OK, so you have received a notice u/s 143(1) & that’s causing sleepless nights for you?
Well, that’s what an income tax notice does to individuals. But let us tell you an interesting fact that, not all income tax notices are as dreaded as they’re perceived. This write up will surely help you respond to the Intimation you have received.
Let’s go step by step:
1) What is intimation u/s 143(1)?
Whenever an ITR is filed it is processed electronically at Centralized Processing Center, Bengaluru (CPC). The objective of such processing is to put some basic checks on the claims and calculations made by tax payer. This processing is carried out in line with section 143(1) of the Income Tax Act.
The result of above processing is a report, which is referred to as intimation u/s 143(1). The intimation provides a comparative analysis of ITR data and CPC’s checked data. The intimation document can be accessed with password which is your PAN and Date of Birth in continuation. E.g. if your PAN is BQJPS2635H and date of birth is 24011987 then the password will be bqjps2635h24011987.
In case all the calculations and claims are correct, there will not be any additional tax demand /adjustment to tax refund. And in such case no action is required from tax payer or the consultant.
On the contrary, if there are any calculation errors or incorrect claims, the intimation will provide details of additional tax liability or adjustment to tax refund.
You can simply get an annexure attached to the intimation to understand if there is any additional tax demand / adjustment to refund.
2) What is CPC?
The CPC is the Centralized Processing Center of the Income Tax department which receives all income Tax Returns (ITRs), both e-filed and sent through post, and processes them for issuance of refunds and also acts as primary verifier of ITR data.
3) What checks are carried out at CPC?
Whenever an Income Tax Return is filed, the Income tax department carries out a preliminary assessment of such returns and informs the taxpayers of the result of such preliminary assessment. This assessment includes arithmetical errors, internal inconsistencies, tax calculations, and verification of tax payment. And as we discussed above such communication by Income tax department to the tax payer after such preliminary assessment is called as intimation u/s 143(1).
4) What action should be taken on receipt of intimation u/s 143(1)?
1. When there is no mismatch:
It’s likely that all of the calculations and claims made in the ITR are correct and there is no additional tax liability or tax adjustment. In this case you can safely assume the intimation to be an acknowledgement of your tax return. i.e. there is no need to take any action against this.
2. When there is a difference resulting in additional tax demand or adjustment to tax refund:
In case you agree with the additional demand, you need to make payment of such amount to IT department. Usually a link and a challan is also provided in the intimation to complete the tax payment. Once you make payment of tax due, no further action is required from your end. In case there is adjustment to tax refund, which is agreeable to you, in such case also, no action is required.
3. Where there is additional tax liability or adjustment to refund but you do not agree with it:
In such cases, either of following methods may be followed:
File a rectification request:
A rectification request under section 154(1) is allowed by the income tax department for correcting mistakes when there is an apparent mistake in your income tax return.
The following errors can be taken care of by filing a rectification-
· An error of fact
· An arithmetic mistake
· A small clerical error
· An error due to overlooking compulsory provision of law.
Here are some examples of these errors:
· a mismatch in tax credit
· advance tax mismatch
· gender mentioned incorrectly
· additional details not submitted for capital gains at the time of filing return
When can rectification be filed?
It can be filed only for returns which are already processed in CPC, Bangalore.
If on rectifying a ‘mistake’ there is a change in income – a rectification should not be filed. In this case, a Revised Income Tax Return should be filed. No new deduction or exemptions are allowed to be claimed.
Through revised return:
A revised return u/s 139(5) of the income tax act can be filed, in case there was any omission or mistake in filing your income tax return.
5) How to provide response to communication u/s 143(1)?
1] Login to Income tax portal by visiting http://www.incometaxindiaefiling.gov.in/home
2] Go to e-proceeding tab and select e-assessment/ proceeding.
3] After clicking on ‘e- proceeding’ you will see a screen as given and click on adjustment u/s 143(1) (a).
4] After selecting the proceeding name for the respective assessment year, the following screen will be displayed.
Click on reference ID to view the notice and to provide the response please select the submit option
5] Now you have to select whether you ‘agree’ or ‘disagree’ with the
Adjustments in the notice and accordingly you have to select the same.
6] If you select ‘agree or partial agree’ you have to file a revised return after making necessary changes. If you select disagree the following screen will be displayed and then you will have to mention the reasons for your disagreement. The reasons are same.
The reasons are:
1. Receipts offered under other heads of income
2. Incorrect details quoted by Deductor
3. Receipts not taxable
4. Exempt under Double Taxation Agreement
5. Any other reasons if any (to be specified).
Enter the necessary details and click on ‘submit’ and once you submit your response, you will see an acknowledgment screen. An acknowledgement email will also be sent to registered email address.
6] When is the possibility of receiving such intimation?
Intimation u/s 143(1) shall be sent before the expiry of one year from the end of financial year in which the return is made.
For e.g. if return is filed on 25/7/18, then intimation u/s 143(1) will be sent to you on or before 31/3/2020.
Feel free to reach us for any discussion on this topic.