Received an income tax notice? Read it carefully, verify it on the Income Tax e-Filing Portal, identify the exact issue and Assessment Year, gather your supporting documents, and submit a point-wise reply through e-Proceedings before the deadline. Most current notices — for Assessment Year 2025-26 and earlier — are still issued under the Income-tax Act, 1961. The new Income-tax Act, 2025 has been in force since 1 April 2026, but it governs Tax Year 2026-27 onward, so its notice provisions will apply once assessments for that year begin. This guide covers both.
1. Why the Income Tax Department Sends Notices
An income tax notice is a formal communication from the Income Tax Department asking for clarification, correction, supporting documents, or payment in relation to a specific Assessment Year. Receiving one is not, by itself, an allegation of wrongdoing. Most notices are generated automatically after the department’s systems compare your return against data received from employers, banks, registrars, mutual funds and other reporting entities through the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS). A defective schedule, a TDS mismatch, an unexplained high-value transaction, or a routine scrutiny selection can all trigger a notice without any suggestion of concealment.
What matters is not the fact of the notice but the response. A timely, well-documented reply resolves most notices without escalation. Ignoring one, or replying without proper evidence, is what turns a routine query into an assessment dispute.
2. Which Act Applies: Income-tax Act, 1961 or Income-tax Act, 2025?
The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961. This is a genuinely useful distinction for anyone replying to a notice today, because the two Acts apply to different periods:
- Income-tax Act, 1961 continues to govern every tax year that began before 1 April 2026 — in practice, this covers Assessment Year 2025-26 (Financial Year 2024-25) and all earlier years. Almost every notice reaching taxpayers right now, including reassessment notices reopening older years, falls under the 1961 Act’s substantive provisions, even where the notice is issued and processed after 1 April 2026.
- Income-tax Act, 2025 applies from Tax Year 2026-27 onward (the period from 1 April 2026). Returns for this Tax Year will only be filed from mid-2027, so notices citing the new Act’s renumbered provisions will start appearing once those returns are processed.
The section numbers have also changed extensively — the new Act runs to 536 sections against roughly 800 in the old one, and even where a provision has been retained in substance, its number has usually moved. Rather than assuming which Act governs a given notice, check the Act and section cited in the notice itself, or have this confirmed as part of your reply preparation.
3. Common Types of Income Tax Notices
The type of notice determines both the response required and the applicable timeline. The most common notices taxpayers see, referenced here by their long-standing 1961 Act section numbers, are:
3.1 Defective Return Notice — Section 139(9)
Issued when the return filed is incomplete or inconsistent — a missing schedule, an unreported financial statement, or a mismatch between income reported and tax credits claimed. The taxpayer is generally given 15 days from the date of the notice to rectify the defect, extendable on request. An unrectified defective return is treated as though no return was filed, with loss of carry-forward benefits and other consequences.
3.2 Intimation and Adjustment — Section 143(1)
Generated after automated processing of a filed return, comparing it against AIS, TIS, Form 26AS and other records. The taxpayer can accept the proposed adjustment, dispute it with evidence, or partially agree.
3.3 Scrutiny Assessment — Section 143(2)
Selects a return for detailed examination of income, deductions and exemptions claimed, conducted primarily through faceless, online e-Proceedings. Selection may follow risk-based data analytics or random selection and does not by itself imply wrongdoing.
3.4 Reassessment (Escaped Income) — Sections 147/148
Issued where the department believes income chargeable to tax was not assessed in an earlier year, generally following a show-cause procedure under Section 148A before the formal notice. Reassessment notices are subject to defined time limits tied to the amount of escaped income and require prior approval of a specified authority.
3.5 Demand Notice — Section 156
States an amount payable following assessment or processing, with reasons for the demand. The taxpayer may accept and pay, dispute with a reasoned response, or seek rectification where the demand results from an apparent error.
3.6 Clarification and High-Value Transaction Notices
Seeks an explanation for a specific entry — a large cash deposit, a significant capital gain, a foreign remittance — usually flagged through AIS or TIS rather than proposing an immediate adjustment. These are generally the easiest to resolve with prompt, documented evidence.
4. What to Do Immediately After Receiving a Notice
- Read it in full before reacting. Note the notice type, the Act and section cited, the Assessment Year, the specific issue raised, and the response deadline.
- Verify it on the e-Filing Portal. Log in and check Dashboard → Pending Actions → e-Proceedings to confirm the notice is genuine before responding to anything received only by email or SMS.
- Confirm the Assessment Year and reference number. A surprising number of defective replies are prepared against the wrong year.
- Break the notice into individual queries. A point-wise understanding produces a point-wise reply, which is what the department expects.
- Diarise the deadline and start preparing well ahead of it — extension requests are discretionary, not guaranteed.
5. Documents You Need Before Replying
The exact document set depends on the notice, but a well-prepared response usually draws on:
- Filed ITR, acknowledgement (ITR-V) and computation of income
- Form 16 / Form 16A and Form 26AS
- Annual Information Statement (AIS) and Taxpayer Information Summary (TIS)
- Bank statements relevant to the transaction or period in question
- Investment proofs and deduction documents (PPF, NPS, insurance, home loan interest, donations)
- Property documents and capital gains computations, where relevant
- Audited financial statements, books of account and GST returns, for business income
- Any prior notices and replies on the same or a related issue
Reconciling your AIS, TIS and Form 26AS against the return before drafting a word of the reply resolves a large share of notices before any further correspondence is needed.
6. Step-by-Step: Replying Through the e-Proceedings Portal
- Read and analyse the notice in full, listing every issue raised separately.
- Verify it under Dashboard → Pending Actions → e-Proceedings, matching notice number, Assessment Year and issuing authority.
- Gather documents relevant to each issue raised.
- Reconcile your return against AIS, TIS, Form 26AS and bank records, and identify the reason for any genuine difference.
- Draft a point-wise reply — reference to the notice, Assessment Year, a brief introduction, a response to each query, supporting annexures, and a closing declaration.
- Upload documents as clearly labelled, legible annexures within the portal’s file-size and format limits.
- Submit through e-Proceedings after a final review — most submissions cannot be edited or withdrawn once filed.
- Download the acknowledgement and retain it with the reply and all annexures.
- Track the proceeding periodically for further queries, hearing notices or the final order.
7. Drafting an Effective, Point-wise Reply
A professional reply generally includes the taxpayer’s name and PAN, the Assessment Year, the notice reference and date, a brief acknowledgement, a response to each query with supporting annexures referenced by number, and a closing declaration confirming accuracy. Address every question the notice actually asks — a generic explanation that doesn’t map to the specific query raised is one of the most common reasons a matter escalates rather than closes. Keep the tone factual and courteous throughout; emotional or defensive language does not strengthen a case and can distract from the facts that do.
8. What Happens If You Don’t Respond
- Defective return notices left unrectified render the return invalid, with loss of carry-forward benefits for business and capital losses.
- Scrutiny, reassessment and clarification notices left unanswered can result in an ex-parte assessment — the department proceeds on the information already on file, without your explanation or evidence, usually to your disadvantage.
- Demand notices left unresolved attract interest, and can lead to recovery action including adjustment of refunds and, in defined circumstances, attachment of bank accounts.
- Missed deadlines generally close the window to explain a discrepancy at the assessment stage, pushing the matter into appeal — a longer and costlier route than a timely reply would have been.
Extensions are sometimes available on request before the deadline, but approval is discretionary — don’t wait until the last few days to ask.
9. Common Mistakes Taxpayers Make
- Assuming the notice can be ignored, or that it will lapse on its own
- Leaving preparation to the final days, resulting in incomplete or rushed submissions
- Submitting explanations without supporting documentary evidence
- Not reconciling AIS, TIS and Form 26AS before replying
- Giving a generic response instead of addressing each query individually
- Providing information inconsistent with the original return or supporting records
- Using an emotional or argumentative tone instead of a factual one
- Handling a scrutiny, reassessment or high-value matter without professional review
10. When to Bring in a Chartered Accountant
Straightforward clarification notices can often be handled directly. Professional involvement is worth the cost where the notice involves scrutiny assessment, reassessment of an earlier year, a large or unusual transaction, foreign income or assets, a substantial demand, or where the same issue keeps recurring across multiple notices — each of these carries a higher cost of a wrong or incomplete response than the cost of a proper review upfront.
11. How Marcken Consulting LLP Helps
Marcken Consulting LLP is a Chartered Accountancy and valuation firm. Our income-tax practice reviews the notice and the applicable provisions, reconciles AIS, TIS, Form 26AS and financial records against the return, prepares a point-wise reply supported by proper documentation, uploads and submits it through e-Proceedings, and follows the matter through to its conclusion — including further queries, virtual hearings and, where required, rectification or appeal. We work with salaried individuals, professionals, business owners, LLPs, companies, startups and NRIs. Where a matter also calls for a valuation report or a Merchant Banker’s certificate, that work is coordinated within the same engagement rather than handed off separately. Our broader taxation services cover return filing, advisory and representation beyond notice response; readers dealing with valuation-linked provisions of the Income Tax Act may also find our guide to sections requiring valuation reports useful.
Frequently Asked Questions
What should I do immediately after receiving an income tax notice?
Read it in full, verify it under Pending Actions → e-Proceedings on the e-Filing Portal, note the Assessment Year and deadline, and start gathering supporting documents. Don’t respond to a notice received only by email or SMS without confirming it on the portal first.
Is my current notice under the Income-tax Act, 1961 or the Income-tax Act, 2025?
Check the Act and section cited on the notice itself. In practice, almost all notices reaching taxpayers today relate to Assessment Year 2025-26 or earlier and fall under the 1961 Act, since the new Act governs Tax Year 2026-27 onward and returns for that year won’t be filed until mid-2027.
Can I reply to an income tax notice online?
Yes. Nearly all notices are responded to through the Income Tax e-Filing Portal’s e-Proceedings facility, where you upload your reply and supporting documents and receive an acknowledgement on submission.
What happens if I miss the deadline to respond?
Consequences depend on the notice type — a defective return can become invalid, scrutiny or reassessment proceedings can conclude ex-parte based on information already on file, and unresolved demands attract interest and recovery action. It is generally far more efficient to request an extension before the deadline than to respond late.
Should I reconcile AIS, TIS and Form 26AS before replying?
Yes — doing this first is one of the most effective steps in preparing any reply, since a large share of notices trace back to a mismatch between these records and the return filed.
When should I involve a Chartered Accountant?
Scrutiny assessments, reassessment of an earlier year, high-value or foreign transactions, substantial demands, and repeated notices on the same issue are all situations where professional review meaningfully reduces the risk of an incomplete or costly response.
Speak to Us
If you’ve received an income tax notice and want it reviewed before you respond, we offer a no-charge 30-minute consultation with no obligation.
Marcken Consulting LLP | CA Murli Chandak — IBBI-Registered Valuer (Securities or Financial Assets)
Website: marckenconsulting.com
Phone: +91 99980 59923 / +91 99985 39902
Email: crm@marckenconsulting.com
