Alert! Got Income Tax department notice? Here is why it must have happened - Check what you must do

Soon after taking charge after retaining power post general elections 2019, the newly elected Narendra Modi government started its crackdown with renewed vigour on tax evasion and money laundering through data analysis to help detect overstated Goods & Services Tax (GST) claims and their mismatches with income tax returns. A recent report even claims that the government has sent notices to such entities. Just like this, the salaried individuals could also get a notice from taxmen if they report wrong income or there is an error in the form. Tapati Ghose, Partner, Deloitte India and Prashanth G, Deputy Manager, Deloitte Haskins and Sells LLP told Zee Business Online that the Income tax department can issue notices to an individual when there is mismatch in the income and Tax Deducted at Source (TDS) reported in Form 26AS and as filed in the tax return.

Types of notices you may get

Heena Arora, Finance & Marketing Head of All India ITR told Zee Business Online,"There are a variety of notices that can be received by an Individual from the Income Tax Department. One should always go through the reasons provided in it and file the appropriate response within the time frame to avoid penalty. You can always consult your tax firm or your Chartered Accountant for the same."

How to identify?

The Deloitte experts explained that the tax department verifies the accuracy of return of income through scrutiny assessment as well. "Scrutiny notice received by an individual can be classified into limited scrutiny or complete scrutiny. Under limited scrutiny, a taxpayer is only required to submit details with respect to specified transaction/query for which the scrutiny has been initiated," they said.

However, in case of a complete scrutiny, a tax officer can ask taxpayer to furnish an exhaustive list of documents/information, which he feels are relevant for detailed audit of the tax return, they added. 

"To issue scrutiny notice, tax department follows certain pre-determined criteria (e.g. substantial tax refunds, foreign tax credit, etc.) for selecting cases for scrutiny. Further, scrutiny cases are also being selected under Computer Aided Scrutiny Selection (CASS) based on broad-based selection parameters," they said. 

What you must do?

Tapati and Prashanth advise that if the notice received is on account of mismatch in data as per Form 26AS, you must review Form 26AS and check whether all incomes and TDS reflecting in the Form, have been declared in the return of income and accordingly file a response online. 

"The return could be treated as defective by the income tax department when the individual has claimed TDS, however, income corresponding to the same is not reported in the respective schedules in the income tax return form," they said. In these cases, the taxpayers need to correct the data reported in the return of income and need to file a response in the income tax account of the individual online, the duo explained. 

"The individual also needs to upload the XML version of the income tax return, using the latest income tax return utility available in the income tax site. Depending on the type of scrutiny notice issued (complete/limited), it is important to review and arrange all documents (e.g. computation sheet, Form 16, details of interest earned, Form 26AS, etc.) well in advance before the reply is submitted," they said.