Income tax Notice Under Section 143(1) of Income Tax Act

Introduction

Filing income tax returns is an essential responsibility for taxpayers, and the process doesn't end there. After you have filed your return, the Income Tax Department carries out a preliminary assessment to determine the tax payable or refund due to you. This assessment is done through a computerized system known as the Centralized Processing Centre (CPC). Once the assessment is complete, the department issues an intimation under Section 143(1) of the Income Tax Act. In this comprehensive guide, we will delve into the details of this intimation and how to interpret it.

Understanding Intimation under Section 143(1)

The intimation under Section 143(1) is a communication from the Income Tax Department to the taxpayer, informing them of the preliminary assessment results. It is important to note that this intimation is not an income tax notice, but rather a confirmation of the initial processing of your return. The purpose of this intimation is to highlight any apparent mistakes or discrepancies in your return that have been identified by the computerized system.

Types of Intimations under Section 143(1)

There are three possible types of intimations that a taxpayer can receive under Section 143(1):

1. Intimation with no demand or refund: This type of intimation indicates that the department has accepted your return as filed without any adjustments or changes.
2. Intimation determining demand: If the computerized system identifies any discrepancies or mistakes in your return that result in a tax liability, this type of intimation will be issued. It will mention the amount of tax due and provide a challan for making the payment.
3. Intimation determining refund: In cases where the computerized system finds that you have paid excess tax, this type of intimation will be issued. It will mention the amount of refund due to you and provide the necessary details for processing the refund.

Center for Centralized Processing

The income tax department encountered issues that caused the processing of income tax returns to be delayed due to the rapidly rising quantity of income tax returns and a jurisdiction-based processing methodology for all returns filed.

As a result, the Central Board of Direct Taxes (CBDT) was given the authority under the Finance Act of 2008 to create a plan for the centralized processing of returns in order to quickly determine the tax owed from taxpayers or the rebate they are entitled to. The department approved the strategy that CPC at Bangalore would process paper and e-returns without any interaction with taxpayers and in a jurisdiction-free way based on the suggestions of the Technical Advisory Group.

Benefits for both the tax department and the public were anticipated by the CPC project. The preliminary processing of citizens' returns became easier and quicker, and the department was freed from the burden of preliminary evaluation, which can be computerized, allowing them to focus on more important tasks.

Taxpayers become anxious whenever they receive a communication from the income tax division. However, one should not be concerned with Section 143(1) intimation. To make it easier for taxpayers to deal with such notifications, we will go into detail in this post on notifications received by Section 143(1).

Preliminary Assessment under 143(1)

Initial return processing by CPC is entirely computerized, and Section 143(1) Intimation is also a record created by a computer. The CPC verifies the information submitted on each tax return using information from the income tax department's own records (such as Form 26AS prepared using information from collecting banks, TDS returns, etc.), and this notice often only flags obvious mistakes discovered by the mainframe system.

• Total income or loss is recalculated by the computerized system after the return is filed based on the department's records and provides a comparison with information submitted by the taxpayer.
• 'As submitted by the taxpayer in the Return of Income' and 'As computed under Section 143 (1)' are the two columns in the intimation.
• Comparisons are made for significant categories like
  • Income under various heads,
  • Gross total income,
  • Deductions under Chapter VIA (80C, 80D, etc.), and
  • Tax deducted at source, and tax paid by taxpayers in the form of advance tax and self-assessment tax
• The income computed in accordance with Section 143(1) is adjusted appropriately, and the final tax liability or rebate is determined.
• Adjustments are only made when the taxpayer has been notified in writing or electronically, to the email address included in the submitted income tax return, of the proposed adjustments.
• Before making the final adjustment, the taxpayer's response must be received within 30 days following the intimation's issuance date. If no response is received within that time frame, the first adjustments will be used instead.Once the final tax liability has been determined, it is offset against TDS and tax payments as well as any additional Section 90/91 relief, if any.
• There must be a prepared and sent to the taxpayer intimation. 

The following list of probable hints is discussed:

• Intimation with no demand or no refund - This typically occurs when the department accepts the return as filed without making any changes.
• Intimation determining demand –When adjustments are made under Section 143(1) because of a mistake discovered and a tax liability is determined, a notification determining demand is issued.
• When a tax is determined to be refundable, a notification of the determination of refund is issued, either because there is no discrepancy in the return that was filed or because adjustments have been made in accordance with Section 143(1), taking into account the taxes and interest that the taxpayer has already paid.
• Refunds, if any, must be given to the taxpayer at the time a demand letter is sent in the event of a final tax liability.

What is the password for Section 143(1) Intimation?

The notice provided in accordance with Section 143(1) is password-protected. Your PAN (in lowercase) followed by your date of birth in the format DDMMYYYY, with no spaces, will serve as the ITR notification password.

The password to open the notification will be "abcde1234e01012000" if your PAN is ABCDE1234E and your date of birth is 01/01/2000.

Nature of modifications under 143(1)

According to Section 143(1), total revenue or loss is calculated after the following modifications:

• Arithmetical mistake in the return

• Any inaccurate claim that is obvious from any information in the return. Examples of incorrect claims include:

• A claim made on a tax return that conflicts with another entry of the same or another item in the form, such as when revenue from other sources is deducted from business income but not stated under income from other sources.

• Disallowance of set off of losses in the current fiscal year that are carried over from prior years where the return was filed beyond the deadline
• Disallowance of costs included in the audit report but not in the income tax return.

Time Limit for Issuance of Intimation

The intimation under Section 143(1) should be sent to the taxpayer within one year from the end of the financial year in which the return was filed. For example, if you filed your return for the financial year 2022-23 in July 2023, the intimation can be sent any time until 31st March 2024. If you do not receive any intimation within this period, it means that there were no adjustments made to your return, and the acknowledgement filed itself is deemed to be the intimation.

What to Do After Receiving an Intimation

Upon receiving an intimation under Section 143(1), it is important to take appropriate action based on its contents. Here are the steps you can follow:

1. Review the Intimation: Carefully review the intimation to ensure that the details mentioned are correct and pertain to your return. Check for any arithmetical errors or incorrect claims that have been identified.
2. Rectify Mistakes: If you identify any mistakes in the intimation that can be rectified by filing a revised return, you can do so by logging into the income tax e-filing website. Refer to our article on how to revise your income tax return for detailed guidance.
3. Disagree with Adjustments: If you do not agree with the adjustments made by the computerized system, you can file an online rectification application under Section 154(1) to correct the mistakes mentioned in the intimation. Our article on filing a rectification application provides step-by-step instructions.
4. Respond to Tax Demand: If the intimation indicates a tax demand that you agree with, it is important to pay the tax amount mentioned. You can make the payment using the pre-filled challan attached to the intimation. Choose "Tax on regular assessment (400)" under the "Type of payment" field in the challan.
5. Seek Clarification or Assistance: If you are not satisfied with the processing of your rectification return by the CPC or have any further queries or concerns, you can file online grievances or contact your assessing officer. In case of no satisfactory action, you have the option to file a complaint with the Income Tax Ombudsman.

However, if the taxpayer accepts the tax demand made by the income tax department after making the aforementioned changes, they must pay those taxes. However, when paying tax on a demand made pursuant to this Section, please select "Tax on regular assessment (400)" in the challan's "Type of Payment" field.

If you want to make a physical payment, the pre-filled challan is included with the following notification.

Conclusion

Receiving an intimation under Section 143(1) of the Income Tax Act can seem daunting, but it is an important part of the income tax filing process. By understanding the different types of intimations, reviewing the contents of the intimation received, and taking appropriate action, you can ensure compliance with the Income Tax Department's requirements. Remember, if you have any doubts or concerns, it is always advisable to consult a tax professional who can guide you through the process.

Intimation under Section 143(1) is not an income tax notice, but rather a confirmation of the preliminary assessment of your return. It is essential to carefully review the intimation, rectify any mistakes, and respond to any tax demand or refund mentioned. By following these steps, you can effectively navigate the process and ensure compliance with the Income Tax Act.