data in your return with the data it has from banks, employers, etc. (like TDS, SFT). Outcome: It results in an Intimation (not a notice). It either says: No demand, no refund: Everything matches. Refund determined: You paid extra tax. Demand determined: You paid less tax. Example: As shown before, a TDS mismatch leads to a demand intimation.

17. Type 2: Scrutiny Assessment (u/s 143(3)) What it is: A detailed examination of your return by a human tax officer. Why it happens: Your return is selected based on risk parameters, randomness, or specific information. The Process: You receive a Notice u/s 143(2) informing you of the scrutiny. You submit documents, books of account, and proofs to the officer. The officer conducts hearings, asks questions. A final Assessment Order u/s 143(3) is passed, stating the final tax payable or refund due. Example: An officer questions high business expenses. You provide all invoices and bank statements to prove they were for legitimate business purposes. .

18. Type 3: Best Judgment Assessment (u/s 144) What it is: An assessment done by the officer without your full cooperation. When it happens: You don't respond to notices. You fail to produce required documents. You don't file a return despite notices. The Problem: The officer will make assumptions that are often unfavorable to you to determine the tax. Example: You ignore a scrutiny notice. The officer can disallow all your deductions and add back your expenses to your income, resulting in a massive tax bill.

19. Type 4: Income Escaping Assessment (u/s 147) What it is: Re-opening a case where the officer has reasons to believe that income has escaped assessment for a past year. Prerequisite: The department must have a tangible reason, not just a suspicion. The Process: It starts with a Notice u/s 148, asking you to file a return for that year again. Example: In 2024, the department gets information that you sold a property in 2019 but did not file a return or report the capital gains. They can re-open the assessment for the Financial Year 2018-19 (AY 2019-20).

20. Type 5: Protective Assessment What it is: An assessment made as a precautionary measure, usually in cases where income is claimed by more than one person, and it's unclear who is the real taxpayer. Purpose: To protect the revenue interests of the government. Example: A cash loan is given by a father but shown in the books of the son. The department may make a protective assessment on both until the true nature is determined, to ensure someone pays the tax.

21. Scrutiny Assessment Example Situation: Mr. Kapoor runs a small business. He filed his ITR showing an income of ₹15 lakhs. Notice Received: u/s 143(2) for scrutiny assessment. The risk parameter was "high business profits compared to industry standards." Officer's Query: Asked for proof of large purchases and sales, bank statements, and stock records. Action: Mr. Kapoor, with his CA, provided all invoices, delivery challans, and full bank statements. Outcome: The officer found everything in order and passed an order u/s 143(3) accepting the originally declared income of ₹15 lakhs.

22. How to Prepare for a Scrutiny Assessment Don't Panic : It's a review, not an accusation. Understand the Query : Read the notice carefully to know what the officer wants. Organize Documents : Gather all requested proofs (invoices, receipts, bank statements, contracts). Seek Expert Help : Engage a CA. They know how to present your case professionally. Be Timely and Truthful : Submit responses before the deadline and never submit fake documents.

23. What Happens After the Assessment Order? If you AGREE: Pay the demand, if any. If you DISAGREE: You can appeal to the higher authorities: First Appeal: Commissioner of Income-Tax (Appeals) [CIT(A)] Second Appeal: Income Tax Appellate Tribunal (ITAT) Further Appeals: High Court -> Supreme Court

24. Difference Between Tax Notice and Tax Assessment

25. Tax Notices & Assessment (Amount Wise) 1. Small mismatch (any value) → Notice 143(1) – Summary Assessment 2. Defective return (any value) → Notice 139(9) 3. Cash deposit in Savings A/c > ₹10L → Notice 143(2) – Scrutiny 4. Cash in Current A/c > ₹50L → Notice 143(2) / 148 – Scrutiny / Reassessment 5. Credit Card pay > ₹1L (cash) or ₹10L (online) → Scrutiny 6. Property buy/sell > ₹30L → Notice 148 – Reassessment 7. MF / Shares invest > ₹10L → Scrutiny 8. Foreign travel > ₹2L → Scrutiny 9. Luxury hotel bill > ₹1L → Scrutiny 10. Cash deal > ₹2L (other than bank) → Penalty + Scrutiny (Sec 269ST) 11. Hidden income found → Notice 148 – Reassessment 12. Extra tax payable → Notice 156 – Demand 13. Refund adjustment → Notice 245

26. Key Takeaways A tax notice is not a punishment, it’s a reminder to correct and comply. Prevention is better than cure → Keep your records clean and organized for at least 6-7 years. “Assessment is the final truth of your tax story.”

27. References www.incometax.gov.in https://tax2win.in/guide/income-tax-notice-us-142-1 https://www.indiafirstlife.com/knowledge-center/tax-savings/types-of-income-tax-notices

28. thank you