Section 143(1): Letter of Intimation

Important Keyword: Income Heads, IT Notice, Section 143(1).

Section 143(1): Letter of Intimation

Once the taxpayer files their return, the income tax department performs an initial check. This process involves verifying any arithmetic mistakes, incorrect claims in the return, differences in tax calculations, and confirming if tax payments are accurate. If the department finds any issues, they send the taxpayer an intimation letter under section 143(1). This letter shows a comparison between the figures provided in the filed Income Tax Return and those calculated by the income tax department.

Intimation under section 143(1)

When a taxpayer submits their return, it undergoes an initial assessment by the Central Processing Centre (CPC). The CPC, established by the Central Board of Direct Taxes (CBDT), centralizes the processing of returns to quickly determine tax liabilities or refunds.

Purpose and Benefits of the CPC

The CPC automates the initial processing of tax returns, providing several benefits:

• For Taxpayers: Faster and smoother processing of returns.
• For the Tax Department: Reduced workload, allowing focus on more complex tasks.

Process of Preliminary Assessment

The assessment involves a computer-driven system that checks the return for accuracy. Here’s the step-by-step flow:

1. Recalculation of Income: The system recalculates the total income or loss based on the available information.
2. Verification: Major categories are verified, including:
   • Incomes under various heads
   • Gross total income
   • Deductions under Chapter VIA
   • TDS and taxes paid (Self Assessment tax and Advance Tax)
3. Adjustments and Intimation:
   • After verification, adjustments are made as per section 143(1).
   • An intimation letter is sent to the taxpayer detailing the proposed adjustments.
   • The taxpayer must respond within a prescribed time limit.
   • If a response is received, final adjustments are made accordingly. If not, the proposed adjustments are considered final.
4. Final Tax Liability: Adjustments are made against TDS and other relief claims under sections 90/91 if applicable, followed by the issuance of the final intimation to the taxpayer.

Types of Intimations

• No Demand or No Refund: No adjustments made, and the filed return is accepted as is.
• Demand Intimation: Adjustments result in additional tax liabilities.
• Refund Intimation: If the tax liability is lower than the taxes paid, the excess amount is refunded.

Types of Adjustments under Section 143(1)

The CPC may issue an intimation letter for the following adjustments:

• Arithmetic Errors: Corrections of calculation mistakes.
• Incorrect Claims: Disallowance of claims that are evidently incorrect based on the return’s information.
• Disallowed Expenses: Expenses reported in the audit report but not in the return.
• Set-Off of Losses: Disallowance of loss set-offs if the previous year’s return was filed late.
• Unreported Income: Income shown in Form 26AS/16A/16 but not reported in the return.
• Inconsistencies: Contradictions within the return or with other sections.

Sample Intimation letter u/s 143(1)

Communication of Intimation under section 143(1)

Taxpayers can receive the intimation letter under section 143(1) through their registered email or mobile number on the income tax portal. The Central Processing Centre (CPC) is the sender of these intimations.

Time Limit for Issuance

The income tax department must issue the intimation under section 143(1) within nine months from the end of the financial year in which the return was filed.

Example

If Jay filed his income tax return on July 20, 2023, for the financial year 2022-23, the income tax department can send the intimation under section 143(1) up to December 31, 2024. This is because it is nine months from the end of the financial year 2022-23, in which the return was filed.

No Communication within Timeframe

If a taxpayer does not receive any intimation within this nine-month period, it implies that there have been no changes or corrections made to the initially filed return. Consequently, there are no modifications in the tax liability or refund due. In such cases, the filed return is considered to have been accepted as filed, effectively serving as an intimation under Section 143(1).

Steps to download Intimation under Section 143(1)

1. Login to the e-filing portal
   Login to the income tax website using valid credentials.
2. Navigate to View Filed Returns
   Go to e-file > Income Tax Returns > View Filed Returns
3. Click on View Details
   For the relevant Assessment Year, click on View Details
4. Download Intimation Order under Section 143(1)
   In the next step, taxpayers can see the status of each filing stage. If it shows ‘Processed’, they can download the intimation by clicking on ‘Download Intimation Order’.
   
   
5. Open Intimation Order under Section 143(1)
   The intimation order is password-protected. The password to open the intimation letter is PAN in lowercase and the date of birth (DDMMYYYY) is without any space. Eg: PAN is AAAPA1234A and the date of birth is 01/01/2000. The password would be aaapa1234a01012000.

Response to Intimation under section 143(1)

Upon receiving the intimation, the taxpayer should initially verify the correctness of the information provided. This includes confirming details such as the Name, PAN, Assessment year, etc.

Case scenario	Action
The taxpayer’s filed return matches the department’s calculations, resulting in no additional tax demand or refunds.	In such cases, no actions are required from the taxpayer. And in cases where excess tax are paid the refund amount will be credited to their pre-validated bank account.
As per the calculations of the department, the tax liability is lower however while filing the return taxpayer has paid excess taxes.	In this case, no actions are required by the taxpayer and the refund will be credited to their pre-validated bank account.
There are a few errors in the return filed by the taxpayer.	The taxpayer needs to file a revised return u/s 139(5).
The tax liability as per the calculations of the department is higher than the tax paid by the taxpayer while filing a return.	If the taxpayer Agrees: They need to pay the outstanding demand and file a response. If the taxpayer Disagrees: They need to file a Rectification request u/s 154.

Consequences of Non-response

Upon receiving an intimation letter under section 143(1), the taxpayer must respond within the specified time limit.

Consequences of Non-Response

If the taxpayer fails to respond within the given timeframe, the income tax department will treat the proposed adjustments as final. The department will then proceed to calculate the final tax liability or refund based on these adjustments.

Final Intimation

After these calculations, the taxpayer will receive a final intimation letter detailing the ultimate tax liability or refund. This final letter concludes the assessment process under section 143(1).

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Official Income Tax Return filing website: https://incometaxindia.gov.in/