Income tax notice

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 December 2015 Dear Sir,
One of my client in engaged in the business of manufacturing and sale of hand tools on small level. And yearly turnover would be around 7 to 8 lacs. Now he has received a notice from local office stating that he has TIN no. in VAT Dept.. If he is income tax assessee then furnish copy of itr from AY 2012-13 to AY 2014-15. And copy of P&L A/c, Balance Sheet, And Bank Statement, Copy of Capital A/c.
The assessee had file online IT return of AY 2013-14 to AY 2015-16 u/s 44AD.

Now I have following queries -
1. In AY 2012-13 his gross sales was about 4 lacs only. Hence profit would be about 50K To 60K only. In respect to AY 2012-13, what clarification should be give, as itr for ay 2012-13 is not filed.
Whether the sales tax assessment order would be sufficient to enclosed for the 2012-13.

2. As the assessee has opted sec. 44AD in AY 2013-14 to AY 2015-16, therefore P&L a/c and balance sheet not prepared, Whether the copy of itr acknowledgement is sufficent to enclose.

Please give me some valuable suggesstions to defend the matter.

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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19 December 2015 Probably the notice has been received because of some mismatch between his VAT returns and income tax returns during AY 2012-13 to AY 2014-15. As you have said IT return for AY 2012-13 was not filed. Check and reconcile the sales shown in annual VAT returns and IT returns for the AY 2013-14 and 2014-15. Also check the gross turnover shown in VAT return for AY 2012-13. If there is no mismatch in any year than you can confidently say that there is no infirmity between sales shown in VAT and IT returns for relevant period.
Regarding non furnishing of IT return in AY 2012-13 you have to claim that gross sales were Rs. 4 lacs only and at 8% there will be no tax liability hence no return was filed.
For AY 2013-14 to 2015-16 file copy of income tax returns along with computation of income and reply that since return was filed u/s 44AD no books were required to be maintained.

Querist : Anonymous

Querist : Anonymous (Querist)

19 December 2015 As the language of notice says - Are you an Income tax assessee ? that means they have no information about filed itr and there is no PAN. is mentioned on said notice. therefore question of mismatch not arise. I think this is act of mo&&y business by local staff on the TIN no. information provided by any third party. And notice no. is written by hand on the notice, whereas these days such notices are issued online and responce is to be submitted online, where as this notice is asking to submit documents in local office.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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31 July 2024 Dealing with such notices can be challenging, but addressing each aspect systematically will help in resolving the issue. Here’s a detailed response to your queries:

### **1. Clarification for AY 2012-13**

**Issue:** The notice requests documents for AY 2012-13, but the ITR for that year was not filed. Your client had gross sales of about ₹4 lakhs and profit of ₹50,000 to ₹60,000 for AY 2012-13.

**Steps to Take:**

1. **Explanation in Response:** In your response to the notice, clearly explain that the gross sales for AY 2012-13 were under the threshold for mandatory filing under Section 44AD. Since the gross sales were below ₹1 crore, the assessee was not required to maintain detailed accounts or file a P&L account and balance sheet under the presumptive taxation scheme.

2. **Supporting Documents:** Attach any available documents that support the turnover and profit figures, such as sales tax assessment orders or bank statements showing the receipts and payments related to the business.

3. **Letter of Explanation:** Draft a letter explaining that the income was below the threshold for detailed reporting under Section 44AD, and hence, the ITR was not filed for AY 2012-13. Mention that the business operations were small-scale and the records were not maintained in a detailed manner as required for larger businesses.

4. **Alternative Evidence:** If available, provide any other evidence to show the nature of the business and its turnover, such as sales invoices or other business documents.

### **2. Filing under Section 44AD for AY 2013-14 to AY 2015-16**

**Issue:** The client has opted for Section 44AD for AY 2013-14 to AY 2015-16, which allows for presumptive taxation, and hence, detailed P&L accounts and balance sheets were not prepared.

**Steps to Take:**

1. **ITR Acknowledgement:** The copy of the ITR acknowledgement should be sufficient to show that the returns were filed under Section 44AD. This acknowledgment confirms that the returns were filed and accepted by the Income Tax Department.

2. **No Detailed Accounts Needed:** Under Section 44AD, detailed accounts are not required if the presumptive taxation scheme is followed. Thus, providing the ITR acknowledgment and a brief explanation that the returns were filed under Section 44AD should suffice.

3. **Attach the Relevant Documents:** Along with the ITR acknowledgment, you can attach a letter explaining that the P&L account and balance sheet are not applicable under Section 44AD, and only the prescribed income and expenditure details were reported.

### **Additional Considerations:**

1. **Verify the Notice Authenticity:** Confirm the authenticity of the notice. Since the notice lacks a PAN number and was hand-written, it’s essential to verify whether it’s an official communication or a possible miscommunication. Check with the local tax office or the Income Tax Department’s online portal.

2. **Responding to the Notice:**
- Draft a clear and concise response addressing each query.
- Provide all the requested documents to the best of your ability.
- Ensure you follow up to confirm that your response has been received and processed.

3. **Online and Offline Submissions:** Even though the notice requests documents in the local office, you may also try submitting your response online if the facility is available. This ensures that you cover all possible avenues for response.

### **Sample Response Letter:**

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**Subject: Response to Income Tax Notice Regarding AY 2012-13 and AY 2013-14 to AY 2015-16**

Dear Sir/Madam,

Ref: Income Tax Notice dated [Insert Date]

I am writing in response to the notice received regarding the submission of income tax documents for AY 2012-13 to AY 2014-15. Please find below the details and documents provided in compliance with your request:

1. **AY 2012-13:**
- **Explanation:** The gross sales for AY 2012-13 were approximately ₹4 lakhs, and the profit was between ₹50,000 to ₹60,000. As the turnover was below ₹1 crore, the ITR was not filed under Section 44AD. Detailed accounts were not maintained for this small-scale business.
- **Supporting Documents:** Attached are the sales tax assessment orders and bank statements showing the transactions related to the business for AY 2012-13.

2. **AY 2013-14 to AY 2015-16:**
- **Filing Under Section 44AD:** The returns for AY 2013-14 to AY 2015-16 were filed under Section 44AD. Therefore, detailed P&L accounts and balance sheets were not prepared.
- **Supporting Documents:** Attached are the ITR acknowledgments for the respective years as proof of filing under Section 44AD.

We hope this clarifies the queries raised in the notice. Please let us know if any further information or documentation is required.

Thank you for your attention.

Sincerely,
[Your Name]
[Your PAN Number]
[Your Contact Information]

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By addressing these points clearly and providing the requested documents, you should be able to handle the notice effectively. If needed, consult with a tax professional to ensure that your response is comprehensive and accurate.