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Income Tax Department issues 58,322 scrutiny notices. Here’s the reason and How to file a reply?

Typically, the scrutiny notices are issued by the Income Tax Department for verification, reassessment, or regular assessment or limited scrutiny.

The Tax Department has issued notices of scrutiny for over 58,322 taxpayers who filed their income tax return (ITR) for FY’17-18. The first phase cases were selected under the e-Assessment Scheme 2019 for ITR filed for FY’18. The online ITR notice was provided before 30th September 2019.

Experts state that there has been a rise in the number of scrutiny notices issued this year, and a large number of the people who received online income tax notice had declared foreign income and assets in their ITR. Shilpa Bhatia, tax director at Maheshewary and Associates Llp, said that a jump of more than 30% was witnessed in cases selected for scrutiny assessment. She added that it looks like the tax department’s primary area of focus is individuals with foreign income.

The tax department can select ITRs for scrutiny until up to six months from the end of the fiscal year in which the return was filed. Hence, the return filed for FY’18 filed before or on the last date to file ITR, i.e., 31st July 2018, can be issued scrutiny notices till 30th September 2019.

Earlier, new rules were added to the Income Tax Slab for the financial year 2019-20 that created confusion for individuals, unaware of the additions, to track their ITR status.

Why are scrutiny notices issued?

Typically, the scrutiny notices are issued by the Income Tax Department for verification, reassessment, or regular assessment or limited scrutiny. If the department requires any details or information or clarification concerning the assessment of ITR, notices under Sections 142 (1) and 143 (2) can be issued.

Earlier, the taxpayers were required to visit the tax department after receiving scrutiny notices physically, but now, the “e-proceeding” facility assists in eliminating person-to-person contact with the tax authority with the help of ITR login, making the process more transparent.

How to file a reply

After receiving the notice, read it carefully, and reply to it within the given time frame. Check whether your income tax account is free of any demands or arrears pending in your name. Each notice from the tax department has a different procedure that needs to follow in filing a reply. The majority of the responses can be submitted online through your income tax account unless your accessing representative or department asks you to visit physically, specifically. The majority of the tax notices can be replied to online.

It is mandatory to reply to a tax notice. Failing to do so, you might end up a hefty penalty that can be as high as 300% or face prosecution with a jail term that can go up to 7 years. However, if you miss the tax notice for a genuine reason, you must request an extension either by approaching the corresponding assessing officer or through the department’s online portal.