Financial Market Commentary: 24th June 2019

I. Got a tax notice? Here is what you should do (Source - The Economic Times Wealth)

A mistake while filing ITR can fetch you a tax notice. Here is how you can respond to such tax notices

• The tax records are integrated online, so even a small mismatch in detail can be detected and can result in an enquiry.


• Simple calculation errors may get you a demand notice, asking you to pay due tax.


• The IT Department will now pry into your social media accounts to detect any gap between your expenses and reported income.

You can respond to tax notice by logging in to www.incometaxindiaefiling.gov.in.

Different types of notices can be found under options on the dashboard in your account.

Types of notices and how to respond to them

• 131(1A)
  What is it for?
  Assessing officer suspects you have concealed income.
  How to respond
  If you are unable to gather all the documents sought, send whatever you have within the deadline, along with an application seeking more time.


• 139(9)
  What is it for?
  Notice for defective return if wrong form is filled, or income details of a refund claim are missing, or there are multiple mistakes in filing.
  How to respond
  Respond within 15 days. Under ‘e-File’, select ‘e-File in response to Notice u/s 139(9)’ to proceed.


• 143(1)
  What is it for?
  Demand notice for additional tax or other required changes if there is a calculation error or incorrect information.
  How to respond
  Respond within 30 days. Find the notice under ‘e-Proceeding'.


• 148
  What is it for?
  For reassessment if some income has escaped assessment. A case up to six years can be reopened under this.
  How to respond
  File a return of the income being asked. Ask for a copy of the reasons for issuing the notice if you want to contest the notice.


• 156
  What is it for?
  Demand notice for due tax, interest, fine or penalty to be paid by the assessee.
  How to respond
  Pay dues within 30 days. Go to ‘e-File’ and then click on ‘Respond To Outstanding Demand’ to pay.

Mismatch in income, expenses

The IT Department will now pry into your social media accounts to detect any gap between your expenses and reported income. If posts related to foreign holidays, luxury cars, 5 star stays or lavish social events do not fall in line with your declared income, you could be in a pickle. If your spending pattern is not commensurate with the income disclosed in the ITR, you will have the taxman knocking at your door.

Until now, the IT department depended largely on annual information return (AIR) by banks, credit card companies, mutual funds and registrar (for real estate deals) for information on high value transactions. Data culled from social media will make it easier for the authorities to validate AIR information.

By using big data and automation, authorities will be able to keep a better watch on high value transactions. Even a slight discrepancy between what you claim to earn and what you actually spend will get you on the taxman’s radar.

However, experts say this should worry honest taxpayers. A working professional with a travelling job can spend beyond the annual limit by a credit card. He has to spend regularly on flight, hotel and commute, which the company reimburses later.

However, the credit card company records expenditures as high value transactions and may report it in AIR. Or, you may have received a large sum as a gift but missed reporting it in the return. Such expenses can raise taxman’s suspicion but if you have documentary evidence, you should not get flustered. Taxpayers should preserve the relevant bills and documents to explain the transaction in case of an enquiry from the tax department.

Hope you enjoyed reading this edition.