Income tax notice is what everybody wants to escape. Sometimes it even comes when the assessee paid all his due tax and filled return on time and no misleading information in the returns. In such a case Mr. Amit got the notice of tax department. Some others might also find themselves in the same situation. This is expert view as what to do in this situation.
Do not panic
A person first needs to read the notice carefully. Check all the details as Name, PAN number and other details are correct. If yes, it means the notice belongs to you.
Then know what the notice say. Sometimes notices are issued for some clarification and not the tax demand. The assessing officer sometimes issue notice asking certain information or documents related to income tax return filed by the assessee. The officer may also issue summons to the assessee in relation to return filed by some other person with whom the assessee has entered into a business transaction.
So one should check about the notice and even if there is a demand notice, there is no issue to panic. One should check about the demand and under which section of income tax act, the demand arises. Demand notice does not fully mean that you need to pay it. There is always an option of appeal.
Some people choose to ignore as they think tax department will forget about it with the passage of time. This is not a good idea. One must respond to the notice of income tax department. An assessee need to response a demand notice within 30 days of the receipt of the notice or as mentioned in the notice, whichever is earlier. After this, the department may attach interest and penalty on the demand. Income tax department also know how to recover amount. It includes cease the bank account and other property too.
You need to choose you want to do appeal against this notice or not. If you are going to appeal, you needn’t to pay the demand amount first.
For appealing, you need to write a letter to assessing officer requesting him to take hold of demand as long as to appeal. It’s assessing officer wish to accept or reject it.
There are four levels of appeal – the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal, the High Court and finally the Supreme Court.
But appealing without paying the demand amount is not suggestive as in the case of losing the case, you need to pay the demand amount plus interest plus penalty.
If you are not going to appeal, remember you need to pay the demand amount within 30 days of receipt of letter from income tax department for escaping from interest and penalty liability
You should make sure to have all the relevant documents for appealing against the demand notice. The documents may includes bank statement, salary slip, vouchers, computation of income, notes etc.
For appealing, you should have a strong case and valid proofs with you. Without relevant documents it also can leave you with less money.
Tax department also can send tax demand for the earlier assessment years so one should keep records of earlier years too. As per income tax rules, an assessee is required to maintain records of 8 years. For the assessee who has an asset outside India needs to maintain records of 15 years.
Lastly, it is advisable to take advice from tax practitioners when you are shocked with demand notice as it includes a lot of money but very less knowledge about income tax laws.