Income Tax department recalls 'defective' notices sent to taxpayers

Introduction

In a surprising turn of events, the Income Tax Department recently recalled a batch of defective notices issued under Section 139(9) of the Income Tax Act, sparking confusion among individual taxpayers and professionals. These Defective Notices by the Income Tax Department were issued in error due to a system glitch, impacting both salaried individuals and small businesses.

Recognising the issue, the department, under the guidance of the Central Board of Direct Taxes (CBDT), quickly issued a clarification and started withdrawing the Section 139(9) notices. According to official Income Tax Department updates, the error was purely technical and is being rectified to ensure that taxpayers aren’t burdened with compliance procedures.

This blog aims to explain what defective notices are, what caused this issue, who’s affected, and the Taxpayer Relief Measures you can expect.

Background Context

What Are Defective Return Notices Under Section 139(9)?

Under Section 139(9) of the Income Tax Act, if a return filed by a taxpayer is found incomplete or inconsistent, like missing schedules or details, the Income Tax Department issues a defective notice. The taxpayer is then required to respond to the notice within 15 days, failing which the return could be treated as invalid.

Why Are They Issued?

Typically, such errors in tax notices arise when:

• Mandatory schedules like the balance sheet and profit and loss account are missing
• There are mismatches between the ITR and Form 26AS,
• Financial statements are incomplete (especially for businesses)
• Incorrect or missing PAN or bank details
• TDS claims do not reconcile with TDS certificates

For instance, if a salaried person omits interest income from savings accounts, their income tax return (ITR) may be deemed defective due to incomplete disclosure.

What Went Wrong

Overview of the Error

In a recent case, numerous taxpayers received notice u/s 139(9) despite their returns being accurate. Upon review, it was discovered that a system-level glitch at the Central Processing Centre (CPC), Bengaluru, was to blame.

System-Level Glitch

Unofficial sources revealed that updates to the CPC’s back-end led to misinterpretation of certain fields in the ITR form. Specifically, deductions or capital gains were not properly recognised, triggering the automatic generation of defective return notices.

This affected returns filed for Assessment Year 2023–24, particularly by users of Excel/JSON utilities and third-party tax e-filing portals.

Timeline and Scope

The notices were issued between February and March 2024. Though exact numbers haven't been revealed, experts estimate tens of thousands were affected. Tax consultants have confirmed that even senior citizens, freelancers, and salaried employees with simple tax liability profiles received incorrect notices.

Example:
Mr. Ramesh, a salaried individual in Bangalore, filed his ITR-1, correctly including ₹8,000 as bank interest. Yet, he received a defective return notice citing the omission of this income. Cross-checking with AIS and Form 26AS confirmed accuracy. The issue? A processing glitch, not a user error.

The root cause: a technical glitch in the IT Department’s back-end processing system.

Official Response by the Income Tax Department

Clarification Issued

The Income Tax Department acknowledged the mistake via its website and social media channels. The clarification confirmed that the Section 139(9) notices were "inadvertently issued" and are now being auto-withdrawn.

“The department is in the process of auto-withdrawing such defective notices, and no action is required from taxpayers at this stage,” said an official statement from the CPC.

The department also assured that:

• Withdrawn notices require no taxpayer response
• Already submitted responses will not lead to penalties
• The technical issue has been fixed to prevent recurrence

Instructions for Taxpayers

• Taxpayers who received such notices need not respond or submit a rectification if the notice is found to be recalled.
• The department has initiated the automatic withdrawal of affected notices through the e-filing portal.
• Taxpayers will receive email and SMS alerts once a withdrawal is completed on their account.

Rectification Timeline

The process of withdrawing the defective notices began in the first week of April 2025 and is expected to be completed in phases by the end of May 2025. Taxpayers are advised to monitor the status via their e-filing dashboard.

What Taxpayers Should Do

How to Check if You Received a Recalled Notice

To check your notice status:

• Log in at the income tax e-filing portal: https://www.incometax.gov.in
• Navigate to e-Proceedings > View Notices
• Look for any active notice u/s 139(9)
• If the status is “withdrawn” or “recalled,” no action is needed

This is especially important if you've been receiving the notice but haven’t filed a revised return yet.

Do You Need to Respond?

If the defective return notice is still marked active, wait a few days and recheck. If truly defective, file a response to the defective notice u/s 139(9) within the timeline.

What If You Already Responded?

If you've submitted a correction despite the ITR filed being complete, don’t worry. The Income Tax Department has assured that your response will be reviewed and will not lead to penal action.

Keep all documents—acknowledgements, proofs, and communications—for reference.

Rectification Timeline

The defective return processing time for these corrections began in April 2025 and will continue through May 2025. Taxpayers are advised to regularly log in to the Income Tax portal and track notice status.

Need Clarification?

You can:

• Raise a query on the e-filing portal under “Helpdesk”
• Contact the CPC via toll-free number: 1800 103 0025
• Email your query with PAN and assessment year details to: ask@incometax.gov.in

Implications for Taxpayers

Refund Delays?

In most cases, refunds won’t be delayed if the defect doesn’t exist. However, for returns marked defective, refunds may be paused until the notice is withdrawn or resolved.

Impact on Compliance?

These incorrect defective notices by the Income Tax Department have understandably raised concerns. The good news is that the department is taking Taxpayer Relief Measures seriously with swift action and communication.

Importance of Regular Monitoring

Always check your income tax login dashboard and ensure your contact details are updated. Real-time alerts can help you act quickly.

Expert Suggestions

• Run periodic manual audits alongside automated processing
• Introduce a “review queue” before auto-issuing notices
• Provide clearer alerts about changes in ITR formats and processing logic

Lessons and Takeaways

This event serves as a reminder for both taxpayers and authorities:

For Taxpayers:

• Verify income with Form 26AS, AIS, and interest statements before filing
• Don’t panic. Errors in tax notices do occur—wait for clarification
• Always consult a tax expert before filing a response to a defective return
• Keep comprehensive documentation—income proof, ITR acknowledgements, and communication records

For the Tax Department:

• Strengthen system validations before notice generation
• Improve communication to reduce taxpayer anxiety
• Test every upgrade extensively before deployment

Limitations of Automation

Even for salaried individuals with straightforward incomes, consulting a professional helps avoid and resolve issues like defective returns in Income Tax. It also ensures accurate filing, especially when dealing with assessment tax, exemptions, and deductions.

Why Consulting a Tax Expert Helps

If you’re unsure about how to interpret or respond to a notice, consult a professional. It can save you time, reduce stress, and ensure compliance.

Even for salaried employees with straightforward income, mistakes in return filing or misinterpretation by the system can lead to complications.

Conclusion

The wrongful issuance of Defective Notices by the Income Tax Department under Section 139(9) was an unexpected setback. Thankfully, swift Income Tax Department updates and Taxpayer Relief Measures have ensured minimal disruption.

Taxpayers are urged to monitor their e-filing account, avoid panic, and consult experts like Mind Your Tax for professional assistance in understanding or responding to such errors in tax notices. As the tax e-filing portal continues to evolve, staying alert and informed will go a long way in ensuring smooth tax compliance.