Received An Income Tax Mismatch Notice? Here’s How To Handle It

Sometimes, the credits granted may be more than the actual hours worked. If you can't explain the difference, you should file an updated income tax return without facing a penalty for not doing so. Note that for ITR-U, the filing deadline is 24 months.
Here’s How To Handle An Income Tax Mismatch Notice
Here’s How To Handle An Income Tax Mismatch Notice

The Income Tax Department (ITD) has been issuing a huge number of Income Tax notices to the taxpayers due to several reasons. In an increasingly digital world, financial transactions rarely remain unreported, and therefore, even an unintentional omission in our filing can result in a notice.

Data processing is super quick now, so even a small error can trigger a notice from the tax department. Alok Agrawal, Partner, Deloitte India said “Income tax mismatch notices could be issued in different types of situations. For example, if a salaried employee receives a salary from an employer who has withheld TDS, but inadvertently reports an incorrect tax deduction account number (TAN) for that employer while filing her annual tax return, she is likely to receive an income tax mismatch notice from the IT Department.”

Such an individual would need to log into her account in the tax portal and correct the TAN so that the mismatch could be reconciled.

“Similarly, mismatch notices may be received where an individual may have omitted to report the sale of an asset, eg redemption of Mutual Fund which would have been reflected on her Annual Information Statement (AIS). Hence, it is very important for taxpayers to review all the details reported on the AIS and Form 26AS before filing their income tax returns,” Agrawal added.

Here are some common reasons why you might get Income Tax Mismatch Notice:

Mismatches between information furnished by third-party entities and income tax returns (ITR) filed by the taxpayers.

  • Non-filing of return;

  • Mismatch of TDS / other information in the return filed;

  • Scrutiny of accounts;

  • Not reporting interest income;

  • Ignoring income received from the previous employer;

  • Non-deposition of the full amount of tax before the due date;

  • High-Value Transactions (HTVs);

  • Non-disclosure of items appearing in SFT

  • Investments in the name of family members to avoid tax;

  • Not reporting foreign assets;

  • Ignoring reporting of tax-free income.

But, don't stress; everything has a solution.

“When you receive an Income Tax notice, the first thing to check is that it is in your name and PAN. Once you are satisfied that the notice was issued to you, the next step is to find out the reason behind its issuance,” Abhishek Soni, CEO, Tax2Win, an income tax portal said.

“The introduction of the compliance portal and the e-verification scheme 2021 by the Central Board of Direct Taxes (CBDT) marks a significant advancement in simplifying tax compliance procedures for individuals. With the availability of on-screen functionality on the Income Tax portal, taxpayers can now easily identify discrepancies and take prompt action without the need for cumbersome offline processes. This 'self-contained' feature empowers individuals to reconcile mismatches directly within the portal, streamlining the entire process and saving valuable time,” Soni further said.

There are some predefined inputs among which the user can choose the desired/ appropriate option for submitting the response. By enabling taxpayers to furnish their responses directly on the portal, the initiative ensures a user-friendly approach towards resolving discrepancies, potentially enhancing compliance rates.

Additionally, the requirement for taxpayers who fail to explain the mismatches to submit an updated Income Tax Return (ITR) if eligible ensures accuracy and transparency in the tax system, ultimately promoting greater compliance and accountability.

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