Don't get caught! Errors that can result in a defective return notice

Income tax notice: Errors in your Income Tax Return (ITR) can lead to a defective return notice, causing significant inconvenience. Common mistakes like incomplete ITRs, missing tax information, and TDS and income mismatches can trigger such notices. Here's a closer look at these errors and how to avoid them to ensure your tax filing is accurate and compliant.

When and why defective return notices are issued

A defective return notice is sent by the tax authority when they identify errors or inconsistencies in your Income Tax Return (ITR). These errors might include missing or conflicting information, calculation mistakes, or other issues. Defective return notices are issued under Section 139(9) via email to your registered email ID, and can also be accessed on the income tax e-filing portal.

The notice aims to prompt taxpayers to correct these errors to ensure their tax return is accurate and complete

Common reasons for defective return notices

The Assessing Officer may issue a defective return notice for various reasons, including:

Incomplete ITR

Necessary details in annexures, statements, or mandatory columns are missing, such as unreported income from all sources.

Missing tax information

Taxes paid but details omitted in the ITR, including TDS, TCS, advance tax, or self-assessment tax.

TDS and income mismatch

TDS claimed but corresponding income not reported in the ITR. For instance, if you earned interest income from term deposits and tax was deducted by the bank, both should be reported in the ITR. Tax assistance platforms can help by auto-populating income details and uploading Form 26AS to prevent discrepancies.

Bookkeeping issues

Incomplete or non-submission of mandated books of accounts like trading accounts, Profit and Loss accounts, Balance sheets, etc.

Income tax audit concerns

If an audit is required under Section 44AB, the complete audit report, including profit and loss account, balance sheet, and auditor’s report, must be submitted. Incomplete submissions may trigger a defective return notice.

Cost audit non-compliance

Failure to submit 'Cost Audit' details as required by the Companies Act, 2013.

Presumptive taxation inaccuracies

Inaccurate computation of presumptive income, non-disclosure of relevant details, or mismatched gross receipts can trigger a notice. For example, if gross receipts are not mentioned in the Profit and Loss account or exceed Rs 2 crore in ITR 4.

Tax payment discrepancies

Partial payment of taxes or paid amounts not aligning with the tax liability in the ITR.

Incorrect details in ITR

Incorrect details regarding turnover, income limits, or inappropriate reporting for a specific head of income.

Name mismatch

When the name in the ITR does not match the name on the PAN card.

How to respond to defective return Notice u/s 139(9)

If you receive a defective return notice, you have 15 days to respond. Here’s what to do:

Revise your return: Address the defects pointed out by the Income Tax Department within 15 days.

Seek extension: If unable to revise within 15 days, you can request an extension.

Failing to rectify the defect within the given period or the extended period may result in your return being treated as invalid, leading to potential consequences like interest, penalties, non-carry forward of losses, and forfeiture of specific exemptions.