I received an income tax notice — how do I respond?

Not every income tax notice means the same thing — knowing the section matters.

Section 143(1) — Intimation: issued automatically after CPC processes your return, comparing your return with CPC's recalculation (TDS mismatches, arithmetic errors). If no demand or refund, it's just intimation; otherwise, action is required.

Section 142(1) — Inquiry: the AO seeks documents or information before assessment — typical asks: bank statements, supporting documents for deductions, capital gain calculations, foreign asset disclosures. Section 143(2) — Scrutiny: your return has been selected for detailed scrutiny, usually within 6 months from the end of the financial year of filing.

Section 144 — Best Judgment Assessment: issued if you don't respond to earlier notices — the AO makes an ex-parte assessment based on available material. Section 148 — Reassessment: income has 'escaped assessment', issued under the new Section 148A (with mandatory pre-notice inquiry) post Finance Act, 2021. Time limit: 3 years for normal cases, 10 years if escaped income is over ₹50 lakh.

Section 245 — Adjustment Notice: issued before adjusting a current refund against outstanding demand of any year. Section 154 — Rectification: to correct apparent mistakes. Section 156 — Demand: formal demand for tax with a 30-day payment window.

All notice responses now flow through the e-Filing portal.

Step 1: log into incometax.gov.in using PAN and password (two-factor authentication recommended). Step 2: go to 'Pending Actions' → 'e-Proceedings' — all notices and pending responses appear here. Step 3: click the specific notice; the portal shows section, deadline, queries raised, and a 'Submit Response' button.

Step 4 — prepare response: read each query carefully; compile supporting documents (PDF within the specified size limit); draft a covering narrative; for complex matters, consult a CA or tax lawyer before submitting. Step 5: submit response with attachments — the portal generates an Acknowledgement Receipt; save it.

Step 6: follow-up notices — the AO can ask further questions, so continue responding through the portal. Step 7 — personal hearing: for some scrutiny cases, you can request a video conference hearing by emailing the National Faceless Assessment Centre with the case ID. Step 8: receive the assessment order on the portal; if unfavourable, appeal rights follow (next section).

Document everything. The portal preserves your submissions, but keep local backups.

Disagreeing with a tax demand triggers a multi-level appeal mechanism.

Section 154 — rectification: for apparent mistakes (arithmetic errors, missed TDS credits, double-counted income) online via the portal — fast resolution. Commissioner of Income Tax (Appeals) — CIT(A): first appellate authority; file Form 35 online within 30 days of the assessment order. Fee ₹250 (income up to ₹1 lakh), ₹500 (₹1-2 lakh), ₹1,000 (₹2 lakh+).

Income Tax Appellate Tribunal (ITAT): second level — appeal within 60 days of CIT(A) order; specialised technical tribunal. High Court: only on a substantial question of law — appeal within 120 days of ITAT order. Supreme Court: final. The Dispute Resolution Committee (DRC) under Section 245MA is an alternative for small taxpayers (income up to ₹50 lakh, disputed income up to ₹10 lakh) and faster than CIT(A).

To have a demand stayed pending appeal, file an application under Section 220(6) — stay is generally granted on payment of 20% of the disputed demand.

Vivad se Vishwas Schemes: the government periodically launches one-time settlement schemes for disputed tax (currently in window or expected). These let you settle pending appeals at reduced rates. Engage a reputable, specialised tax CA or lawyer.

A Section 148 reassessment notice is very serious — it allows the Income Tax Department to reopen past assessments where income is alleged to have escaped tax. After the Finance Act, 2021, the process was structured under Section 148A.

Section 148A(b) — pre-notice inquiry: the AO sends a 'show cause' notice asking why reassessment shouldn't be initiated; response window 7-30 days. Section 148A(d) — order to issue notice: if the AO is satisfied, an order to proceed is issued. Section 148 — reassessment notice: calls upon you to file a return for the relevant year. Section 147 — reassessment proceedings: the AO reassesses income. An order under Section 147 concludes with a fresh assessment and revised tax demand.

Time limits post 2021: 3 years from the end of the relevant assessment year for normal cases; 10 years for cases where escaped income is ₹50 lakh or more in that year; earlier years cannot be reopened.

Action steps: engage a reputable, specialised tax CA or lawyer immediately; respond to the Section 148A(b) notice substantively — many proceedings are dropped at this stage if the response is well-drafted; don't ignore, because non-response leads to ex-parte reassessment with maximum tax plus 50-200% penalty plus interest; cooperate during proceedings — Section 271 penalty is harsher for non-cooperation.

CAs and tax lawyers cover overlapping but distinct territory.

Chartered Accountant (CA) is ideal for: routine notices (143(1), 142(1) for documents, 245); rectification under Section 154; ITR-related issues — revised return, defective return; GST notices, TDS reconciliation, audit queries; Faceless Assessment responses on factual matters; and periodic tax compliance and planning.

Tax lawyer is ideal for: Section 148 reassessment proceedings; search / seizure (Section 132) and survey (Section 133A); penalty proceedings under Section 271(1)(c) and 270A; prosecution proceedings under Chapter XXII; appeals at ITAT, High Court and Supreme Court; transfer pricing, international taxation, complex legal interpretation; and Settlement Commission applications and Vivad se Vishwas optimisation.

For high-value cases, engage both — the CA handles computation and documentation, and the tax lawyer manages legal strategy and representation.

Fees: CA — ₹5,000-₹50,000 for routine notices, ₹50,000-₹2,00,000 for complex scrutiny. Tax lawyer — ₹25,000-₹5,00,000+ for appeals; senior counsel for major High Court matters can charge per hearing.

For finding the right professional, see our good-lawyer guide.