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

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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.

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

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.

How Can Tax2win Help You Respond to an Income Tax Notice?

Received a tax notice from the Income Tax Department? Don’t worry—Tax2win’s got your back! Here's how we make it stress-free:

• Expert Guidance: Get personalised assistance from our team of experienced CAs and tax professionals.
• Detailed Notice Analysis: We decode the notice to help you understand exactly what the IT Department wants.
• Right Documentation: We help identify and compile all necessary documents needed for your reply.
• Drafting Accurate Responses: Our experts prepare clear, compliant, and timely replies to avoid penalties.
• Complete Compliance: We ensure your response aligns with tax laws to reduce the chances of further queries.

Don’t ignore that notice—get it resolved with ease! Connect Today