Notice u/s 143(1)(a) for A.Y. 2019-20 for various reason such as Capital gain, Late fee etc:

Notice u/s 143(1)(a) is an initial processing of return after it has been filed u/s 139 or 142(1) and such notice is issued in relation to various reasons such as arithmetical error, incorrect claim etc and after replying to such notice you will receive intimation u/s 143(1) of the Income Tax act. Notice u/s 143(1)(a) is available under E-proceedings tab of e filing website.

Capital gain u/s 112A of Income tax act:

Income tax department has started processing Income tax return and most of the people have started receiving notice u/s 143(1)(a) and most of them have same query with regard to income from Long term capital gain u/s 112A of the Income tax act. To explain in short such capital gain income is attracted when you have sold a listed equity share, equity oriented fund etc which you were holding for more than 1 year.

As soon as people filed their Income Tax return for A.Y. 2019-20 they have started receiving notice u/s 143(1)(a). The reason for such notice is:

Schedule CG in the ITR for AY 2019-20 (first released on 5.4.2019) did not provide for such calculations scrip wise, compelling the taxpayer to file the ITR and offer LTCG by manual entries. The ITR utility which was released in August 2019 provided an option to the assessee to either enter the Long Term Capital Gain scrip wise or on totality basis.

As the due date was around the corner, most of the taxpayers or tax professionals have gone for the second option based on the workings available with them and filed the ITR with amounts offered on totality basis in Schedule CG.

While processing the returns u/s 143(1)(a), CPC has picked up Cost of Acquisition as Higher of (i) and (ii) as mentioned above, which is based on TOTALs and not scrip wise/ transaction wise. This has led to computation of an income under Capital Gains much higher than what it is as per the provisions of Section 112A, 55(2)(ac) and FAQs (dated 4.2.2018).

One more issue in respect of LTCG computation is that the system is considering LTCG from shares acquired between 1-2-2018 to 31-3-2018 without deduction of cost of acquisition, i.e. the whole of sale consideration is considered as gains. For eg. If you were allotted shares in an IPO after 1-2-2018 for Rs.2,000/- and sold the same on say 15-3-2019 for Rs.4,000/-, then system is considering the whole of Rs.4,000/- as LTCG.

Right now the best option is to disagree with such adjustment and wait for clarification from Income tax department.

Charging of late fee of Rs. 5,000 in case of partners of audited partnership firm:

The Return of Income for firms subjected to tax audit and their Partners were to be e-filed by 31st October, 2019 as per Section 139(1) of the Act. Despite the Firm and Partners of such firm e-filing their returns of income before 31st October, 2019, CPC has levied a penalty of Rs. 5,000 as Late Filing Fees under Section 234F of the Act.

However this issue was later on rectified by CPC by issuing a circular. Hence if any partner has received any such notice just reprocess your return.

Issuing defective notice u/s 139(9) of the Income Tax act:

CPC has even issued defective return notice u/s 139(9) to various assessee where their total income as shown in Form 26AS is less than the income shown in their Income Tax return.

CPC must understand that many a times the deductor deducts tax on amount including GST or doesn’t reverse TDS on sale return and therefore deductee would claim TDS on such amount as he would have received less amount from purchaser but he/she cannot include such amount as his/her turnover in their return of income just to match the income with Form 26AS. Also by declaring the return as defective they have made it null and one cannot file an appeal also against such notice.

All the above are causing unnecessary harassment to tax payers and resulting in waste of national resources in terms of having to file applications for rectification. Therefore it is requested to CPC to issue intimation for such issue rather than declaring such return as defective so that same can be appealed before an authority and this gets resolved.

The same plea has been made by BCAS (Bombay Chartered Accountant Society). You can read the same here.

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