Under Tax Scrutiny Proceedings, Notice Has To Be Issued Within A Certain Period; It Cannot Be Issued To The Tax Payer After Expiry Of Twelve Months From The End Of The Month In Which Return Of Income Was Filed
THE income tax authorities for various reasons may issue a tax enquiry notice. Sometimes you may also receive a notice despite filing your returns.
Issue of notice where a tax return has not been filed: Salaried employees are required to have their returns filed by July 31, each year for the income earned by them during the previous financial year. To illustrate: For the financial year April 1, 2006 up to March 31, 2007, the tax return was due by July 31, 2007. In case no return of income has been filed but the tax officer feels that a return should have been filed, he or she may issue a notice under Section 142(1) of the Income Tax Act requiring such person to file a return of income within the specified time.
Tax notice where a tax return has been filed: It is possible to get a notice from the tax officer, even if you have duly filed your tax return, in the following situations:
A tax enquiry notice is most commonly issued for audit of income and expense details disclosed in the return of income, commonly referred to as “Tax Scrutiny Proceedings”. Under tax scrutiny proceedings, a notice is issued under Section 143(2) of the act if the tax officer believes that less income has been disclosed or excessive claims have been made of losses, exemptions, deductions, allowance or relief in the return.
The tax payer is normally requested to answer certain questions, file documents as evidence and provide additional information. However, such a notice has to be issued within a certain period; it cannot be issued to the tax payer after the expiry of twelve months from the end of the month in which the return of income was filed.
There is also a provision under the act, which empowers a tax officer to initiate audit proceedings by issuing a notice under section 148 for the past six assessment years for which scrutiny proceedings may or may not have been conducted, subject to satisfaction of certain conditions. These proceedings are commonly referred to as “Reassessment Proceedings” and are initiated where the tax officer has reasons to believe income which should have been taxed has escaped audit i.e. no taxes have been paid on such income by the tax payer. For instance: As on November 1, 2007, reassessment proceedings can be initiated for assessment year 2001-02 (financial year April 1, 2000 to March 31, 2001), and onwards.
In cases, where a taxpayer has filed his return, and a tax officer requires certain additional information, a notice may be issued under section 142(1) of the Act. A tax notice may also be issued where a return is found to be defective. In such a case, the tax payer is issued a notice under section 139(9) of the act requiring the taxpayer to rectify the defect within 15 days from the date of notice or such extended period which the authorities may permit.
To illustrate: if you have missed filling in all the details in the required columns in your tax return, the return would be treated as defective and you would have to rectify the error. Even a third party can be served a notice to collect information about you. For example, the tax officer can issue notice to a bank asking for the account details of a person who has an account with the said bank. How to respond to a tax notice? In relatively simple issues, you may attempt to handle the situation on your own but in complex cases, please go to your tax advisor. Here are some action points:
Verify the validity of notice as regards whether the same has been issued within the time limit prescribed for issue of such notice and whether appropriate procedures have been followed while issuing the notice. Typically, the act provides for a limitation period for issuance of all kinds of notices.
Go through your past returns, assessments orders, financial statements before responding to the tax officer. Be aware of the deadline for responding to a notice or attending a tax hearing, as any non-compliance may be viewed as non cooperation and may adversely influence the outcome of the enquiry proceedings. Unless the notice or summon requires personal appearance of a person, the details/ information may be furnished via post or through an authorized representative.
THE income tax authorities for various reasons may issue a tax enquiry notice. Sometimes you may also receive a notice despite filing your returns.
Issue of notice where a tax return has not been filed: Salaried employees are required to have their returns filed by July 31, each year for the income earned by them during the previous financial year. To illustrate: For the financial year April 1, 2006 up to March 31, 2007, the tax return was due by July 31, 2007. In case no return of income has been filed but the tax officer feels that a return should have been filed, he or she may issue a notice under Section 142(1) of the Income Tax Act requiring such person to file a return of income within the specified time.
Tax notice where a tax return has been filed: It is possible to get a notice from the tax officer, even if you have duly filed your tax return, in the following situations:
A tax enquiry notice is most commonly issued for audit of income and expense details disclosed in the return of income, commonly referred to as “Tax Scrutiny Proceedings”. Under tax scrutiny proceedings, a notice is issued under Section 143(2) of the act if the tax officer believes that less income has been disclosed or excessive claims have been made of losses, exemptions, deductions, allowance or relief in the return.
The tax payer is normally requested to answer certain questions, file documents as evidence and provide additional information. However, such a notice has to be issued within a certain period; it cannot be issued to the tax payer after the expiry of twelve months from the end of the month in which the return of income was filed.
There is also a provision under the act, which empowers a tax officer to initiate audit proceedings by issuing a notice under section 148 for the past six assessment years for which scrutiny proceedings may or may not have been conducted, subject to satisfaction of certain conditions. These proceedings are commonly referred to as “Reassessment Proceedings” and are initiated where the tax officer has reasons to believe income which should have been taxed has escaped audit i.e. no taxes have been paid on such income by the tax payer. For instance: As on November 1, 2007, reassessment proceedings can be initiated for assessment year 2001-02 (financial year April 1, 2000 to March 31, 2001), and onwards.
In cases, where a taxpayer has filed his return, and a tax officer requires certain additional information, a notice may be issued under section 142(1) of the Act. A tax notice may also be issued where a return is found to be defective. In such a case, the tax payer is issued a notice under section 139(9) of the act requiring the taxpayer to rectify the defect within 15 days from the date of notice or such extended period which the authorities may permit.
To illustrate: if you have missed filling in all the details in the required columns in your tax return, the return would be treated as defective and you would have to rectify the error. Even a third party can be served a notice to collect information about you. For example, the tax officer can issue notice to a bank asking for the account details of a person who has an account with the said bank. How to respond to a tax notice? In relatively simple issues, you may attempt to handle the situation on your own but in complex cases, please go to your tax advisor. Here are some action points:
Verify the validity of notice as regards whether the same has been issued within the time limit prescribed for issue of such notice and whether appropriate procedures have been followed while issuing the notice. Typically, the act provides for a limitation period for issuance of all kinds of notices.
Go through your past returns, assessments orders, financial statements before responding to the tax officer. Be aware of the deadline for responding to a notice or attending a tax hearing, as any non-compliance may be viewed as non cooperation and may adversely influence the outcome of the enquiry proceedings. Unless the notice or summon requires personal appearance of a person, the details/ information may be furnished via post or through an authorized representative.
