Got a Tax Notice? Here's What It Means and How to Respond
An income tax notice in your inbox feels alarming. It usually isn't. Most notices are routine — a processing intimation, a minor mismatch, a missed schedule. A few are serious. The key is knowing which is which, and responding correctly within the deadline.
Where to Check Notices
All notices and your responses are managed on incometax.gov.in:
- Pending Actions > Worklist — pending responses to notices
- Pending Actions > e-Proceedings — scrutiny and assessment proceedings
- Compliance section — information or mismatch alerts
The portal shows your deadline, the section under which the notice was issued, and lets you upload documents and submit responses electronically.
Common Notice Types
This is not a notice — it's an automated processing result from CPC Bengaluru. Every ITR gets one. It shows CPC's computation alongside yours. Three possible outcomes:
No Demand No Refund — CPC agrees with your return. Nothing to do.
Refund Due — CPC found you overpaid. Refund is processed automatically.
Demand Raised — CPC found a mismatch. Compare line by line. If CPC is correct, pay via Challan 280. If you disagree, file a rectification under Section 154 or appeal to CIT(Appeals) within 30 days.
CPC found something incomplete or inconsistent in your return. Common triggers: missing schedules, wrong ITR form (filed ITR-1 but had capital gains), mismatch with Form 26AS or AIS data, or tax not computed correctly.
The portal shows exactly what's defective. Correct the issues and re-file the corrected XML. You can also submit a response stating the return is not defective if you disagree.
CPC is proposing to adjust your current refund against an outstanding demand from a prior year. An intimation is sent before the adjustment is made.
You have four options: agree the demand is correct, provide challan details if the demand was already paid, upload an appellate order if the demand was reduced or deleted on appeal, or indicate that a rectification is pending.
Your return has been selected for detailed examination by an Assessing Officer. Triggers include CASS risk algorithms, high-value transactions, large refund claims, AIS mismatches, or random selection.
Two types: Limited scrutiny (AO examines only specific flagged issues) and Complete scrutiny (AO examines everything). Limited scrutiny can be converted to complete scrutiny only with PCIT approval.
Responses go through e-Proceedings on the portal. Keep ready: bank statements, investment proofs, capital gains statements, rent receipts, Form 16, and business books if applicable.
The AO has information suggesting income escaped assessment. Triggers: undisclosed bank accounts, unreported property transactions, information from the investigation wing, or data from foreign jurisdictions.
Section 148A is mandatory first. The AO must share the information, give you 7-30 days to respond, and then pass an order (with PCIT/CCIT approval) before issuing the actual 148 notice.
Time limits: up to 3 years for normal cases, up to 5 years if escaped income is Rs 50 lakh or more, and up to 10 years with specific information suggesting Rs 50 lakh+ escaped income.
A formal demand after assessment determines you owe additional tax. Issued after scrutiny, reassessment, or rectification that increases your liability.
If you agree, pay via Challan 280 on e-Pay Tax. If you disagree, file a rectification under Section 154 (for errors apparent from record) or appeal to CIT(Appeals) within 30 days. If appealing, apply for stay of demand — CBDT guidelines typically require paying 20% of the disputed amount.
Section 154 Rectification — Fix CPC Mistakes
Not a notice you receive, but something you file when CPC made a mistake. Use this when:
- TDS credit wasn't granted despite appearing in Form 26AS
- Arithmetical error in CPC's computation
- Tax rate applied incorrectly
- Deduction disallowed due to a data processing error
Section 154 covers only "mistakes apparent from the record." Debatable legal interpretations don't qualify — those need a formal appeal.
Portal path: Services > Rectification > New Request. Select the AY, type of correction, and upload supporting documents. Typically processed in 3-6 months. Time limit: 4 years from end of the FY in which the order was passed.
Understand what your refund status means with the Refund Status GuideWhat You Can Handle vs When to Get a CA
Handle yourself
- Defective return corrections (139(9))
- Simple 143(1) TDS mismatches
- Section 154 rectifications for arithmetic errors or TDS credit
- Section 245 responses with payment proof
Consult a CA
- Scrutiny notices — especially complete scrutiny
- Reassessment under Section 148
- Large demand notices (Rs 1 lakh+)
- Penalty proceedings
- Cases involving international transactions
Frequently Asked Questions
Do not ignore it. Log into incometax.gov.in, go to Pending Actions, and check the notice details. Identify the notice type (Section number), understand why it was issued, and respond within the deadline. For simple issues like defective returns or 143(1) mismatches, you can handle it yourself. For scrutiny or reassessment notices, consult a Chartered Accountant.
Technically, no. A 143(1) intimation is an automated processing result from CPC, not a notice from an Assessing Officer. It shows CPC's computation compared to your return. If the result is "No Demand No Refund" or a refund, no action is needed. If there is a demand, you can pay it, file a rectification under Section 154, or appeal within 30 days.
It depends on the notice type. Section 139(9) defective return: 15 days. Section 156 demand notice: 30 days to pay. Section 148A reassessment: 7 to 30 days. Section 143(2) scrutiny: as specified in the notice, typically 15-30 days per hearing. For most notices, you can request an extension before the deadline expires.
The department escalates. For a defective return notice, your return is treated as never filed. For a demand notice, interest at 1% per month accrues under Section 220(2), followed by penalty and recovery proceedings — attachment of bank accounts, salary, or property. For scrutiny, the AO proceeds with best judgment assessment under Section 144 without your input. In extreme cases, prosecution proceedings can be initiated.
You can handle simple cases yourself: defective return corrections, 143(1) TDS mismatches, Section 154 rectifications for arithmetic errors, and Section 245 responses with payment proof. Consult a CA for scrutiny notices (especially complete scrutiny), reassessment under Section 148, large demand notices, penalty proceedings, and cases involving international transactions.
Log into incometax.gov.in. For pending responses: go to Pending Actions then Worklist. For scrutiny and other proceedings: go to Pending Actions then e-Proceedings. For compliance-related information requests: go to the Compliance section. All responses can be submitted online with supporting documents.