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Show Cause Notice - Proposed addition in assessment

Where the Income tax officer is proposing any addition of income in the case of any person in assessment / reassessment under different provisions of the Income tax Act, 1961 on which tax liability will arise, then before making such addition the Income tax Officer gives an opportunity to the person to show the reason why such addition should not be made to income of the person. It is to be noted that it is the last opportunity where the person can defend himself at lower levels, preferably through Authorized representative / Chartered Accountant on the date & time specified in the notice.

If this notice is not complied with then the Income tax Officer determines the Income of the person on the basis of documents available , then we need to go to the higher authorities which double the burden of the person. Sometimes, the initial notices / preliminary notices may get neglected / ignored / unattended, then also before making addition the Income tax Officer compulsorily issue show cause notice to the person. Thus this notice, must be attended by the person preferably through Authorized representative / Chartered Accountant otherwise it may escort to adverse consequences along with imposition / levy of harsh fines and penalties

Frequently Asked Questions

A Show Cause Notice is issued by the Income Tax Officer when he proposes to make addition to returned income during assessment or reassessment. It gives the taxpayer a final opportunity to explain why such addition should not be made.

Yes. It is very important to reply within the specified date and time mentioned in the notice. If no reply is filed, the officer may complete the assessment based on available records, which may result in higher tax liability.

If ignored, the Income Tax Officer may pass an adverse assessment order and add the proposed income. This can lead to additional tax demand, penalties, interest, and further legal proceedings.

Yes. You can respond through an Authorized Representative or Chartered Accountant who can properly draft and submit a legal and factual reply on your behalf.

In most cases, yes. It is generally the last opportunity at the assessment level to defend your case before the officer passes the final order. If not handled properly, you may need to file an appeal before higher authorities like CIT(A) or ITAT.
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