A flawed Income Tax Return (ITR) is one that falls short of meeting the stipulations outlined in the Income Tax Act of 1961.
Section 139(9) of the Income Tax Act, 1961, grants authority to the Assessing Officer (AO) to issue a notice to a taxpayer in the event their income tax return (ITR) is deemed defective. A defective ITR is one that fails to align with the stipulations set forth in the Income Tax Act, potentially due to incomplete or inconsistent information.
Upon receiving a notice under Section 139(9), the taxpayer is obligated to rectify the ITR’s defect within a 15-day window from the date of notice receipt. Failure to comply may result in the AO treating the ITR as though it was never submitted.
Examples of incomplete or inconsistent information rendering an ITR defective include:
- Missing or inaccurate personal details, such as name, PAN number, or address.
- Omissions or inaccuracies in income-related data.
- Errors or omissions in deduction information.
- Discrepancies between the ITR and supporting documents, such as TDS certificates or investment proofs.
It is crucial to acknowledge that even minor discrepancies can render an ITR defective. Consequently, utmost care and diligence should be exercised when completing the ITR form. Should you receive a notice under Section 139(9), it is advisable to initially scrutinise the grounds for receiving the notice before deciding on the appropriate course of action.
When the Income Tax Department identifies an ITR as flawed, they will dispatch a notice in accordance with section 139(9) of the Act to the taxpayer. This notice provides the taxpayer with a 15-day window to rectify the defects. Failure to address these issues within the stipulated timeframe will result in the ITR being treated as though it was never filed.
It is crucial to understand that a defective ITR can lead to significant repercussions. For instance, the taxpayer may become liable for paying interest and penalties on outstanding taxes. Additionally, they may be exposed to further enforcement measures, such as scrutiny of their tax records or even potential legal action.
Which errors can result in an ITR becoming defective?
Let’s examine some of the factors that can classify a filed ITR as defective.
Inaccurate data in the Annual Information System (AIS): It’s possible that you inadvertently inputted an incorrect challan number when submitting your ITR, or you made an advance tax payment for the wrong assessment year. Alternatively, your employer might have filed an inaccurate TDS return, leading to erroneous data in your Form 26AS, AIS, or TIS. Such errors can also occur if the bank incorrectly recorded the TDS amount in their TDS returns.
TDS without the corresponding income declaration: A common reason for categorising a return as defective is a disparity between the income and TDS figures reported in the return and those reflected in the taxpayer’s Form 26AS. Form 26AS serves as a comprehensive record of TDS deductions made on behalf of the taxpayer by various entities, including employers, banks, and investment institutions. The Income Tax Department relies on Form 26AS to verify the accuracy of the income and TDS data declared by the taxpayer in their ITR.
If such a mismatch exists between the income and TDS reported in the return and the information in Form 26AS, the Income Tax Department may issue a notice to the taxpayer pursuant to section 139(9) of the Income Tax Act, 1961. Subsequently, the taxpayer will be required to clarify the discrepancy to the Income Tax Department and rectify the flaw in their ITR.
Several potential factors can contribute to a discrepancy between the income and TDS figures in the return and those in Form 26AS:
- The taxpayer may have unintentionally omitted some of their income from the return.
- The “Gross Total Income” and each category of income have been recorded as “nil”, but tax obligations have been calculated and settled.
- Errors may have occurred during the taxpayer’s TDS calculations.
- Deductors might have failed to remit the deducted TDS amount to the Income Tax Department on the taxpayer’s behalf.
- Deductors may have made errors while filing their TDS returns.
It is crucial to underscore that even a minor divergence between income and TDS can result in the ITR being labelled as defective. Thus, it is imperative to exercise caution and thoroughness when completing the ITR form, and it is advisable to cross-verify the information with Form 26AS before finalising and submitting the return.
Necessary tax audit not carried out: Individuals with business income are required to submit their income tax audit report by September 30, 2023, for the financial year 2022-23 (Assessment Year 2023-24). Additionally, a penalty under Section 271B may be levied if taxpayers do not have their accounts audited or fail to furnish an audit report in accordance with Section 44AB using Form 3CA and Form 3CB or Form 3CD, as applicable, by the specified deadline.
How to deal with a defective ITR notice?
Correcting a flawed ITR notice is a straightforward process. If the designated time frame for filing the income tax return for a specific assessment year has not yet expired, the individual has the option to submit either a new or a revised return. Here’s how you can address the issue:
Comprehend the problem: Carefully review the notice received from the Income Tax Department, which outlines the shortcomings in your ITR. Understand precisely what needs correction.
Collect necessary information: If the deficiency is linked to incomplete or inconsistent data, gather all the essential information required to rectify the issue. Ensure you have accurate and complete documentation.
Remedy the deficiency: After assembling the necessary information, proceed to rectify the defect in your ITR. You can accomplish this task either online or by submitting an updated ITR form.
Submit the revised ITR: Once you’ve successfully addressed the defect, submit the revised ITR to the Income Tax Department for processing.
If there are no alterations in the gross total income or the deductions claimed (such as under sections 80C, 80D, etc.), filing an ITR in response to a defective notice will be regarded as a fresh submission. This new ITR will replace the previously filed defective return, effectively substituting the original ITR upon responding to the defective notice.
However, if an individual intends to modify the gross total income or the deductions claimed, they will need to file a revised ITR. In this scenario, it is essential to reference the original ITR number in the revised ITR form.
The deadline for submitting a revised return is December 31, 2023, for the fiscal year 2022-23 (Assessment Year 2023-24). If this deadline has passed, the taxpayer will not have the option to submit a new or revised return. The sole recourse available at that point is to address the notice issued.
The AO may grant the individual a 15-day window from the notice's receipt date to rectify the defect. If the taxpayer is unable to respond to the notice within this timeframe, the ITR will be invalidated. Moreover, if rectifying a mistake in the defective ITR results in an additional tax liability, interest may be imposed on the outstanding amount.
Receiving a notice from the income tax department can be unsettling, which is why it’s essential to first understand the reasons behind receiving the notice and how to effectively respond to it.