5 Major Reasons that May Invite Income Tax Notice:

5 Major Reasons that May Invite Income Tax Notice The Income Tax Return (ITR) filing season is already here. For individuals, Hindu Undivided Family (HUF), Association of Persons (AOPs), and Body of Individuals (BOIs), which are not mandated to obtain their accounts audited, the due date for filing ITR is 31st July 2025. All the ITR Filing Forms for Financial Year 2024-25 have been notified by the government. Before utilities are released and Form 26AS and Annual Information Statement (AIS) are updated, Taxpayers need to gear up for the ITR Filing. Be careful in your return filing, as incomplete and incorrect information can invite an Income Tax Notice.

Here are 5 Major Reasons that may invite an Income Tax Notice:

Mismatch in Income Reporting

Mismatch in income reporting, where ITR data does not match with Form 26AS/AIS or Form 16, can invite an ITR Notice at the time of processing of the ITR itself. Some examples:

• Mismatch in Salary income reported in ITR, Form 26AS/AIS or Form 16
• Mismatch in Deductions/Exemptions reported in ITR, Form 26AS/AIS or Form 16
• Income Transactions coming in Form 26AS, but not shown in ITR and TDS Credit claimed.

High Value Transactions

High-value transactions, especially where your expenditure does not match with your ITR, can invite a Tax Notice. Some examples: High Value of cash Deposit/Withdrawal in your Bank Account

• A banking company or cooperative bank on which the banking regulation is enforced must report Cash deposits amounting to Rs. 10 lakh or above in more than one account (excluding the current account and time deposit) in a financial year.
• A banking company or cooperative bank to which the banking regulation is applicable must report Cash deposits or cash withdrawals (including through bearer's cheque) totaling Rs. 50 lakh or more in a financial year, from one or more current accounts of a person.

Large Credit Card spent: Payments above Rs. 1 lakh in cash or above Rs. 10 lakh in any other mode made to pay the credit card bill is reported by the banking company, cooperative bank or other financial institution in SFT with your PAN. High Cash Payments/ Reciepts Any person who is liable for audit u/s 44AB of the Act is required to report Receipt of cash payment of more than Rs. 2 lakh for the sale of goods or services of any kind.

Non Filing of ITR

Non-filing of ITR can invite an income tax notice if it is found that your Income was more than the Slab limit. Large transactions, like the purchase of House property and non-filing of ITR, generally invite Income Tax Notice u/s 147. It is usually advised, if you have purchased House Property or are planning to purchase one, please file your ITR, even if your income is below the slab limit.

Claiming Fake Exemption/ Deductions to increase Income Tax Refund

Generally, it is a very common practice among salaried taxpayers to claim fake exemptions/Deductions to increase the Income Tax Refund or reduce Tax Liability. With complete matching with Form 16 and automated scrutiny, this can land you in trouble and invite a tax notice.

Random ITR Scrutiny u/s 143(2)

Random ITR scrutiny u/s 143(2) on the basis of past data, flagged PAN or high value transactions as per the algorithm of the Income Tax Department can also take place.

Received Income Tax Notice! What can happen?

Summon u/s 133(6) for claiming exemptions or deductions in your ITR:

• Give a proper reply and submit all the relevant proof on time.
• File ITR-U and correct the excess exemptions or deductions claimed in your ITR.

Scrutiny Notice u/s 143(2) or Income Escaping Notice u/s 147

• You cannot file ITR-U now.
• You need to proceed legally by submitting the reply.
• Income Tax Officer can levy a Penalty of up to 200%.

Filing ITR for 2024-25

Be very careful in ITR filing for the current year. Best to avoid any kind of fake claim or exemption.