Best Practice to deal with an Income Tax notice

Any communication from the Income Tax department, especially
receiving a notice from them, can send shivers down anyone’s spine. However,
there are chances that it might only be a routine enquiry or a request for
simple clarification.

An Income Tax notice can be issued for varied reasons, and
there’s no standard solution to deal with them. There are various kinds of
Income Tax notices.

Here are 12 golden steps to follow in response to any kind
of IT notice you may receive.


  1. Don’t Panic or Ignore: Your first
    reaction would be to press the panic button or ignore the notice completely.
    Both these ways are wrong. The key is to handle the situation carefully and
    sincerely, or you may end up paying a penalty of up to Rs 10,000 along with the
    tax payment.
  2. Is it issued to your PAN card number?
    The Income Tax department issues notices based on the PAN card and not on the
    basis of names. So make sure that the notice is issued to your PAN card, and
    not to someone else who may have a similar name or date of birth as yours.
  3. Identify the reason behind the notice:
    Reasons could be a simple mismatch in TDS or inconsistency in your returns, or
    some serious concerns like income concealment. It can also be a survey or
    scrutiny of accounts.
  4. Validity: Check the validity of the
    notice and the timely issuance. Also check the section under which the notice
    has been issued.
  5. Issuer Details: Notice will mention the
    officer in-charge, his or her designation, signature, address with details of
    ward and circle number. Verify these details to avoid being cheated.
  6. DIN: If the notice is delivered online,
    then check the Document Identification Number.
  7. Gather the documents: Start collecting
    the documents that the department has requested via the notice. Documents
    needed can vary depending on the gravity of the notice.
  8. Letter: Prepare a covering letter along
    with the set of documents.
  9. Acknowledgement: Prepare two set of all
    the documents required, along with a copy of the covering letter. Get your copy
    stamped to maintain personal records, and as a proof of submission of the
    documents thereby complying with the notice.
  10. Reply on time: Always respond to the
    notice on time even if you are unable to collect the required documents. You
    can even ask for some time to gather all the documents. Timely response will
    help establish that you are honest, and cooperating with the law.
  11. Preserve the envelope: If you receive
    the notice in an envelope, keep it safely as it will have the Speed Post number
    that will work as evidence of its delivery to you.
  12. Seek professional Help: If the gravity
    of 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 regardless of
the notice, is to keep a track record of all your tax papers and financial
transactions in the last six years. This will help you substantiate your claims
in case of any scrutiny.

RECOMMENDED READ  Lesson 53 - How to insert company logo in Sales Invoice in Tally.ERP9

Share this post