What is a Defective Return and How to Correct It?

A defective return may be defined as an income tax return that has been identified as having errors by the income tax department. Such errors can include a mismatch in income and tax deducted amounts between Form 26AS and the filed return.

When the tax authority discovers errors or discrepancies in your ITR, they will give you a faulty return notice. These inaccuracies might be due to inaccurate computations, missing or contradictory data, or other problems. This notification is intended to remind taxpayers to fix these inaccuracies and ensure that the data on their tax returns is accurate and complete.

Section 139(9) defective return notices are sent to your registered email address by email. The same information is available on the income tax e-filing platform as well.

Your email address on file with the income tax department will receive the notice pursuant to Section 139(9) from the IT Department. Communication under section 139(9) for PAN AWZXXXXXXX for the Assessment Year 2023–24 will be the subject of the email.

When issuing a defective return notice pursuant to Section 139(9), the Assessing Officer may take the following into account:

• Incomplete Income Tax Return (ITR): An incomplete income tax return (ITR) is one that doesn't include all of the required information in its annexures, statements, or mandatory columns, such as income from other sources.
• Missing Tax Information: If taxes have been paid but the ITR is missing information about them, such as TDS, TCS, advance tax, or self-assessment tax information.
• TDS and Income Mismatch: If Tax Deducted at Source (TDS) is claimed, but the associated income is not included in the ITR's tax-offering list. For instance, both interest income and tax deducted by the bank should be recorded in the ITR if you received interest income from term deposits. However, when filing a return, the income tax department will automatically fill in all of your income information, and there is also the option to upload 26AS, which will aid in preventing such inconsistencies from the outset.
• Bookkeeping Problems: Defective return notices may result from incomplete or non-submission of required books of accounts, including trading accounts, profit and loss accounts, balance sheets, and others.
• Income Tax Audit Concerns: The full audit report, including the profit and loss account, balance sheet, and auditors report, should be supplied if an audit is required to be performed under section 44AB. You risk receiving a faulty return notice if you fail to provide these documents or submit an incomplete audit report.
• Cost Analysis Non-compliance: According to the Companies Act of 2013, a faulty return notice may result from failure to submit the "Cost Audit" facts.
• Presumptive Taxation Errors: When presumptive taxation is involved, giving an erroneous calculation of presumptive income, withholding pertinent information, or having mismatched gross receipts might result in a faulty return notice. For instance, a faulty return notice will result if gross receipts are not reported in the profit and loss account or if the amount reported in ITR 4 is greater than Rs. 2 crore.
• Tax Payment Discrepancies: A notice of defective return may be issued if the income tax payable as calculated based on the income tax slab are partially paid or if the amount paid differs from the tax liability calculated by the system.
• Incorrect details in ITR: Inaccurate information in the ITR can result in a defective return notice if the ITR is filed with inaccurate information about turnover, income thresholds, or inappropriate reporting for one or more head of income.
• Name mismatch: When the name on the PAN card and the name on the ITR are different.

A notification will be delivered to the taxpayer if the Assessing Officer finds the return to be flawed. You will need to respond within 15 days and make the necessary changes to your return to resolve the issues the Income Tax Department raised. However, you can request an extension if you cannot complete these adjustments within the allotted timeframe.

Your return could be considered invalid if the defect is not fixed within the allotted 15 days or within the extension period. This can result in penal interest on unpaid taxes, a fine, the inability to carry losses forward, and the loss of particular tax deduction benefits and exemption, etc. depending upon the assessment made by the tax authorities.

Below is a step-by-step guide regarding how you can revise the ITR that was filed earlier:

As per current income tax rules, you can either file a revised income tax return or a fresh return in case the time provided for filing the ITR in a particular assessment year has not lapsed.

When you file an Income Tax Return (uploaded and validated) in response to defective notice, it would be considered as a fresh return and replace the defective return that was filed earlier. This is the case even if there is no change in the gross total income or even if no additional deduction is claimed.

However, a revised ITR must be submitted if the individual desires to alter the gross total income or deduction claimed. The Original ITR number must be referenced in the applicable section of the Revised ITR form to indicate thus.

Please be aware that the deadline for submitting an amended return is December 31, 2023 (AY 2023–24) for the fiscal year 2022–23. The taxpayer cannot submit a new or amended return if this deadline has passed. At that point, responding to the notice would be the only option left. Remember that under certain conditions, an individual may file an updated ITR per the tax legislation.