In India, a “defective return” refers to an income tax return that does not comply with the prescribed rules or lacks necessary information.
Section 139(9) of the Income Tax Act,1961, deals with defective income tax returns. It outlines the process and consequences when the Income Tax Department finds a return filed under Section 139 to be defective.
A notice under Section 139(9) of the Income Tax Act,1961, can be issued for various reasons related to defects in the income tax return.
Here are some common reasons:
- Your return lacks essential details, such as income sources or necessary schedules
- The taxpayer has used the wrong ITR form based on their income type or status.
- Mistakes in mathematical calculations, such as incorrect totals for income or tax.
- Discrepancies between the reported income in your return and the information available to the tax authorities like TDS, bank interest, crypto transactions, dividends etc.
- Incomplete information provided in the return.
- Claiming deductions or exemptions that do not align with the nature of the income or are unsupported
- Failure to report certain sources of income, which may raise red flags.
When defective return notice is issued?
When the Income Tax Department identifies any issues which they think should be rectified by the taxpayer, they will issue a notice under Section 139(9) to the taxpayer, outlining the defects in the notice.
The Assessing Officer (AO) will notify the taxpayer by providing a reasonable time frame (usually 15 days) to rectify these issues.
Failure to address these defects can lead to the return being considered invalid, resulting in potential penalties or re-assessment.
If required, taxpayers can revise their original return and reply to the defective return notice online.
Tax authorities issue notices to the taxpayers under section 139(9) in order to correct the income tax return.
What to do after getting a defective return notice?
After receiving a defective return notice under Section 139(9) of the Income Tax Act, 1961, you should read it to understand the specific defects mentioned in the notice.
The notice will typically outline what information or corrections are required.
Receiving a defective notice gives you an opportunity to correct these issues, but it’s important to respond promptly to avoid penalties.
The taxpayer typically has a specified period to rectify the issues. If not addressed, it could lead to penalties or denial of claimed benefits.
Collect all necessary documents, details, and corrections needed to address the defects highlighted in the notice.
Make the necessary corrections in your income tax return. If the notice permits, you can submit the corrected information without re-filing the entire return. In some cases, it may be necessary to file a revised return using the appropriate form.
You typically have 15 days from the date of the notice to rectify the defects. Make sure to submit your corrections within this period to avoid penalties.
Maintain copies of the notice, your response, and any documents submitted as proof of your corrections.
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What if the defect in the return is not rectified?
If the taxpayer fails to rectify the defects within the given period, the return may be treated as invalid, leading to potential penalties or a re-assessment of income.
In some cases, if a return is deemed defective and not rectified, the taxpayer might need to file a fresh return.
The defective return can also impact the assessment proceedings, as it may delay the processing and lead to further scrutiny.
The Income Tax Department may proceed with the assessment based on available information. This could lead to a reassessment of income, and any income that was not reported may be added to the taxpayer’s total income.
Any deductions, exemptions, or benefits claimed in the return may be denied, leading to a higher tax liability.
Non-compliance may raise red flags, leading to increased scrutiny of future returns or even audits by the tax authorities. In extreme cases, failure to respond to a defective return notice may lead to legal action by the tax authorities.
To avoid these consequences, it’s essential to respond promptly to the defective return notice and rectify the issues identified by the Income Tax Department.
Understanding Section 139(9) is crucial for taxpayers to ensure compliance and avoid complications in their tax filings. Timely responses to defective notices can help in preventing penalties and ensure smooth processing of tax returns.
If the defects are complex or you’re unsure how to rectify them, consider consulting a tax professional for guidance.
Also Read: How to prepare for income tax return filing?
