Resolving Tax Notices for Startups - Income Tax, GST & TDS
Angel Tax Notice - Section 56(2)(viib) on Share Premium
IT department issued notice treating share premium received from HNI investors as income under Section 56(2)(viib). We prepared DCF valuation report and filed objections with DPIIT exemption certificate.
GST Audit Notice - ITC Mismatch for E-commerce Startup
GST department raised audit notice for ₹18L ITC mismatch between GSTR-2A and books. Reconciled invoice-level data and filed a detailed response eliminating the mismatch.
Section 143(2) Scrutiny Notice - SaaS Startup, Angel-Funded
AO raised queries on high deductions claimed against subscriptions and foreign software payments made without TDS. We compiled full documentation and represented before the AO.
Resolving Tax Notices for Startups - Income Tax, GST & TDS
When startups receive income tax or GST notices, it can disrupt fundraising and operations. SMACAS has represented early-stage and funded startups before Assessing Officers, GST authorities, and appellate forums - resolving scrutiny notices, ITC mismatches, and angel tax demands with documented outcomes.
Frequently Asked Questions
What should a startup do when it receives a Section 143(2) scrutiny notice?
A startup receiving a Section 143(2) notice must respond within the specified deadline - typically 30 days - with supporting documents for all income and deduction claims. Engage a Chartered Accountant immediately to assess the scope of scrutiny, compile documentation, and represent before the Assessing Officer. Delayed or incomplete responses lead to ex-parte assessments and tax additions.
Why do startups get income tax notices?
Startups commonly receive notices for high deductions against low revenue, foreign payments without TDS, angel tax (Section 56(2)(viib)) on share premium, mismatches between Form 26AS and ITR, and first-year losses. ESOP deductions, R&D claims, and startup exemption certificates under Section 80-IAC are also frequent triggers.
Can a startup receive a GST audit notice?
Yes. GST authorities issue audit notices under Section 65 for mismatches between GSTR-1 and GSTR-3B, high ITC claims relative to outward supply, or sudden zero-turnover months. Startups with B2B and export invoices are especially scrutinised. Timely response with invoice-level reconciliation is critical.
What is Section 148 reassessment and how does it affect startups?
Section 148 allows the tax department to reopen past assessments if income is believed to have escaped assessment. For startups, this often arises from undisclosed investor payments, foreign remittances, or crypto transactions flagged by the Financial Intelligence Unit. The reassessment window is 3 years for amounts below ₹50 lakh and 10 years for larger amounts.
Need help with a tax notice?
Our CAs are available for immediate consultation. Response within 24 hours.
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