Income Tax Notices

Notice under Section 142(1) of the Income-tax Act - Inquiry Notice before Assessment of Tax

Income tax notice is sent by the Income Tax Department because of various reasons like non-filing of returns, discrepancies in tax returns, incomplete information, underreported income, tax evasion suspicions, reassessment, statute of limitations, and more. Inquiry notice under section 142(1) is sent to taxpayers when a return is not filed, or additional information is required by the ITD regarding the disclosures you made. This guide will help you understand more about intimation under section 142(1), what it means and how to respond to it.

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  7. Section 142(1) Income Tax Act: Inquiry Notice before Assessment of Tax
Updated on: 16 Sep, 2024 03:32 PM

Contents

What is Notice Under Section 142(1) of the Income Tax Act?

Section 142(1) of the Income Tax Act, 1961 grants authority to the Income Tax authorities to issue notice seeking additional clarifications or further details regarding a filed return. In cases where a return has not been filed, the provision empowers the authorities to request the necessary information to be furnished in a prescribed manner.

Who has the Power to Issue Income Tax Notice u/s 142(1)?

A notice under Section 142(1) can be issued whether or not you have filed your income tax return under Section 139(1).

If you haven't filed your return within the time limit specified in Section 139(1), the Assessing Officer can issue a notice requiring you to file the return within the time given in the notice.

This notice can also be issued after the end of the relevant Assessment Year.

Even if you are not required to file a return under any provision of the Income Tax Act, 1961, you must still respond to a notice under Section 142(1)(i) by filing a return.

When is Notice Under Section 142(1) Issued?

Notice u/s 142(1) can be issued in both cases, where you file your income tax return u/s 139 (1) and also in the case you do not file your income tax return u/s 139 (1) and time specified to file a such return has been expired.

If the assessee has not filed the return within the prescribed time frame, the assessing officer can issue a notice asking the assessee to furnish the ITR within the time specified in the notice. This notice can also be issued after the end of the relevant Assessment Year.

If a notice under Section 142(1)(i) is issued to someone who is not required to file a return under any provision of the Income Tax Act, 1961, they are still obligated to file a return in response to the notice.

It can also be issued in cases where the Income Tax Department needs additional information in cases where tax return has been filed or in cases where it has not been filed.

Notice to File Income Tax Return:

If the taxpayer fails to file their income tax return within the specified period or before the end of the relevant assessment year, they may receive a notice under Section 142(1) prompting them to file their return. It serves as a reminder and legal requirement to fulfill their tax obligations.

Request for Specific Accounts and Documents:

Upon receipt of the filed income tax return, the Assessing Officer (AO) may request the taxpayer to furnish specific accounts and documents pertinent to the assessment. This could include providing evidence supporting claimed deductions, invoices for expenses declared under various income sources such as business income, etc.

Any other information, notes, or workings as desired by the AO:

The assessing officer may require you to furnish in writing and in the prescribed manner the information, notes, or workings on specific points as required by him, which may or may not form part of books of accounts. For example, A statement of your assets and liabilities.

What is the Objective for Issuing a Notice Under Section 142(1)?

The primary objective of issuing a notice under Section 142(1) of the Income Tax Act includes:

  • This applies to the taxpayer's own income as well as the income of another individual for whom the taxpayer is legally responsible, such as in cases involving legal guardians or deceased individuals.
  • Providing necessary accounts and documents to facilitate the tax assessment process.
  • Furnishing written information on various matters, including a detailed statement of the taxpayer's assets and liabilities as of a specific date.

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Penalty for Non-Compliance of Section 142(1) Tax Notice:

If you don’t comply with Notice u/s 142(1), then:

  • A penalty of Rs 10,000 can be imposed on you u/s 271(1) (b).
  • Your case can fall under “Best Judgement Assessment” u/s 144, where the assessment will be carried out according to the Assessing Officer's best judgment based on all the relevant material he gathered.
  • You can be prosecuted u/s 276D for up to 1 year with or without a fine.
  • A warrant may also be issued u/s 132 for conducting a search.

Have you received a tax notice under section 142(1)? Don’t panic. Tax2win tax experts can assist you in resolving these notices and responding to them timely and accurately. Connect with an expert now!

How can Taxpayers Safeguard Themselves?

Demand for Accounts and Statements:
Section 142(1)(i) allows the Assessing Officer to request financial accounts, documents, and a statement of assets and liabilities, regardless of whether these details are included in the accounts.

Prior Approval Requirement:
To prevent harassment, the Assessing Officer must obtain prior approval from the Joint Commissioner before requiring the taxpayer to provide a statement of assets and liabilities that are not part of the accounts.

Time Limitation:
Section 142(1)(i) limits the Assessing Officer from requesting accounts related to a period more than three years before the previous year. This ensures the information sought is relevant and recent.

Application to All Taxpayers:
A notice under Section 142(1)(i) can be issued to both taxpayers who have filed their income tax return and those who haven't, emphasizing its comprehensive scope.

Sample of a Notice under Section 142(1) of the ITA

Sample email of the Notice under Section 142(1)

Steps to Submit a Response to the Notice u/s 142(1)

To respond to a notice under Section 142(1) of the Income Tax Act, you can use the online ‘e-Proceedings’ facility on the Income Tax portal. Here are the steps to follow:

  • Log in to the Income Tax E-filing portal
  • Click on the “Pending Actions” Tab and then select “E-proceedings.”
  • Select the ‘View Notices’ option.
  • ‘Submit Response’ to go to a new page.
  • Now click on the ‘Select Response type for Notice.’
  • Choose either ‘Partial Response’ or Full Response’ to submit your response.

If you have received an income tax notice, make sure you respond to it within the given time frame, or else you might attract heavy penalties and legal consequences. And if you are not sure or need assistance with resolving your notices, connect with our experts, who can not only help you respond to notices accurately but also help you gather the relevant documents and avoid further delays and penalties. Connect with tax experts now!

FAQs on Section 142(1) Income Tax Act

Notice under section 142(1) is issued when the assessee still needs to file or where the return is filed for producing required documents asked by the A.O.
AO, i.e., the assessing officer, can serve the notice under section 142(1). This notice can be issued if the A.O. demands additional documents or supporting information about the assessee’s financial
When notice is received for filing the return, an assessee should file his return within the time period provided in the notice, and if documents and details are asked to produce and then provide the same to A.O. within the specified period.
After filing of ITR under section 142(1), there are chances of notice under section 143(2) for scrutiny assessment if any information is sought by A.O. from the documents and information submitted by you. Otherwise, if the return is filed as per the section, no further action will be taken.
Notice under Section 142(1) can be responded to electronically only with the help of 'e-Proceedings' in the assessee's registered 'e-Filing' accounts.
Tax2win has expertise in responding to Income Tax Department. Click here to seek help from our experts to avoid legal consequences.
There is no maximum limits to issue the notice u/s 142(1). This notice can be issued even after the end of the particular assessment year.
  • A penalty of Rs 10,000 can be imposed on you u/s 271(1) (b).
  • A warrant may also be issued u/s 132 for conducting a search.
Normally, it is impossible to receive a wrong notice from ITD, but it may happen that PAN mentioned needs to be corrected in the notice; in that case, you may get a notice from the income tax department.
A notice under section 142(1) is issued by the Assessing Officer to conduct a preliminary investigation into the mismatch between the income tax return filed by the assessee and the information available to the AO. It is a way of asking for more details from the assessee before making the final assessment by the AO.
An Income Tax Assessment Order is a notice sent by the Assessing Officer to the assessee. It shows the calculation of the total income that the assessee earned in the previous year. It is based on the assessment of the income tax return filed by the assessee.
The assessment year is the year (from April 1 to March 31) in which you pay tax on the income you earned in the previous financial year. You have to file your income tax return for the income you received in the financial year in the corresponding assessment year. The assessment year comes right after the financial year.
Even if you've paid your taxes on time, missing the return filing deadline will still result in a late filing fee under Section 234F. If you are eligible for a refund, filing late can result in a loss of interest on the refund amount, and certain losses (like business loss, capital loss, etc.) cannot be carried forward.
Here are the most common reasons people receive Income Tax Notices after filing their ITR:
  • Discrepancies in income declared
  • TDS/TCS mismatch
  • High-value transactions
  • Non-filing of returns
  • Errors in return filing
Here’s a brief overview of some common notices and what they mean:
  • Notice under Section 139(9): This notice is issued when there are errors or discrepancies in your filed return, making it defective.
  • Notice under Section 142(1): This is a preliminary inquiry notice asking for additional information or documents to complete the assessment.
  • Notice under Section 143(1): This is an intimation notice sent after the preliminary assessment of your return. It can show a refund, demand for additional tax, or no discrepancy.
  • Notice under Section 143(2): This notice is issued for a detailed scrutiny assessment.
  • Notice under Section 148: This notice is issued if the Assessing Officer believes that your income has escaped assessment.
  • Notice under Section 156: This is a demand notice issued when you owe additional tax, interest, or penalty.
  • Notice under Section 245: This notice is issued when the department intends to adjust your refund against any outstanding demand from previous years.
Receiving a notice from the Income Tax Department can be stressful, but handling it promptly and correctly is crucial. Here’s what you should do:
  • Understand the reason for the notice
  • Verify the information in the notice
  • Respond within the stipulated time
  • Provide necessary documents
  • Consider consulting a tax professional if needed
Failure to respond to a notice within the specified time can lead to:
  • Further notices with stricter demands
  • Penalties and interest
  • Legal action in severe cases
Received a Notice
Belated Return

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.