Library / Income-tax Act, 2025: The Professional's Master Guide

40. Handling Income Tax Notices

Almost every taxpayer now receives some communication from the department: an intimation after processing, a request for information, or a notice for scrutiny. Most are generated automatically from data matching. Knowing what each one means, and how quickly to act, avoids unnecessary demands.

40.1 Types of communication and how to respond

Communication	What it means	Time to act	How to respond
Intimation after processing (section 270)	CPC has processed the return; may show demand, refund or no change	30 days for demand; rectification within 4 years	Compare with the return; if an adjustment is wrong, file rectification online or appeal
Proposed adjustment before processing	CPC proposes to adjust income or disallow a claim (mismatch with Form 168, audit report)	30 days	Agree or disagree online with reasons; revise the return if needed
Defective return notice	Return lacks required information or documents	15 days (extendable)	File a corrected return in response; otherwise the return becomes invalid
Request for information (old 133(6))	Officer seeks information about transactions (often from AIS)	As specified	Provide factual information with documents; it is not an assessment
Inquiry before assessment (section 268)	Notice to file a return or produce accounts and documents	As specified	Comply fully; non-compliance can lead to best judgment assessment and penalty
Scrutiny notice	Return selected for detailed examination	As specified in each notice	Point-wise replies with evidence through the portal
Show cause or draft order	Proposed additions before the final order	As specified (usually 7 to 15 days)	Rebut each addition with facts, law and evidence; request personal hearing if needed
Reassessment show cause (section 281)	Information suggests income escaped assessment	Minimum period stated in notice	Object on facts and law; explain the information; insist on the material relied on
Penalty show cause	Proposal to levy penalty	As specified	Show bona fide explanation, full disclosure, or immunity eligibility
Demand notice	Tax payable after an order	30 days	Pay, or appeal and seek stay
Refund adjustment intimation (section 438)	Refund proposed to be set off against old demand	30 days	Confirm or contest (demand already paid, stayed or wrong)
TDS default intimation (TRACES)	Short deduction, late payment or late filing	Promptly	Check; file correction statements; pay interest and fee if correct

40.2 Getting the basics right

Verify that the notice is genuine using the Document Identification Number (DIN) on the e-filing portal; communications without a DIN are invalid except in specified situations.
Keep the email and mobile number on the portal updated, and check the e-proceedings tab regularly; notices are served electronically.
Never ignore a notice, even if it looks wrong. A short reply stating the facts is better than silence.
Where the issue is a mismatch between AIS and the return, first check whether the AIS data is correct and submit feedback where it is not.

Illustration 145: Mismatch intimation

A CPC intimation proposes to add Rs. 2,40,000 of interest shown in Form 168 but not in the return. The taxpayer finds that Rs. 1,80,000 was reported under "income from other sources" as a single figure and Rs. 60,000 belongs to an FD held for his minor son (clubbed but reported separately). He responds online, disagreeing with the adjustment and explaining where each amount appears in the return. The proposed adjustment is dropped.

Practice note

For clients with many notices, prepare a single notice tracker with DIN, section, year, date of issue, due date, officer, status and next action. Review it weekly. Missed deadlines are the main reason small issues become large demands.

Chapter summary

• Identify the type of communication and deadline; verify the DIN.

• Respond point-wise with documents; never ignore a notice.

• Use AIS feedback for data errors; maintain a notice tracker.