Once you have filed your income tax returns, the Income Tax Department will examine your returns. For this purpose, the Department may issue you an intimation, assessment, or scrutiny notice.
Sections 142(1), 143(1), 143 (2), 148, and 156 of the IT Act vests power in the Department to issue various types of notices. You can receive a notice if you have not filed your ITR accurately or if there is any calculation error.
Section 142(1) of the Income Tax Act, in particular, enables the authorities to issue notice for the purpose of assessing your tax liability. Read on to know more about the provisions pertaining to Section 142(1) of the Income Tax Act and the penalty if you violate them.
As per Section 142(1) of the Income Tax Act, tax authorities can issue a notice for the purpose of assessment of your tax liability. When you receive a notice under the aforementioned section, it is considered a preliminary step for conducting an inquiry into your tax returns.
This is generally when the Assessing Officer (AO) finds any discrepancy in your income tax return. The AO may call upon certain documents and information to further investigate the matter. However, the powers vested by this section to the AO are subject to certain limitations so as to safeguard you from any unreasonable inquiry.
The Assessing Officer can issue you a notice of assessment under Section 142(1) in the following circumstances:
To further investigate tax-related matters after you have filed an income tax return (ITR) under Section 139(1)
If you have not filed your ITR and the due date to do so has expired
However, the AO will not ask you to submit tax-related documents dating back to more than three years of the previous financial year.
The Income Tax Department can issue a notice under Section 142(1) of the Income Tax Act of 1961 for the following purposes:
1. To File an ITR
If you have not filed your ITR under Section 139(1) before the due date, you will receive a notice under Section 142(1). The notice will ask you to file the ITR and furnish a copy to the concerned authorities.
2. To Produce Documentation
If you have already filed your ITR, the AO can issue a notice under this section to call upon certain documents to assess your returns. These may include your sales and purchase ledger, proof of tax deductions availed by you, etc.
3. To Furnish Any Other Information
The Assessing Officer (AO) may also ask for any other information in writing that she/he may deem necessary for the assessment of your tax liability. For instance, the AO may ask you to furnish a statement of assets and liabilities.
Note that after you provide the documents and information asked for, the AO may or may not start the assessment proceedings. If the Assessment Officer is satisfied with the documents provided by you, she/he may choose not to start the assessment.
Complying with the notice under Section 142(1) is mandatory, even if you believe that the documents that have been asked for are irrelevant. If you fail to comply with the notice, you will have to face the following consequences:
Best Judgement Assessment Under Section 144
The wilful failure to produce the documents or information to AO may result in the Best Judgement Assessment under Section 144. According to this section, the AO will make the judgement and proceed ahead with your case based on the conclusion she/he may draw.
Penalty Under Section 271(1)(b)
A monetary penalty of ₹10,000 will be imposed under Section 271(1)(b) for violating provisions of Section 142(1).
Prosecution Under Section 276D
If you fail to comply with these provisions, you may face prosecution of up to one year under Section 276D.
You can furnish a response to the notice under Section 142(1) online using the ‘e-Proceedings’ facility available on the Income Tax portal. Follow these simple steps to file your response online:
Log into the Income Tax Department portal
Select the ‘Pending Actions’ option
Click on the ‘E-Proceedings’ button
Choose the ‘View Notices’ option
‘Submit Response’ to proceed ahead to a new page
Now click on the ‘Select Response type for Notice’
Choose between ‘Partial Response’ and ‘Full Response’ to file toy response
In conclusion, Section 142(1) of the Income Tax Act of 1961 empowers the Income Tax authorities to issue a notice of assessment. An Assessment Officer (AO) can issue this notice to call upon documentation and information to further investigate your tax returns.
In case you receive such a notification, you do not have to visit the Income Tax office or submit the required documents in person. You can do so easily online on the Income Tax Department portal.
Moreover, complying with the notice under Section 142(1) is mandatory. If you fail to do so, you may be prosecuted under Section 276D, or a fine of ₹10,000 may be imposed under Section 271(1)(b).
FAQs on Section 142(1) of the Income Tax Act
When is a notice issued under Section 142(1) of the Income Tax Act?
An AO will issue a notice under Section 142(1) if you have filed ITR but she/he needs additional information to assess it. She/he can also issue you a notice if you have not filed the ITR till the expiry of the due date.
Who issues the notice under Section 142(1) of the Income Tax Act of 1961?
The Assessing Officer (AO) issues notice under Section 142(1) of the Income Tax Act of 1961.
Can I receive an incorrect notice under Section 142(1) of the Income Tax Act?
You can receive an incorrect notice under Section 142(1) if the PAN is mismatched. However, the chances of such an inaccuracy happening are very minimal.
What is the maximum Section 142(1) of the Income Tax Act time limit for issuing a notice?
There is no maximum Section 142(1) of the Income Tax time limit for issuing a notice.
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