Section 143(1) to 245: Decoding the 7 income tax notices every taxpayer should know

Filing your Income Tax Return (ITR) does not always mark the end of the tax compliance process. Even after a return has been submitted, taxpayers may receive communications from the Income Tax Department ranging from routine intimations and refund updates to scrutiny notices and tax demands.

While receiving an income tax notice often causes anxiety, tax experts say not every notice signals wrongdoing. Many are system-generated communications seeking clarifications, correcting errors or informing taxpayers about refunds, outstanding tax dues or further verification.

Here's a look at the seven key income tax notices taxpayers should understand after filing their ITR.

Section 143(1): Intimation

This is the most common communication issued after the Central Processing Centre (CPC) processes an ITR. It compares the taxpayer's return with the department's records and informs whether the return has been accepted, whether a refund is due or whether additional tax is payable.

Differences in tax calculations, TDS mismatches or interest payable for short payment of advance tax are among the common reasons for such intimations. Taxpayers can minimise the chances of discrepancies by reconciling their return with Form 26AS and the Annual Information Statement (AIS) before filing.

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Section 139(9): Defective Return

A notice under Section 139(9) indicates that the return contains errors preventing it from being processed. This could result from filing the wrong ITR form, omitting mandatory schedules or reporting incomplete income details.

Taxpayers are generally given 15 days to rectify the defects and resubmit the return. Choosing the correct ITR form and reviewing disclosures carefully can help avoid such notices.

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Sections 142(1) and 143(2): Inquiry and Scrutiny

Under Section 142(1), the Income Tax Department may seek additional documents or clarifications before completing the assessment. Such notices may also be issued if a person liable to file an ITR has failed to do so.

A notice under Section 143(2), meanwhile, means the return has been selected for detailed scrutiny. It does not automatically imply tax evasion but requires taxpayers to substantiate the income, deductions and exemptions claimed in the return. High-value financial transactions, significant deduction claims or mismatches in reported information may result in scrutiny.

Section 148: Income Escaping Assessment

Section 148 notices are issued when the department believes certain income has escaped assessment. This could happen if interest income, capital gains, dividends or other taxable income has not been disclosed, or if new information becomes available indicating under-reporting.

Reviewing AIS and reporting all income sources accurately remains the best safeguard against reassessment proceedings.

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Sections 156 and 245: Demand and Refund Adjustment

A notice under Section 156 is a demand notice issued when additional tax, interest or penalty becomes payable after processing or assessment.

Section 245, on the other hand, relates to refund adjustments. Instead of issuing a refund, the department may propose adjusting it against an outstanding tax demand from an earlier assessment year. Taxpayers have an opportunity to agree or object before the adjustment is made.

Responding to a notice

Taxpayers need not visit the income tax office to respond to most communications. Notices can be viewed and replied to through the e-Proceedings facility on the Income Tax Department's e-filing portal by logging into the account, accessing Dashboard > Pending Actions > e-Proceedings, reviewing the notice and uploading the required explanation and supporting documents.

Tax professionals advise taxpayers not to ignore any notice, even if it appears routine. Responding within the prescribed timeline, maintaining supporting documents and ensuring accurate disclosures while filing can help resolve most issues quickly and avoid prolonged tax disputes.

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