How to Response Income Tax Notice in a Proper Way By Experts?

As per the Income Tax Act 1961, The Income Tax Department can serve notice on transactions — both digital and cash transactions.

The aforesaid department is highly vigilant about an individual’s spending Even a single hint of mismatch between the income tax return (ITR) filed by the taxpayer and his/her spending is sufficient for the income tax department to send income tax notice to an individual. However, if we take into consideration the views of think tanks of tax, there is no necessity to get panic if you have been served notice by the income tax department. The reason being, after serving notice, the income tax department provides reasonable time to the taxpayer to give justification or defend his position against the notice.

Tax expert Jitendra Solanki said, "Income tax department can slap notice on both cash and digital art. But, after receiving the income tax notice, one should first find out the reason for the income tax notice. To find that reason, one needs to log in to the income tax portal and look at the form 26AS where the reason for income tax notice will be mentioned."

Solanki further added that the first platform to defend yourself is by logging at the website of Income Tax and post the grievance on the homepage.

On answering the question as to what ought to be the course of action that has to be selected if the income tax notice has been served against cash transaction Dr. Suresh Surana, Founder at RSM India said, "There are various restrictions or limits imposed on cash transactions which can be carried out by the taxpayers. In case of violation of any of the restrictions, the income tax department may issue a notice to the taxpayer assessee, which is generally done online. The revenue department collects data relating to transactions from the Annual Information Report (AIR) filed by various third-party organizations such as mutual funds, banks, registrar of properties, etc. This data is then co-related with the income tax return and any discrepancy in both would be highlighted by way of notice which may be intimated to the taxpayer assessee by way of SMS or e-mail.”

Dr. Suresh Surana commented that the responses to such notices can be answered by following the below-mentioned steps.

Step 1: Log in to the web portal of  Income Tax portal via https://incometaxindiaefiling.gov.in. 

Step 2: Go to the option of ‘e-campaign – High-Value Transaction’ available on the ‘Compliance Portal’ which can be accessed via the ‘My Accounts’ Tab.

Step 3: Thereafter, the Taxpayer ought to click on the option of Financial Year under “High-Value Transactions” after which an informative advisory message would be displayed that is to be dealt with by simply clicking on the “OK" button. Then the taxpayer can view the information Summary.

Step 4: Then, The taxpayer  has to select one of the below-mentioned  options based on the facts and circumstances of the case which are as follows:

• Option A - Information is correct.
• Option B – Information is not fully correct.
• Option C – Information related to other Persons/ Year.
• Option D – Information is duplicate/ included in other displayed information.
• Option E – Information is Denied.

Step 5: Once the said information has to be  selected by the taxpayer, then  he has to provide further details about the 

• Origin of such transaction amount 
• and/or any other details based on the option selected. 

For instance, if he opts for Option C, then he would be required to furnish details such as the name of the other person, their PAN, relationship with such person, and so on.

Step 6: The response that has been submitted can be seen under the same e-campaign Tab for various reference purposes.

SAG Infotech: leading top CA software development company for small businesses that are highly acknowledged for its taxation software meant for professionals like Chartered Accountants (CA), Company Secretaries (CS), HR Managers, and more.