Income tax notices, assessments and appeals

We read it and identify the section, the assessment year, the document identification number, the portal it has to be answered on and the response deadline, then tell you plainly whether it is procedural or substantive. We also check who it is addressed to. A notice can reach you as the person being assessed, or as a third party who holds information about someone else, and the two need different replies. Most bad replies come from answering what the recipient feared rather than what was asked. That takes one reading to prevent and months to undo.

The Income-tax Act, 2025 replaced the 1961 Act and renumbered nearly all of it. Processing and scrutiny that sat in section 143 now sit in section 270. Inquiry before assessment moved from 142 to 268. Reopening moved from 148A and 148 to 281 and 280. The power to call for information moved from 133 to 252. A notice carries the numbering of the Act it is issued under, and older years continue to be governed by the repealed Act through its savings provisions. We cite the section printed on your notice and verify it against the Act in force for that year. The mechanics of a reply did not change.

Processing is automated. The return is checked for arithmetic, for claims that are inconsistent on the face of the return, and against the tax credit already reported to the department. The intimation shows two columns, what you filed and what the system computed. Most demands at this stage come from a credit mismatch, a schedule left blank, or a deduction claimed without the schedule that supports it. Before an adjustment is made, the proposed adjustment has to be communicated and the response considered. If that step was skipped, that is itself a ground. We reconcile the two columns line by line, then choose between rectification and appeal.

This notice does one of three things. It calls for a return that was not filed, it asks for accounts and documents, or it asks for a statement of assets and liabilities. It is an inquiry step, and it can precede either a plain assessment or a scrutiny. The reply is a production exercise, and the real risk is not refusal, it is overproduction. Whatever you file becomes part of the record and can be read back at you later in the same proceeding. We produce what was asked, in the form asked, with a covering index. Where an item does not exist we say so on the record rather than sending a substitute.

The department can call for information from anyone, not only from a person already under assessment. Where no proceeding is pending, the officer needs approval from a senior authority before issuing it. These notices reach people who did not file because they believed there was nothing to file: a property sale, a large cash deposit, a maturity payout, a share transaction reported by the counterparty. It is not an allegation. It asks you to explain a transaction the department already has on record. The reply usually has to establish two things, that the transaction happened as reported, and that it either was not income or was below the filing threshold for that year.

The notice states whether the case is limited or complete. A limited scrutiny names the issues selected, and the questions are meant to stay inside them. Selection is largely system driven, off third party reporting and mismatches in what was filed. A limited scrutiny can be widened, but that requires the officer to record the reason and obtain approval from a senior authority. That step matters. If the questions drift outside the stated issues without a conversion being communicated, we put that on record in the reply and answer the listed issues in full anyway. Objecting to scope and answering the scope happen in the same submission, not instead of each other.

A reopening does not begin with the reopening notice. It begins with a show cause notice that must carry the information the department is relying on and must give you the chance to answer before any notice to file a return is issued. The officer then passes a speaking order deciding whether to proceed, with approval from the specified authority. This is where cases most often end, because the information is frequently a third party report that is right about the transaction and wrong about the person, the year or the amount. We answer the information itself, at that stage. After the return notice issues, the argument moves to a much longer track.

There is no officer to visit. Notices arrive on the portal, replies are uploaded with attachments, and units that never meet you draft, review and finalise. Three consequences follow. Deadlines are hard, because the window closes in software and no one is available to extend it informally. File size and format limits shape how a reply is assembled, so a large record is indexed and split rather than dumped. And where a variation is proposed, you are served a show cause notice with the draft, and a hearing has to be requested through the portal. That request is a step you take, not one that happens for you.

This is the part most descriptions leave out. Before anything is drafted, the year is rebuilt. The return goes against the books, the books against the bank statements, the annual information statement and the tax credit statement against both. Every difference is listed with a reason beside it, and the ones with no reason are chased until they have one. That worksheet decides the reply. The submission is then a short covering note, a schedule of the reconciliation, and annexures numbered to match it. The officer should be able to trace a figure from the notice to the ledger entry without asking a second question. A reply drafted before that worksheet is finished usually earns a second notice.

Not every addition is worth contesting. Some are correct, some are arguable, and some rest on a reading of the section that will not survive. We separate them before replying. Where an item is right, it is conceded plainly and the tax on it computed and paid, because a wrong item argued anyway weakens the items worth arguing. Where an item is contested, the reply carries the provision, the year it applies to and the facts already on record, not an assertion. Making that split needs a view of what the appeal would look like, which is why it is taken at reply stage rather than after the order arrives.

The appeal is filed electronically in the prescribed form against the order, with grounds of appeal, a statement of facts and proof of the tax the Act requires to be paid before it is admitted. Grounds are drafted from the assessment order issue by issue, because a ground not taken is difficult to add later. Evidence that was not filed before the officer is admitted only in defined situations, which is the second reason the assessment stage record matters so much. First appeals are heard through the faceless route. We draft the grounds, the statement of facts, the written submissions and the paperbook, and appear where a hearing is granted.

A single intimation reconciled against a filed return is one thing. A scrutiny running across several issues, a reopening, or a year where the books have to be reconstructed before anything can be answered is another. Scope changes when the record is incomplete, when the notice covers more than one year, when a search or survey sits behind it, when an international transaction or transfer pricing is involved, or when the reply needs a valuation or a certificate this office does not issue. We tell you which of these apply at the reading stage, not later. Representation before the Tribunal and above, and any matter requiring counsel, is arranged separately.