Income Tax Notices in India: Types, Reasons, and How to Respond

Income Tax Notices in India: Types, Reasons, and How to Respond

Receiving an income tax notice can feel alarming, but most notices are procedural. Understanding what each notice type means, why it was issued, and how to respond within the deadline is the difference between a routine compliance step and an escalating tax dispute. This guide covers the seven most common income tax notices that individuals and businesses receive in India.

Section 143(1): Intimation After Processing

What It Is

A Section 143(1) intimation is the most common communication you will receive from the Income Tax Department. It is not a scrutiny notice. It is an automated intimation generated by the Centralised Processing Centre (CPC) in Bengaluru after your return is processed.

The CPC system scans your return for:

• Arithmetical errors in income computation
• Incorrect claims that are apparent from the return itself
• Mismatches between the income, TDS, or tax paid as declared in your return and the data available in Form 26AS, AIS (Annual Information Statement), or TIS (Taxpayer Information Summary)
• Disallowance of deductions claimed without proper evidence in the return (for example, claiming Section 80C without corresponding investment proof flagged in AIS)

Three Possible Outcomes

How to Respond

If the intimation shows a demand:

1. Log in to the e-filing portal (incometax.gov.in).
2. Go to e-Proceedings or Outstanding Demand under the Services tab.
3. Compare the CPC's computation with your original return. Check whether the difference is due to a genuine error in your return or a mismatch in TDS/advance tax credits.
4. If the CPC is correct, pay the demand and submit proof.
5. If you disagree, file a rectification request under Section 154 (Section 295 under the Income Tax Act, 2025) or submit a response explaining the discrepancy with supporting documents.

Deadline

The CPC must issue the 143(1) intimation within nine months from the end of the financial year in which the return was filed. For a return filed in July 2026 for AY 2026-27, the intimation deadline is March 31, 2028.

Under the Income Tax Act, 2025 (effective FY 2026-27), this provision corresponds to Section 270.

Section 139(9): Defective Return Notice

What It Is

A Section 139(9) notice means your filed return has defects that make it incomplete or internally inconsistent. The return has been accepted, but it needs correction.

Common Reasons

• Filing the wrong ITR form for your income type (for example, filing ITR-1 when you have capital gains, which requires ITR-2 or ITR-3)
• Missing schedules (not filling Schedule CG when you have capital gains, not filling Schedule HP when claiming house property loss)
• Mismatch between gross total income and income declared under individual heads
• Not attaching the audit report when your turnover exceeds the audit threshold
• Claiming deductions under the old regime while filing under the new regime
• Missing or incorrect bank account details for refund

How to Respond

1. Log in to the e-filing portal.
2. Go to e-Proceedings and select the defective return notice.
3. Review the specific defects listed in the notice.
4. File a revised or corrected return within the deadline, addressing each listed defect.
5. Save the acknowledgement.

Deadline

You must rectify the defect within 15 days of receiving the notice. The Assessing Officer can extend this period on your request. If you do not respond within 15 days (or the extended period), the return is treated as invalid, as if it were never filed. This triggers late filing consequences: interest under Section 234A, late fee under Section 234F (Rs 1,000 to Rs 5,000), and loss of the right to carry forward certain losses.

Section 142(1): Inquiry Before Assessment

What It Is

A Section 142(1) notice is an inquiry notice issued by the Assessing Officer (AO) before or during assessment. It serves two purposes:

1. To require you to file a return if you have not filed one (but were expected to).
2. To request additional information or documents to complete the assessment of a return you have already filed.

What the AO Can Ask For

The notice typically asks for specific documents such as:

• Bank statements for the relevant period
• Investment proofs for deductions claimed (PPF receipts, insurance premium receipts, ELSS statements)
• Invoices and expense vouchers supporting business deductions
• Capital gains computation sheets, purchase and sale agreements
• Details of cash deposits, especially during specific periods
• Reconciliation between books of accounts and the return

How to Respond

1. Check the notice in e-Proceedings on the e-filing portal.
2. Prepare the requested documents in the specified format (PDF, scanned copies).
3. Upload your response with supporting attachments before the deadline mentioned in the notice.
4. Keep a copy of the acknowledgement.

Consequences of Non-Compliance

Failing to respond to a Section 142(1) notice can result in:

• Best judgment assessment under Section 144, where the AO estimates your income based on available information (often unfavourably)
• Penalty of Rs 10,000 for each default under Section 271(1)(b)
• In extreme cases, prosecution proceedings

Section 143(2): Scrutiny Assessment Notice

What It Is

A Section 143(2) notice means your return has been selected for detailed scrutiny. This is more serious than a 143(1) intimation. The AO will examine your return in depth, ask for documents, and may call for a personal hearing (now typically conducted through video conferencing under the faceless assessment scheme).

Why Returns Are Selected for Scrutiny

The CBDT issues annual guidelines for scrutiny selection. Common triggers include:

• Mismatch flags: Significant differences between income declared in the return and information in AIS/TIS/Form 26AS
• High-value transactions: Large cash deposits, property purchases, investments disproportionate to declared income
• Abnormal financial ratios: Sharp drop in profit margins compared to previous years, unusually high deductions relative to income
• Specific categories: Cases arising from surveys under Section 133A, search and seizure cases, cases flagged by intelligence units
• Random selection: A small percentage of returns are picked through computer-assisted random selection
• Recurring additions: Cases where additions were confirmed in prior assessment years (above Rs 50 lakh in metro cities, Rs 20 lakh elsewhere)

Limited vs Complete Scrutiny

If you receive a limited scrutiny notice, the AO cannot expand the scope to other issues without obtaining prior approval from the higher authority. Check the notice carefully for the stated reason.

How to Respond

1. Engage a Chartered Accountant if you do not already have one. Scrutiny proceedings require careful document preparation and legal understanding.
2. Review the notice in e-Proceedings to understand the specific issues flagged.
3. Prepare a written submission addressing each point. Attach supporting documents (bank statements, sale deeds, contracts, computation sheets, invoices).
4. Submit through the e-filing portal. For faceless assessments, all submissions are electronic.
5. Attend the hearing (virtual or in-person) as scheduled. Bring your CA.
6. Keep records of every submission and acknowledgement.

Time Limit

The Section 143(2) notice must be issued within the prescribed time from the end of the assessment year. For AY 2026-27, the notice must be served by the date prescribed in the Act. If the notice is issued after the time limit, the scrutiny proceedings are invalid and any resulting assessment order can be challenged.

Section 148: Reassessment Notice (Income Escaping Assessment)

What It Is

A Section 148 notice (Section 280 under the Income Tax Act, 2025) is issued when the AO has reason to believe that income chargeable to tax has escaped assessment in a particular year. This can happen when:

• You did not file a return for that year and had taxable income
• You filed a return but did not disclose certain income (for example, capital gains from property sale, foreign income, interest income)
• New information surfaced after the original assessment was completed (from AIS data, third-party reporting, bank data, or investigation by another agency)

Time Limits

Procedural Safeguard: Show Cause Notice

Under the Income Tax Act, 2025 (Section 281), before issuing a reassessment notice under Section 280, the AO must first issue a show-cause notice explaining why they believe income has escaped assessment. You get an opportunity to respond before the reassessment notice is formally issued. This is a procedural improvement over the older process.

How to Respond

1. Read the notice carefully. Understand which assessment year and which income item is in question.
2. If a show-cause notice under Section 281 (new Act) is received, respond within the deadline with reasons why reassessment is not warranted, if applicable.
3. If the reassessment notice is issued, file a return for the relevant year as required by the notice.
4. Engage a CA or tax lawyer. Reassessment proceedings involve legal questions about the validity of the notice, the sufficiency of the AO's reasons, and the correctness of your original return.
5. Challenge the notice if it was issued beyond the time limit or without proper reasons.

Section 156: Demand Notice

What It Is

A Section 156 notice (Section 289 under the Income Tax Act, 2025) is a formal demand for payment of tax, interest, penalty, or any other sum that becomes payable as a result of an order passed by the AO. It specifies:

• The exact amount of tax, interest, or penalty due
• The assessment year to which it relates
• The deadline for payment (usually 30 days from the date of service)

Common Triggers

• Assessment order under Section 143(3) or 144 determines additional tax liability
• Rectification order under Section 154 creates a demand
• Penalty order (for concealment of income, late filing, or other defaults)
• Processing of return under Section 143(1) identifies a shortfall

How to Respond

If you agree with the demand:

1. Pay the amount using the e-Pay Tax facility on the e-filing portal.
2. Submit proof of payment against the demand.

If you disagree:

1. File an appeal before the Commissioner of Income Tax (Appeals) within 30 days of receiving the demand notice.
2. If the demand arises from a 143(1) processing, you can file a rectification request under Section 154 instead.
3. Apply for a stay of demand if the amount is large and you have a strong case, to prevent coercive recovery action while the appeal is pending.

Consequences of Non-Payment

If you do not pay or respond within 30 days:

• The department can initiate recovery proceedings (bank account attachment, salary garnishment, property attachment)
• Interest under Section 220(2) accrues at 1% per month on the unpaid demand

Section 245: Refund Adjustment Intimation

What It Is

A Section 245 intimation is sent when the Income Tax Department proposes to adjust your pending refund against an outstanding tax demand from a previous assessment year. Before making the adjustment, they must give you prior notice.

Example

You have a Rs 45,000 refund due for AY 2026-27, but there is an outstanding demand of Rs 30,000 from AY 2024-25. The department sends a Section 245 intimation stating that they will adjust Rs 30,000 from your refund against the old demand, and credit you only Rs 15,000.

How to Respond

1. Log in to the e-filing portal and check the intimation under Outstanding Demand.
2. Verify whether the old demand is valid. Sometimes old demands persist due to processing errors, unrecorded payments, or rectification orders that were not reflected in the system.
3. You have three options:
   • Agree: Accept the adjustment. The refund is reduced accordingly.
   • Disagree: If the old demand is incorrect or already paid, submit a response with proof (payment challans, rectification orders, appeal orders).
   • Partially agree: Accept part of the demand and dispute the rest.
4. Respond within 30 days of receiving the intimation. If you do not respond, the department will proceed with the automatic adjustment.

How to Check and Respond to Notices on the E-Filing Portal

All income tax notices are now served electronically through the e-filing portal (incometax.gov.in). Here is how to access and respond:

1. Log in to incometax.gov.in with your PAN and password.
2. Go to Pending Actions and then e-Proceedings (or Worklist in the newer interface).
3. You will see all open notices, their deadlines, and the option to submit a response.
4. For demand-related notices, check under Outstanding Demand in the Services section.
5. Upload your response and supporting documents in the prescribed format (usually PDF, max file size varies by notice type).
6. After submission, download and save the acknowledgement number. This is your proof of timely response.
7. Check your registered email and mobile for OTP prompts during the submission process.

Tips for Responding

• Do not ignore any notice. Even a benign 143(1) intimation with a small demand should be addressed. Unanswered demands accumulate interest and can block future refunds through Section 245 adjustments.
• Respond before the deadline. Extensions are sometimes possible (for 139(9), you can request more time), but the default deadlines are strict.
• Keep records. Save every notice, every response, and every acknowledgement. If a dispute escalates, you will need the full paper trail.
• Verify the notice is genuine. Income tax notices come through the e-filing portal and are sent from official email addresses (@incometax.gov.in or @cpc.gov.in). If you receive a notice through WhatsApp, SMS from an unknown number, or an unofficial email, verify it on the portal before responding.

Quick Reference: Notice Types at a Glance

When You Need Professional Help

A 143(1) intimation with a small demand or a 139(9) defective return can usually be handled on your own if you are comfortable with the e-filing portal. But these situations call for a CA or tax professional:

• Any Section 143(2) scrutiny notice, especially complete scrutiny
• A Section 148 reassessment notice, which involves legal questions about validity and time limits
• Large Section 156 demands (Rs 1 lakh or more) where you disagree with the computation
• Multiple notices for the same assessment year, which may indicate a deeper compliance issue
• Notices related to transfer pricing, international transactions, or search and seizure proceedings

Tax Garden's tax compliance services include income tax notice handling for individuals and businesses. We review the notice, prepare the response with supporting documents, file through the e-Proceedings portal, and track every deadline. For the full ITR filing context, see our ITR Filing Guide for AY 2026-27, AIS vs Form 26AS vs TIS guide, and what happens if you miss the ITR deadline.

Frequently Asked Questions

Is a Section 143(1) intimation a notice?

It is technically an intimation, not a notice or a scrutiny. It is generated automatically by the CPC after processing your return. If it shows no demand and no refund, or a refund due, no action is needed. If it shows a demand, you should either pay or file a rectification request within 30 days.

What happens if I do not respond to a 139(9) defective return notice?

If you do not rectify the defect within 15 days (or an extended period granted by the AO), your return is treated as invalid, as if it were never filed. This means you lose the benefit of timely filing, interest under Section 234A starts accruing, late fee under Section 234F applies, and you cannot carry forward losses reported in that return.

Can I challenge a Section 148 reassessment notice?

Yes. You can challenge the notice if it was issued beyond the prescribed time limit, if the AO did not have valid reasons to believe income escaped assessment, or if the procedural requirements (like the show-cause notice under the new Act) were not followed. This typically requires filing a writ petition or raising objections during the reassessment proceedings.

How do I know if my income tax notice is genuine?

Genuine notices appear in the e-Proceedings or Pending Actions section of the e-filing portal (incometax.gov.in) under your login. Official emails come from @incometax.gov.in or @cpc.gov.in domains. If you receive a notice through unofficial channels, always verify it on the portal before responding or sharing any documents.

What is the penalty for not responding to a Section 142(1) inquiry notice?

Non-compliance can result in a penalty of Rs 10,000 per default under Section 271(1)(b). Additionally, the AO can proceed with a best judgment assessment under Section 144, estimating your income based on available information, which is typically unfavourable to the taxpayer.

Can the Income Tax Department adjust my refund against old demands without my consent?

The department must send a Section 245 intimation before making the adjustment, giving you 30 days to respond. If you do not respond, the adjustment proceeds automatically. If the old demand is incorrect or already paid, you should actively respond with proof within the 30-day window.

Sources

This guide is verified against the Income Tax Act, 1961 (Sections 139(9), 142(1), 143(1), 143(2), 143(3), 147, 148, 154, 156, 220(2), 234A, 234F, 245, and 271(1)(b)), the Income Tax Act, 2025 (corresponding Sections 270, 279, 280, 281, 289, and 295), and the CBDT scrutiny selection guidelines for AY 2025-26. Cross-checked against ClearTax, Tax2win, IndiaFilings, BajajFinserv, TaxGuru, and the official incometax.gov.in portal help pages as of April 2026. Section number mappings between the 1961 Act and the 2025 Act are verified against the ClearTax mapping table and TaxGuru analysis. Always verify notices directly on the incometax.gov.in e-filing portal before responding.