It is natural to make a mistake or two when you do something you don’t often do or are not used to doing – like filing income tax returns. Sometimes we may miss entering specific information, and sometimes there could be an error. In such cases, your return is considered a ‘defective return’ and the income tax department will issue a notice of defective return as per Section 139(9) to rectify the errors. These mistakes, if not rectified in time, can lead to not-so-pleasant repercussions. In this article, we shall talk about situations which render your return defective and how to deal with the notice issued by the IT Department.
The Assessing Officer may consider the below-mentioned reasons, errors or omissions to issue a notice of defective return under section 139 (9):
1. Incomplete ITR-In case income tax return is incomplete, or there is an omission of details in the annexure, statements and columns, which are mandatory. For instance, while claiming deduction under section 80D, its schedule details are not filled or wrongly filled.
2. Missing information on taxes-Taxes paid, but their details are missing in the income tax return. Details of taxes paid like TDS / TCS / advance tax or self-assessment tax should be mentioned while filing the income tax return.
3. TDS claimed, but the corresponding income was not offered for tax. If you have earned interest income from term deposits and tax has been deducted by the bank, both interest income and tax deducted should be reported in the tax return. However, if TDS has been claimed, but interest income has not been reported in the tax return, you may receive a defective notice.
4. Related to books of accounts– If books of accounts are to be maintained, incomplete submission or non-submission of books of accounts including trading account, Profit and Loss Account / Income or expenditure account, Balance sheet, Personal capital account (proprietor, partners, AOP, BOI), etc. as prescribed by the law will lead to defective return notice.
5. Related to Income Tax Audit– If an audit is required to be done under section 44AB, the complete audit report, including profit and loss account, Balance sheet, auditors report, should be submitted. In the absence of these documents or submitting an incomplete audit report, you may invite a defective return notice.
6. Related to Cost Audit- If the entity has to mandatorily conduct ‘Cost Audit’ under the Companies Act, 1956, it fails to submit its details. The return filed will be considered defective, and notice may be issued.
7. Related to Presumptive Taxation-If regular books of accounts are not required to be maintained, or if the return is filed under the provisions of presumptive income, you may receive a defective return notice if the computation of the taxable income is less than the prescribed rate of 8% or 6% of the turnover / gross receipts. Also, in such cases, non-disclosure of details related to sundry debtors, sundry creditors, stock and cash in hand will lead to notice. For instance, gross receipts not mentioned in the Profit and Loss account, or the amount mentioned is more than Rs. 2 crore is ITR 4, will lead to a notice of defective return.
8. Unpaid taxes-Partial payment of taxes against liability or if taxes are paid, but the amount does not match the tax payable in the income tax return, the department may issue a defective return notice.
9. Incorrect details in ITR– ITR filed is incorrect in terms of the turnover/ income limit or not applicable for the reported head of income as prescribed. Such return filed will be considered as defective, and notice shall be issued.
10. Mismatch in the name-The name mentioned on the income tax return does not match with the name on the PAN card.
Suppose the Assessing Officer considers the return filed to be defective. In that case, a notice of defective return shall be sent, and the assessee will have an opportunity to rectify the defect within fifteen days from the date of receipt of such notice. This AO may consider to further allow an extended period on the ground of application.
Step 1: You must revise your return addressing the defects the Income Tax Department has pointed out within 15 days from receiving the intimation order under Section 139(9).
Step 2: You can seek an extension by writing to your local Assessing Officer if you fail to revise your income tax return within 15 days.
If the defect is not rectified within fifteen days or the extended days allowed, the original return will be treated as invalid. This means it will be considered as if no income tax return has been filed.