Tax Alert: Tax Department sending out Intimation Notices during ITR Processing for large refund/deductions

In the significant changes, there is an important update for the income tax taxpayers that now the income tax department started sending out the intimation notices while the processing of ITR.

A Chartered Accountant on Twitter shared, “The Income Tax Department is now sending out Intimation Notices during ITR processing under the “Risk Management System”. “

If you reported high-value transactions or requested a substantial refund, you may receive an alert. This is just a request to confirm or correct your return.

Check your worklist area on the Income Tax Portal and respond accordingly—either reaffirm your claim or file an amended ITR if needed.

Delay in ITR Processing

This year ITR and refund processing is delayed in comparison of last year’s. Many taxpayers who filed ITR in June, are still waiting for their ITR to get processed.

When is the Income Tax Intimation Notice issued?

During the processing of your ITR, the tax department checks for mathematical errors, internal discrepancies, and tax and interest computations before validating tax payments. After the ITR is processed, the tax department sends an intimation under section 143(1). It is worth noting, however, that the tax department performs an initial examination during the ITR processing. In the future, they may issue an income tax notice under a different section, demanding additional information.

When do you get Intimation under Section 143 (1)?

• If a taxpayer is due a refund on their return, but the tax department has made some changes.
• When a taxpayer must pay additional tax or interest.
• If no refund request is received and the taxpayer’s return has already been processed.

What does the intimation notice under Section 143(1) mean?

• Your income, deductions claimed, and tax computations correspond to the tax department’s assessments and calculations. In this situation, the notice will indicate that you owe no further taxes. Additionally, both tax payable and refundable will be displayed as zero.
• Additional tax demand notice: There may be a case in which you failed to declare a certain income in your income tax return, claimed an improper deduction, or calculated your tax incorrectly, resulting in additional tax payable. In this case, the tax department will issue you an assessment and ask you to pay the additional tax and interest (if applicable).
• Income tax refund: According to the income tax department’s assessment, you paid more taxes than your real tax burden. In such cases, your income tax refund will be displayed as owed to you.