How to Reply to an Income Tax Notice — A CA's Complete Guide (2026)

Receiving an income tax notice is stressful for any taxpayer and time-consuming for any CA. But under the Income Tax Act 2025, with new section numbers, new form references, and the faceless assessment regime now fully integrated, drafting a proper response requires updated knowledge and a structured approach.

This guide covers the most common types of income tax notices, their new section references under IT Act 2025, response timelines, and a practical step-by-step framework for drafting effective replies.

Types of Income Tax Notices Under IT Act 2025

1. Intimation Notice — Section 263(1) [erstwhile Section 143(1)]

This is the most common notice. It is an automated communication generated after CPC processes the return. It highlights discrepancies between the return filed and the information available with the department (AIS data, TDS credits, etc.). The notice may result in a demand, a refund, or simply confirm the income as declared.

Response timeline: 30 days from date of intimation. However, a revised return or rectification request under Section 263 can be filed within the prescribed time limits.

2. Scrutiny Notice — Section 263(2) [erstwhile Section 143(2)]

A scrutiny notice means the Assessing Officer (AO) has selected the case for detailed examination. Under the faceless regime (now integrated into Section 264), this is handled by a National e-Assessment Centre (NeAC). The notice will specify what documents or explanations are required.

Response timeline: As specified in the notice, typically 15-30 days. Extensions can be requested through the e-filing portal.

3. Demand Notice — Section 265 [erstwhile Section 156]

Issued when the AO determines that tax is payable. This follows either an intimation or an assessment. It specifies the amount due and the deadline for payment.

Response timeline: 30 days from date of service. Payment or appeal must be initiated within this period.

4. Reassessment Notice — Section 279 [erstwhile Section 148]

Issued when the AO has "reason to believe" that income has escaped assessment. Post the Supreme Court's judgment in Ashish Agarwal v. PCIT (2022), the procedural requirements for issuing reassessment notices have been tightened significantly.

Response timeline: As specified, but the taxpayer has the right to demand reasons for reopening before filing a response (per GKN Driveshafts v. ITO).

5. Defective Return Notice — Section 263 [erstwhile Section 139(9)]

Issued when the return filed is incomplete or contains errors. The taxpayer gets an opportunity to rectify the defects within 15 days (extendable on request).

Step-by-Step: How to Draft a Professional Reply

Step 1: Read the Notice Carefully

Identify: the notice type, the section cited, the assessment year, the specific issues raised, the demand amount (if any), and the response deadline. Many CAs make the mistake of drafting a generic response without addressing the specific points raised.

Step 2: Gather Supporting Documents

Collect all relevant records: bank statements, investment proofs, Form 130 (Form 16), computation sheets, AIS reconciliation, and any prior correspondence. Organize these by the issues raised in the notice.

Step 3: Map Old Section Numbers to New

If the notice is for an earlier year but issued after April 1, 2026, it may reference old section numbers. Your response should reference both: "In response to the demand raised under Section 265 of the Income-tax Act, 2025 (erstwhile Section 156 of the Income-tax Act, 1961)..."

Step 4: Structure Your Reply

A professional reply should include:

1. Reference details: Notice number, date, PAN, assessment year
2. Acknowledgment: Brief acknowledgment of the notice
3. Facts of the case: Clear, chronological statement of relevant facts
4. Legal submissions: Applicable sections of IT Act 2025, with old Act equivalents
5. Supporting case law: Relevant Supreme Court, High Court, and ITAT decisions
6. Documentary evidence: List of enclosed documents
7. Prayer: Specific request (drop proceedings, delete addition, etc.)

Step 5: Cite Supporting Case Law

Relevant case law strengthens your response significantly. Here are some landmark cases frequently applicable to notice responses:

Common Mistakes in Notice Replies

1. Missing the deadline: This is the most damaging mistake. An ex-parte assessment (best judgment) can follow if you don't respond in time.
2. Generic responses: "I deny all allegations" without addressing specific points raised in the notice is counterproductive.
3. Not requesting reasons: For reassessment notices, always demand recorded reasons before filing your response. This is a legal right established by GKN Driveshafts.
4. Wrong section references: Using old section numbers without mapping to the new Act can create confusion, especially with younger AOs trained on the new Act.
5. Over-sharing: Provide what's asked for. Volunteering additional information can open new lines of inquiry.

Conclusion

A well-drafted notice reply saves your client from penalties, additional tax demand, and the stress of prolonged proceedings. The transition to IT Act 2025 adds an extra layer of complexity with new section numbers, but the fundamental principles of tax jurisprudence remain the same. Master the new references, maintain your case law knowledge, and build systematic workflows for notice response.

RUSOM AI's AI Tax Notice Reply Generator can read notice images and draft structured replies with section mappings and case law citations in 60 seconds — available in 11 Indian languages including Hindi, Tamil, Bengali, Marathi, and more.