Income tax notices are common and do not always indicate wrongdoing. Many notices are system generated due to mismatches between the return and third party data such as Form 26AS, AIS, TIS, SFT reporting, or TDS returns filed by deductors.
The key is to respond within timelines, submit a clear reconciliation, and maintain supporting documents. A structured approach reduces escalation into scrutiny, penalty, or demand recovery.
First Step When You Receive a Notice
Before drafting any response:
- Verify the notice authenticity using the DIN and portal login
- Identify the section and issuing authority
- Note the response due date and mode of compliance
- Download the notice and annexures and create a case folder
Practical tip: Do not ignore even minor intimations. Delays can convert simple mismatches into demand and recovery actions.
Common Types of Income Tax Notices and What They Mean
Intimation under Section 143 1
This is a processing intimation after ITR filing. It may show:
- Tax payable or refund
- Adjustments for arithmetic errors
- Mismatch in TDS credit or deductions n Typical actions:
- If correct accept and pay demand if any
- If incorrect file rectification under Section 154 with supporting reconciliation
Defective return notice under Section 139 9
Issued when the return is treated as defective due to missing information or incorrect form selection.
Typical actions:
- Correct the defect and upload within the allowed time
- Ensure audit report and financial statements are correctly linked where applicable
Notice under Section 142 1
This seeks information or documents and can be issued for enquiry or assessment.
Typical actions:
- Submit requested information with a structured index
- Provide reconciliations and explanations for variances
Scrutiny notice under Section 143 2
This indicates selection for scrutiny assessment.
Typical actions:
- Prepare a complete documentation pack
- Respond through e proceedings and attend hearings
- Maintain consistency between submissions and books
Reassessment notice under Section 148
Issued when income is believed to have escaped assessment.
Typical actions:
- Review reasons and information basis
- Evaluate whether notice is within limitation and valid
- Prepare factual and legal response and supporting evidence
Demand notice under Section 156
This is a demand arising from assessment or processing.
Typical actions:
- Pay if correct
- If disputed file rectification or appeal and consider stay of demand
Refund adjustment notice under Section 245
Refund is proposed to be adjusted against outstanding demand.
Typical actions:
- Verify demand correctness
- Respond to accept or disagree and provide reasons
Information notice under Section 133 6
Seeks information from taxpayer or third parties.
Typical actions:
- Provide accurate information with supporting documents
- Ensure consistency with ITR and books
Mismatch Areas That Commonly Trigger Notices
- TDS credit mismatch between ITR and Form 26AS
- AIS and TIS high value transaction mismatch
- Capital gains reporting mismatch for shares or property
- Cash deposit or bank interest mismatch
- Foreign remittance and overseas asset reporting
- GST turnover vs ITR turnover mismatch
Portal Response Practical Steps
A practical response flow:
1 Login to income tax portal and open e proceedings or compliance portal 2 Download notice and identify specific issues and annexures 3 Prepare reconciliation working and supporting documents 4 Draft point wise response referencing notice paragraphs 5 Upload response and attachments in prescribed format 6 Submit and download acknowledgement 7 Track further communication and maintain a submission log
Documentation Pack to Keep Ready
Depending on notice type, keep:
- ITR and computation with working papers
- Financial statements and tax audit report where applicable
- Form 26AS, AIS, TIS downloads
- TDS certificates and deductor confirmations
- Bank statements and interest certificates
- Capital gains working with contract notes and sale deeds
- GST returns summary and turnover reconciliation
- Proofs for deductions and exemptions claimed
Practical Checklist to Reduce Escalation Risk
1 File returns accurately and reconcile with AIS and 26AS before filing 2 Maintain a year end tax file with all key downloads and workings 3 Respond within timelines and request extension only when needed 4 Provide reconciliations not just explanations 5 Avoid inconsistent statements across submissions 6 Track demands and clear incorrect demands through rectification 7 Keep evidence of all submissions and acknowledgements
How Perfect Accounting Can Help
Perfect Accounting and Shared Services supports notice management end to end:
- Notice review and risk assessment
- Reconciliation of AIS 26AS and return data
- Drafting and filing responses on the portal
- Representation in faceless proceedings and hearings
- Rectification appeals and stay of demand support