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WHAT SHOULD YOU DO IF YOU RECEIVE AN INCOME TAX NOTICE?

A notice from the Income Tax department can be stressful, especially because many of us do not understand what it entails or what needs to be done in response. To get a clearer understanding of the situation, we spoke to financial experts CA Rishabh Parakh, and he outlined a few steps that we can take in case of receipt of a notice from the Income Tax department.

1. Neither Panic nor Ignore

Your first reaction could be to press the panic button or ignoring it completely due to ignorance, both ways are wrong and key is to handle this carefully and sincerely else you may end up paying hefty penalty along with tax payment.

2. Check if it's issued in your PAN

Department issue notices based on your PAN and not by name, so make sure notice is issued in your PAN andis not meant for someone else who shares similar names or DOB as yours!

3. Identify the reason behind issuing a notice

Reasons could be a simple mismatch in TDS or inconsistency in your returns or some serious concerns like income concealment or survey or scrutiny of accounts.

4. Check Validity and Issuer Details

Check the validity of the notice, time of issuance, the IT section under which it has been issued, and also look at the mention of officer in-charge, his or her designation, signature, address with details of ward & circle no. etc. Verify these details in view to avoid being cheated.

5. Preparation two sets of documents and covering letter

Start collecting documents which you are asked to furnish before the assessing officer or things required based on the gravity of the notice and make sure you prepare a covering letter along with the set of documents. Prepare two set of all the documents required to be submitted to the department along with a covering letter, get a stamp on your copy for your record purpose and as a proof of submission of documents in compliance with the notice. You can also consult a CA for his help in drafting the proper income tax notice reply letter.

3 important points to remember

Reply on time – Always reply on time even if you are not able to collect the required documents. You can even ask for some time to prepare the same. It would establish that you are honest and cooperating with the laws.

Preserve the Envelope: If you receive the notice in an envelope please keep it safe as it contains Speed Post number which works as an evidence of its delivery to you.

Get Professional Help: If the gravity of the notice is high then it would be prudent to have a CA represent you. Otherwise, you can follow the above steps and represent yourself in most of the cases.

One of the major steps that you need to take even otherwise is to keep track & records of all your Tax papers & financial transactions for the last 8 years as it will help you substantiate your claims in case of any scrutiny.

There could be several reasons for receiving a notice from the Income Tax department, and it is important we know what to do when we get one. However, it is better if we follow good Income Tax practices to avoid getting a notice. If you have faced any issues with filing your IT returns or if you have any queries about notices from the Income Tax department, write to us at jaagorein@gmail.comor just comment on our Facebook and Twitter page.

More about the Experts:

Rishabh Parakh

Rishabh is a Chartered Accountant and a founder Director cum Chief Gardener of Money Plant Consulting, A leading tax and investment service provider He also writes for several leading publications in India.

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