Introduction : Sections 143(2), 148, 156, and 271 Explained
Receiving an Income Tax notice can be overwhelming, but not all notices indicate wrongdoing. Many are issued for verification or clarification purposes. Understanding the type of notice and responding appropriately can help you avoid penalties and reduce legal complications.
This article provides a comprehensive explanation of key Income Tax notice sections, reasons for issuance, and the appropriate response strategy.
Section 143(2): Notice for Scrutiny Assessment
Meaning
This notice indicates that your income tax return has been selected for a detailed examination or scrutiny by the Income Tax Officer (ITO).
Common Reasons for Issuance
- Mismatch in TDS or income data
- High value deductions or refunds claimed
- Unusual or suspicious financial transactions
- Large cash deposits not supported by income
Response Strategy
- Remain calm — this is a verification process, not an accusation
- Collect supporting documents (Form 16, rent receipts, bank statements, etc.)
- Respond within the stipulated time frame
- Be prepared for a personal hearing or to submit documents online
Section 148: Notice for Income Escaped Assessment
Meaning
This notice is issued when the department believes that your income for a previous year was under-reported or not disclosed. The case is reopened for reassessment.
Common Reasons for Issuance
- New information received through banking or GST systems
- High-value transactions not reported
- Past returns not filed
Response Strategy
- Request the recorded reasons for reopening the case
- File the return under Section 148 within the due date
- Provide relevant documentation to support your claims
- Engage a tax professional for drafting an effective and compliant reply
Section 156: Notice of Demand
Meaning
This is a formal demand for payment of outstanding tax, interest, penalty, or fees.
Common Reasons for Issuance
- Demand raised after completion of assessment
- Errors discovered during scrutiny or rectification proceedings
- Penalty for late filing or other non-compliance
Response Strategy
- Verify the correctness of the demand raised
- Pay the demand within 30 days to avoid further legal action
- If the demand is incorrect, apply for rectification or request a stay
Section 271: Penalty for Non-Compliance
Meaning
This notice indicates the initiation of penalty proceedings for failure to comply with provisions of the Income Tax Act.
Possible Triggers
- Concealment of income
- Filing inaccurate particulars
- Non-filing or late filing of return
Response Strategy
- A penalty is not automatic — you have a right to be heard
- Present valid reasons such as genuine error, illness, or delay in receiving documents
- File a structured reply or legal representation
- You may request a personal hearing before the penalty is finalized
Best Practices for Responding to Any Income Tax Notice
- Verify authenticity of the notice through the official Income Tax Portal
- Adhere to deadlines — most notices are time-sensitive
- Submit a formal response — casual replies are not accepted
- Maintain documentation — ensure you keep copies of all replies and supporting documents
- Seek professional help from a Chartered Accountant or tax consultant
Case Study: Scrutiny Under Section 148
A small business owner received a notice under Section 148 for non-disclosure of certain bank transactions in FY 2020–21.
Our firm assisted in:
- Filing a revised return
- Reconciling bank data with reported income
- Drafting a structured response to the notice
Outcome: The case was resolved with no additional tax liability.
Understanding the Income Tax Appellate Process in India
Your Legal Right to Challenge Unfair Tax Orders
If you receive a tax order that you believe is incorrect or unjustified, the Income Tax Act provides a well-defined appellate structure that allows you to challenge it. Knowing your rights and how to approach the process can protect you from undue financial and legal stress.
What is an Income Tax Appeal?
An appeal is a formal process through which a taxpayer can challenge decisions such as:
- Incorrect tax demands
- Rejected refund claims
- Disallowed deductions or expenses
- Excessive penalties
Appellate Authorities: Hierarchy and Jurisdiction
1. Commissioner of Income Tax (Appeals) – CIT(A)
- First level of appeal under Section 246A
- Handles appeals against orders passed under Sections 143(3), 144, 147, 154, 271, etc.
- Must be filed within 30 days from the date of the order
2. Income Tax Appellate Tribunal (ITAT)
- Second level of appeal under Section 253
- No new evidence allowed unless permitted by the Tribunal
- Matters heard by a two-member bench: one Judicial Member and one Accountant Member
3. High Court
- Appeals can be filed under Section 260A
- Limited to substantial questions of law
- Must be filed within 120 days of the ITAT decision
4. Supreme Court of India
- Final authority under Article 136 of the Constitution
- Only for cases involving constitutional issues or significant questions of law
Filing an Appeal: Step-by-Step
- Submit Form 35 online (for CIT-A level)
- Clearly mention the grounds of appeal
- Attach the assessment order, computation, and related notices
- Pay the applicable appeal fees as per assessed income
Common Grounds for Appeal
- Addition of unexplained income
- Disallowance of legitimate deductions (Sections 80C, 80D, etc.)
- Wrong income classification (e.g. capital gains vs business income)
- Denial of refunds
- Orders passed without being given a hearing
Benefits of Filing an Appeal
- Protects your legal rights as a taxpayer
- May result in reduction or elimination of tax, penalty, or interest
- Helps avoid future litigation or prosecution
- Demonstrates intent to comply with tax laws
Case Study: Appeal Before CIT(A)
A salaried professional received a demand of ₹2.8 lakhs due to a mismatch in Form 16 and ITR data.
We assisted in:
- Filing an appeal with CIT(A)
- Submitting revised Form 16 and employer confirmation
Result: Full relief granted and the demand was nullified.
Professional Assistance with Income Tax Notices and Appeals
At LTD Solution, we specialize in handling:
- Responses to Income Tax Notices under Sections 143(2), 148, 156, 271
- Appeals before CIT(A), ITAT, and higher authorities
- GST and Direct Tax Representation
Our services include:
- Review and legal analysis of notices
- Drafting structured replies
- Filing of appeals and stay petitions
- Representation before appellate and assessing authorities
