What is a Defective Return Notice?
Whenever any error occurs in filing Income Tax Returns, the tax authority, i.e., the Income Tax Department, declares it as a defective return. The assessee having a defective return receives a notice from the Income Tax Department under Section 139(9).
The assessee has 15 days to respond to the notice and file his reply. Such an anomaly can occur due to several factors.
It is necessary to timely reflect on the mistakes made in filing so that you can rectify them and respond to your notice in a better manner.
If you fail to rectify the error or fail to give a satisfactory reply, then your ITR can become invalid also.
Difference Between Defective Return and Invalid Return
It is very normal to commit a mistake or two when you are doing something. But to ignore it and not rectify it in due time can result in unforeseen circumstances.
An ITR will not be discarded just because you committed an error in filing it. But if you fail to submit a proper reply within the due time frame, then your return will be treated as invalid.
An invalid return renders your ITR null. In the case of an invalid return, your entry will be cancelled, and you can’t claim any returns for that financial year.
Unlike a defective return, an invalid return discards the return in full sense. An invalid return cannot be filed again like a defective return.
What is the Reason for Defective Notice 139(9)?
The assessing officer, while processing a return, may consider the following factors to decide the credibility of returns:
• The return is deemed defective if any or all of the information that must be reported or included in it is left out, or if any required schedules, annexures, or declarations are not included.
• The return is deemed faulty if all taxes are paid but their information is missing from the ITR.
• When taxes of any kind, including TDS, are paid but the accompanying income is not included in the ITR for taxation.
• When accounting records are not maintained as required by law.
What Should I Do After Receiving Notice Under Section 139(9)?
The IT department provides a window of 15 days to respond to such a notice. Failure to file for a response in such a timeframe will result in an invalid return. Such failure will also result in refunds. (if applicable)
• Identify Cause: Examine the reason for the defect by reading such notice carefully. It aids in determining the root source of this kind of flaw.
• Analyze and Revise: After analyzing the reason for such an anomaly, such a record can be corrected by filing a raised return. It should be kept in mind that the revised return should not contain any errors. Special consideration should be paid to the errors that were listed by the department in the notice.
• Submit: Once you’ve made the modifications, turn in the revised document of return on the IRS website or through a tax professional.
• Acknowledgement: A receipt will be received from the Income Tax Department, which confirms the revised return.
Follow the progress of your amended return and confirm that the tax department is handling it.
Note – If you choose to ignore this notice then your returns for the year can be cancelled. Failure can also lead to penalties, and you can be rendered ineligible from certain exemptions.
Withdrawing or editing a response of notice under 139(9)
As per the revised rules, you cannot withdraw a filed response of a Defective Return Notice but you can edit it.
How to Avoid Defective Return Notices?
• Whenever you claim credit for TDS, make sure to attach related receipts/income.
• There should not be any discrepancies in tax payments. If taxes are not paid in full or the paid amount does not match with the tax liability. Then, it will trigger a notice under 139(9).
• There shall be a cost audit compliance. Failure to submit ‘Cost Audit’ details as per the guidelines of the Companies Act 2013 can lead to the issuance of a Defective Return Notice.
• Presumptive income should be correctly computed, there should not be a non-disclosure or mismatched gross receipts.
• Regular accounting records, including profit and loss statements, should be kept up to date and properly filed.
• The income shown in Form AIS 26 should match.
• Your details in certain documents should not mismatched.
As an example, a person's name on their PAN card and their ITR may not match.
Conclusion
A person should not panic after receiving a Defective Return Notice. They should analyze the errors, and they can also take the assistance of a certified professional to rectify such notices.
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