Receiving an income tax notice can be unsettling—for individuals and businesses alike. As Chartered Accountants, it’s our job to ensure clients respond correctly, completely, and calmly.

Notices are increasingly common with AI-powered systems flagging mismatches, high-value transactions, and unreported income. While not all notices are bad news, they must be handled professionally and within deadlines to avoid escalation.

In this blog, we’ll cover:
✅ Common types of IT notices
✅ What triggers scrutiny
✅ How to prepare documentation
✅ Step-by-step response strategy for CA firms
✅ Client communication do’s and don’ts

📬 Common Types of Income Tax Notices (India)

🔎 What Triggers a Scrutiny or Notice?

Some common red flags that may prompt scrutiny:

• High-value cash deposits or property purchases
• Mismatch in income reported vs. 26AS/AIS/TIS
• Non-filing of return despite taxable income
• Under-reported capital gains or foreign assets
• Repeated losses or suspicious deductions
• TDS mismatch between payer and payee records
• Claims under 80G, 80C, etc. that don’t match bank data
   

📁 How CA Firms Should Prepare for Client Notices

 1. Maintain Updated Records

• Client PAN login credentials
• Previous 6–8 years of ITRs
• Form 26AS, AIS, and TIS downloads
• Investment proofs and donation receipts
• Capital gain reports (especially from shares and crypto)
  

2. Use a Notice Preparation Checklist

• Create a standardized response template for:
• Client name and PAN
• Assessment year
• Type of notice and section
• Summary of issue raised
• Supporting documentation list
• AO contact info and deadlines
  

(Include a sample checklist as a downloadable asset if possible)

📝 Step-by-Step Guide to Responding to a Notice

Step 1: Review the Notice Carefully

• Check section, assessment year, response deadline
• Download the notice from the IT portal under e-Proceedings
  

Step 2: Understand the Issue

• Compare notice data with filed ITR, Form 26AS, and AIS
• Identify mismatches, calculation errors, or missing disclosures
  

Step 3: Prepare the Response

• Draft a clear and concise cover letter
• Attach numbered annexures for each document
• Use digital signatures if required
• Convert all files to properly named PDFs
  

Step 4: File Online via e-Proceedings

• Login to the Income Tax e-Filing Portal
• Navigate to Pending Actions → e-Proceedings → Submit Response
• Upload documents in requested format (PDF only, max size limits apply)
  

Step 5: Track Response Status

• Regularly monitor the status and any follow-up queries
• Escalate via grievance or rectification route if not resolved
  

💬 Client Communication Tips for CA Firms

• Don’t scare clients – not all notices mean penalties or fraud
• Explain clearly what the notice is about and why it happened
• Share a timeline and plan of action
• Send a summary email + WhatsApp for clarity
• Educate clients to keep full records going forward
  

Common Mistakes to Avoid

❌ Ignoring deadline reminders
❌ Uploading incorrect or unnumbered files
❌ Submitting scanned handwritten documents
❌ Responding emotionally or carelessly
❌ Filing revised ITR without understanding the root issue

🛡️ Pro Tips to Stay Ahead of Scrutiny

• Cross-verify all ITRs with AIS, TIS, and 26AS before filing
• Reconcile brokerage statements and capital gains annually
• Avoid excessive cash transactions in business
• Declare all foreign assets and crypto holdings properly
• Advise clients to use proper donation receipts for 80G
  

🎯 Conclusion

A tax notice doesn’t need to send your clients into panic mode. With proper documentation, a proactive approach, and a standardized process, CA firms can turn scrutiny into a trust-building exercise.

The key is: don’t react, respond—accurately and within time.