Section 143 (1) of Income Tax Act

A notice under Section 143(1) of the Income Tax Act is a communication from the Income Tax Department after you have filed your income tax return. This notice tells you whether the tax calculated by the department matches the tax you computed and declared in your return.

Usually, this intimation shows adjustments made by the Income Tax Department that generally result in additional tax liability, interest payments, or refunds payable to you. Let’s understand the key provisions of Sec 143(1), check its scope, and learn how you can respond to it.

What is Section 143(1) of the Income Tax Act?

The notice under Section 143(1) will outline the tax discrepancies between the taxpayer's and department's computations. Any identified adjustments may result in increased tax liability, interest payments, or a refund for the taxpayer.

After processing, the Income Tax Department reviews your return to ensure there are no discrepancies or errors, such as:

• Inconsistencies in data
• Calculation mistakes
• Incorrect data entries

If the department finds any issues, they send you an “Intimation Order” under Section 143(1), which informs you of their findings. You can think of this notice as a communication, which states whether the tax calculations made by you match the calculations made by the Income Tax Department.

Now, this comparison usually leads to two possible situations:

• Either you owe additional tax or
• You are due for a refund

It is essential to note that this process applies to all taxpayers, including salaried individuals, self-employed taxpayers, businesses, banks, and Hindu Undivided Families (HUFs).

Scope of assessment under Section 143(1)

An assessment under Section 143(1) of the Income Tax Act conducts a basic review of your income tax return to catch common errors. If needed, adjustments are made to compute the correct amount of tax. It is essential to note that this assessment is a computerised check to catch:

• Simple errors and
• Incorrect claims in your tax return.

The goal is to ensure that your tax return is accurate and complies with the tax laws.

For better clarity, let’s have a look at some common adjustments:

• Any simple calculation mistakes in your tax return will be corrected.
• If you have made an incorrect claim in your return, it will be adjusted. For example, if you claim a deduction you are not eligible for, it will be disallowed.
• If you claim a loss from a previous year but filed your return late (after the due date specified in Section 139(1)), that loss will not be allowed and will be adjusted.
• If your audit report shows certain expenses that you didn’t claim in your tax return, they will be disallowed.
• If you claim deductions under Section 80 but file your return late, those deductions will not be allowed.
• If you fail to include any income shown in Form 26AS, Form 16, or Form 16A, that income will be added to your total income.

Also read about: What is section 80C in income tax

Process of assessment under Section 143(1)

The assessment process under Section 143(1) of the Income Tax Act ensures that any discrepancies in your tax return are identified and corrected. You are duly notified of these corrections and are also given an opportunity to respond before any final adjustments are made.

The recalculated tax is then adjusted, and you are informed about any additional:

• Tax due or
• Refunds to be received by you

To understand better, let’s see how this process is executed through simple steps:

Step I - Comparative statement

• After making any necessary adjustments to your tax return, a comparative statement is created.
• This statement shows both your original calculations and the adjustments made by the Assessing Officer (AO).
  

Step II - Notification of adjustments

• Adjustments are not made to your return immediately.
• The tax department will notify you in writing or electronically about the adjustments.
  

Step III - Consideration of your response

• You have 30 days to respond to the notification.
• If you respond, your input will be considered before finalising the adjustments.
• If you do not respond within 30 days, the adjustments will be incorporated automatically.
  

Step IV - Recomputation of income

• The AO will recompute your income, taking into account the adjustments.
• They will also calculate the new tax liability and any interest due.
  

Step V - Adjustment against payments

• The re-calculated tax amount will be adjusted against any:
• Advance tax you have paid
• Tax deducted (TDS) or collected at source (TCS)
• Tax relief under agreements (Sections 90, 90A, or 91)
• Rebates
• Self-assessment tax paid
• Other tax or interest payments you have made
  

Step VI - Intimation to the taxpayer

• After computing the tax liability, the department will prepare and send you an intimation.
• This document will specify either the amount you owe or the refund you are due.
  

Step VII - Issuing refunds

• If you are due a refund, it will be granted to you as per the intimation.
  

Step VIII - Loss adjustment intimation

• Even if there’s no change in your tax liability, but losses have been adjusted, you will receive an intimation.
• If no tax is payable or refundable and no adjustments are needed, the acknowledgement of your return filing can be considered the intimation.
• Also, it is worth mentioning that if the AO has already issued a notice under Section 143(2) for detailed scrutiny of your return, issuing an intimation under Section 143(1) is not necessary. In this case, your assessment will be made as per the provisions of Section 143(2).

Also read about: Section 112A of Income Tax Act

How to respond to income tax notice under Section 143(1) of the Income Tax Act?

Responding to a notice u/s 143(1) is necessary to ensure that any discrepancies are addressed properly. Let's go through some simple steps and see how you can respond:

1. Go to the income tax e-filing website and log in to your account using your credentials.
2. After logging in, click on the "E-Proceedings" tab on the website.
3. In the e-Proceedings section, select the "e-Assessment" option.
4. Now, you will see an option for adjustments under Section 143(1)(a).
5. Click on this option to see the details of the notice.
6. After checking the notice, click on "Submit" to start the process of responding to the notice.
7. Now, you will see a list of mismatches found by the Income Tax Department.
   1. Next to each mismatch, there will be a drop-down menu.
   2. For each mismatch, select the appropriate response from the drop-down menu.
   3. If you have specific details or explanations for the mismatch, enter the justification in the provided space.
   4. If you have any documents to support your response, upload them as needed.
8. After entering all required information and uploading any supporting documents, proceed by clicking the "Submit" button.
9. After submitting, you will receive an acknowledgement that your response has been successfully submitted.
   

When does one receive intimations under Section 143 (1)?

It must be understood that an intimation received under Section 143(1) of the Income Tax Act is a routine part of the tax return process. This stage is fully automated with no human intervention and doesn’t involve verifying the actual income. It ensures that all income tax returns:

• Are arithmetically correct
• Do not have internal inconsistencies
• Exhibit correct tax calculations
• Are based on accurate documents

For more clarity, let’s check out some common reasons why you might receive an intimation order from the Income Tax Department:

• If there are differences between the amounts you reported and the records the Income Tax Department has, you will be notified. This could happen if you forgot to report some income or provided incorrect details.
• One common error is related to TDS. If your employer deducted TDS from your paycheck, but there’s a mismatch in the reported TDS amount, you will receive a notice.
• Sometimes, the Income Tax Department wants to review the documents you used to file your tax return. In such cases, they will send you an intimation, and you need to respond promptly with the required documents.
• If you purchase valuable assets (like property or fixed deposits) in the names of your spouse or relatives to avoid taxes, these assets must be reported. If not, you will receive a notice from the department.
• The department might also send an intimation for a random audit of the records and data used to file your tax return. You’ll need to cooperate and provide all necessary information.

Also read about: Section 111A of Income Tax Act

How will I receive notice under Section 143(1) of the Income Tax Act?

The Income Tax Department mostly sends notifications, called “intimations” under Section 143(1). These intimations are sent:

• To your registered email address or
• Through your account on the income tax e-filing portal

Additionally, you might also receive an SMS on your registered mobile number informing you that the intimation has been sent.

Hence, as an assessee, you must make sure that the email address and contact details you provide when filing your income tax returns are accurate and up-to-date. This will help you in:

• Receiving all important communications promptly and
• Responding or taking necessary actions as required
  

What do notices under Section 143 (1) say?

An intimation under Section 143(1) of the Income Tax Act states whether your return matches the department’s calculations. Upon comparison, it is determined:

• If you owe more tax or
• If you are due a refund

Let’s understand through three different scenarios what happens when you receive a notice under Section 143(1):

Scenario I: Matching calculations

• If the tax department's calculations match your self-assessed tax return, this means everything is correct.
• You don’t need to pay any extra tax and won’t receive a refund.
• This shows your return is accurate as per the department's review.

Scenario II: Discrepancies found

• If the tax department finds that their calculations do not match yours, they will send you a notice.
• Usually, this happens due to:
  • Mathematical errors: Simple mistakes in addition, subtraction, etc.
  • Incorrect claims: If you claimed deductions or exemptions that you are not eligible for.
• In this case, you will receive a “demand notice” asking you to pay additional tax.

Scenario III: Overpayment of taxes

• If you paid more taxes than required, the department will notify you.
• They will send an income tax refund notice indicating that you are due a refund.
• Also, the department will process the refund, which is usually paid along with interest.

Also read about: Section 56 of Income Tax Act

What If you do not receive any intimation till the end of a year?

If a taxpayer hasn’t received any intimation under Section 143(1) within a year from the end of the financial year in which they filed their return, it means the return has been processed without any modifications. In this case, the taxpayer can assume that their return has been accepted by the Income Tax Department.

Nature of adjustments under 143(1)

You must be aware that when you file your tax return, the Income Tax Department reviews it to ensure accuracy. While reviewing, they specifically look for any missed income or deductions by comparing the information with their records (like Form 26AS).

Post-comparison, the department reassesses your tax liability if necessary and corrects any mathematical errors or incorrect claims. These adjustments ensure that your tax return accurately reflects your tax obligations. For a better understanding, let’s look at the various types of adjustments that can be made under Section 143(1):

• Missed income, deductions, or exemptions
  If you forgot to include certain income, deductions, or exemptions in your tax return, the Income Tax Department will add or adjust these items. This ensures that all your taxable income and eligible deductions are correctly accounted for.
• Mismatched information with Form 26AS
  For the uninitiated. Form 26AS is a tax statement. It shows details of tax deducted at source (TDS), advance tax, and self-assessment tax paid by you. If the information in your tax return does not match Form 26AS, adjustments will be made.
  For example, if TDS is shown in Form 26AS but not included in your return, it will be added to your tax return.
• Reassessment based on available information
  On the basis of information possessed by the Income Tax Department, they may reassess your income, deductions, or tax liability. This reassessment adjusts your income or deductions to reflect the correct amounts.
• Mathematical errors or incorrect claims
  If there are any calculation mistakes in your return or if you have made incorrect claims (such as claiming a deduction you are not eligible for), these errors will be corrected.
  

Time limit for issue of 143(1)

The Income Tax Department has one year from the end of the financial year in which you filed your return to:

• Complete the assessment under Section 143(1) and
• Send you an intimation
• Let's understand better through an example:
• Say you filed your income tax return for FY 2023-24 on July 31, 2023.
• Now, this financial year refers to the period from April 1, 2023, to March 31, 2024.
• It must be observed that this financial year ends on March 31, 2024.
• As per the current provisions, the department has one year from the end of this financial year (March 31, 2024) to complete the assessment.
• Therefore, the department must send the intimation by March 31, 2024.

Also read about: Income Tax Slabs for FY 2024-25

What is the password for intimation under Section 143(1)?

The intimation received under Section 143(1) is password-protected. The password to access the ITR intimation is your Permanent Account Number (PAN) in lowercase, followed by your date of birth in the format DDMMYYYY without any spaces.

For instance, if your PAN is ABCDE1234E and your date of birth is 01/01/2000, the password to open the intimation would be ‘abcde1234e01012000.’

Action to be taken by the taxpayer after receiving a 143(1)

1. Verify intimation details

• Relevance: Ensure the Section 143(1) intimation pertains to your return.
• Data accuracy: Confirm that the data provided aligns with the financial year mentioned in the intimation.
• Details: Check name, PAN, address, assessment year, and e-filing acknowledgement number.

2. Rectify errors (if applicable)

• Revised return: If errors are identified, file a revised return through the income tax e-filing website.
• Guide: Refer to our article on revising returns online.

3. Disagree with adjustments

• Rectification application: If no errors exist and you disagree with the adjustments, file an online rectification application under Section 154(1).
• Guide: Refer to our article on filing rectification applications.
• Tax demand: Provide your response to the tax demand on the e-filing portal, indicating agreement or disagreement.

4. Escalate if necessary

• Grievances: If dissatisfied with the rectification process, file online grievances or contact your assessing officer.
• Complaint: If no satisfactory resolution is obtained, file a complaint to the income tax ombudsman.

Also read about: What is direct tax code

Conclusion

Section 143(1) of the Income Tax Act is related to sending intimations or communications to the assessee after the tax returns have been reviewed. Usually, this review is made by comparing the self-assessed taxes with departmental calculations. If discrepancies like calculation errors or incorrect claims are found, adjustments are made.

Mostly, taxpayers receive intimation through email or the e-filing portal. These communications detail if any additional tax is owed or refunds are due. Also, an assessee gets 30 days to respond to these intimations. If you do not respond within 30 days, the adjustments will be incorporated automatically.

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