How to Respond to Notice u/s 143(1)(a)?

In an earlier Post regarding Communication u/s 143(1)(a) for PAN XXXxxxxxXX for the A.Y. 2017-18 we had asked readers to wait for further clarity from Income tax department as was communicated by them through their helpline number – 18001034455.

But it’s more than 10 days now and there have been NO further clarification coming from department, we thought we should start responding to Proposed adjustment u/s 143(1)(a) of Income Tax Act, 1961 Notice.

Why taxpayers are getting Notice u/s 143(1)(a)?

The Section u/s 143(1)(a) existed earlier too but has not been used extensively by tax department. What has happened this time they are sending out notices even if there is slightest mismatch between Form 16, Form 16A and Form 26AS versus the return filed.

Even for deductions u/s 80TTA which exempts interest income up to Rs 10,000 in savings bank account which mostly do no figure out in Form 16 are receiving notices. The problem is we still do NOT know what proof tax department would require for this exemption.

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All pensioners who do not have to submit their investment declaration u/s 80C too are receiving this notice.

Other than that salaried employees who have not submitted their investment proofs or rent receipts to their employers and claimed such deductions at the time of filing the return are getting these notices.

How to respond to Notice u/s 143(1)(a)?

The notice mentions that you should respond to the same within 30 days of receiving it. We list down steps you should follow to respond to the notice.

Step 1: Login to the efiling portal – incometaxindiaefiling.gov.in

Step 2: Goto e- Proceeding > eAssessment menu

For some tax payers this section may show nothing even if they have received notice. This is because it takes 2 to 3 days for the details to appear.

This is what is visible on clicking the above menu options.

Also Read: How are your Investments Taxed?

Step 3: Click on Prmia Facie Adjustment u/s 143(1)

This will open the next screen

Also Read: Best Tax Saving Investments u/s 80C

Step 4: Choose “Submit” to Direct to the next page

Step 5: Choose to Agree or Disagree

The details show the same details as present in the notice. Now you have to choose from “Response” – Agree or Disagree.

In case you agree which means the tax department was right in its calculation, you should submit the response and file a revised return within 15 days after paying additional taxes.

Also Read: How to file Revised Income Tax return?

Another thing to notice is if you agree it sums up the Variance – which is a bug in the system. Both the rows question the same exemption and hence it should have shown addition of Rs 1,59,000 only (as in the above example).

Also Read: How to pay additional Self-Assessment Tax Online?

However in most cases Taxpayer would disagree to the addition. So if you respond by choosing Disagree, an additional response table opens up at the bottom asking for more details.

Also Read: Detailed explanation on Mutual Funds taxation

The Form for reply is shown below:

The form has the following fields. Read carefully on what needs to be filled:

TAN

• Enter the TAN of the employer (available in the Form 16 or Form 26AS) for salary income
• If you have income from interest etc, put TAN of bank/company (available in Form 16A or Form 26AS)

Deduction made under section

• Mention 80C (for investment in PPF, Tax Saving Fixed Deposit, etc),
• 80CCD(1), 80CCD(2) or 80CCD(1B) for NPS as the case may be,
• 80TTA for taking deduction of Rs 10,000 on interest from savings account
• 10(13A) for HRA
• 80D for medical insurance
• 80E for education loan
• 80G for donation made to charity/NGOs, etc

You’ll get the complete list from the ITR form you filled

Also Read: 21 changes in Income Tax laws in FY 2017-18

Amount paid/credited by deductor

Put the amount paid – you’ll get this from Form 16 or 26AS (shown below) for salaried and Form 16A or 26AS for interest income, etc.

Nature of receipt as per the deductor

This would be any of five types of income defined by income Tax – salary (Pension is salary income), Business, Capital Gains, income from house and other income (includes interest income)

Also Read: How to Pay 0 Income Tax on Rs 11 Lakh Salary?

Income/Gross Receipts as per the return

Enter the amount after taking on account the above deduction.

So for the case above I would put Rs 4,36,160 (5,95,156  – 1,59,000) which was the income filed in actual tax return

Head of Income/Schedule under which reported in the return

This should be same as “Nature of receipt as per the deductor” until you have put it differently in income tax return. For e.g. Pension income should be treated as salary income but someone unknowingly has put in other income. So in this case he has to fill “Other Income”

Head of Income/Schedule under which reported in the return IS ACCEPTING ONLY NUMERIC VALUE BUT YOU SAID IT IS SAME AS NATURE OF RECEIPT. So you’ll have to put following numbers (Sections) as the case may be:

• Salary/Pension – 17 
• Capital Gains – 54 
• House Property – 24 
• Business/Profession – 28 
• Other Income (includes interest) – 56

This idea came from comment from Sagar (Thanks Sagar)!

Also I am surprised how tax department thinks all taxpayers would know these sections. If it was just 5 they should have given a drop down rather than fill numbers only!

Also Read: When and How can Tax Benefits Claimed Earlier be Reversed?

Reason

There are 10 reasons to choose from as shown below:

In case you claimed HRA which was not present in Form 16 then select reason as “Allowance exempt claimed in return but not in Form 16”

Also Read: How to claim Tax Benefit on both HRA & Home Loan?

For all deductions under chapter VIA (includes 80C, 80D, 80E, NPS related etc) which you claimed but were not part of Form 16 select “Deductions claimed in the return but not in Form 16”

In case everything was present in your Form 16 but still you got notice select “Others” and mention in Justification that the deduction already present in Form 16. Also attach the Form 16.

Justification/Remarks

Briefly state why your Allowance or deduction was not in Form 16. It could be “employer did not consider this deduction” or “investment was made after proof submission to employer” etc.

And most important DO NOT forget to attach relevant documents.

• For 80C investments you can attach the investment proof.
• For HRA you can submit rent receipt, etc.
• I am still not sure what proof to attach for 80TTA!

Also Read: How to Claim Tax Exemptions while filing ITR?

Section 143(1) Acknowledgement

After all the process is complete you get the following acknowledgement:

Disclaimer: Please remember this post is best to my understanding and I am not a tax expert. You might want to consult a qualified tax consultant or CA for your specific case!

To Conclude:

This action was initiated by income tax department as some tax payers misused the “proof not required while filing tax return” part and used to claim deductions they were not eligible for. For e.g. with more strict polices at employer end many people could not claim HRA with fake receipts as rent receipt without landlord PAN in not accepted. But they claimed while filing ITR as this is allowed. We all know there are a lot of genuine tax payers who are not able to claim HRA as landlords DO NOT share their PAN number. Also some tax payers took advantage of 80C without making actual investment.

Also Read: 13 Tax Free Components You Must have in Salary

The intent of income tax department was good – to weed out such events. But unfortunately as we have seen with mot government initiatives – the plan is good on paper but execution is very poor. Same is the case here.

Even tax helpline is NOT able to guide people and telling them to wait. Also this should be stated while filing returns and not sending a notice after that. This would badly hurt people who are not tech savvy and do not check emails frequently & this means a lot of housewives, senior citizens on pension income.

Also sending notice for Section 80TTA – deduction up to Rs 10,000 for interest earned in savings account is ridiculous because I do not understand what proof would be required for the same.

Also Read: 25 Tax Free Incomes & Investments in India

The e- Proceeding form has bugs and it adds income across rows – as shown above. The department has still not corrected these and neither sent further communication. On one hand they want more and more people to file returns by telling it’s simple and then bowl a googly by sending such notices. Hopefully the tax department is working on it and would create more awareness on how to reply to these notices or at the end its tax payer would be sufferer.