Section 142(1) of Income Tax Act

A notice under Section 142(1) of

Income Tax Act is generally served to taxpayers in order to call upon certain documents and details or to particularly assess a case. When an individual receives a notice under this section, it is most commonly the first step in the preliminary investigation into any discrepancies found by an Assessing Officer who would require the taxpayer to furnish further proofs or details. This notice could be sent to an assessee before or after the assessment of their tax return. Taxpayers should keep in mind the fact that it is not wise to ignore notices received from the Income Tax Department. The notice could be addressed to the assessee when the return has already been filed, and additional details and documents are required from the assessee to complete the process. The taxpayer would then be given time for the submission of the required documents and a proper chance of being heard before concluding the process. The present article provides an insight into the aspects which one has to keep in mind when a taxpayer receives a notice under Section 142(1) of the Income Tax Act.

Objective of the Notice

The following could be the objectives of serving a notice under Section 142(1) by the Assessing Officer:

• To furnish a return of income with respect to which an individual is assessable, where they have not filed their return of income within the reasonable time allowed (which may include return in regard to their own income or income of another individual for which they are liable to be assessable), for example, in the case of a legal guardian or deceased person.
• To produce documents or accounts which the Assessing Officer may require to make an accurate assessment.
• To furnish information in writing on matters including the assessee's statements, for instance, an account of their assets and liabilities for a particular date.
• To be compliant with the notice under Section 142(1) is deemed mandatory.

Procedure for Issuing Notice

• Prior to the execution of a scrutiny assessment, a notice under Section 142(1) of Income Tax Act would be sent to the taxpayer. The purpose of the notice is to enquire about the submission or to produce certain documents, information or records that the Assessing Officer finds necessary to make an accurate assessment of income of the taxpayer.
• In order to facilitate e-assessment proceedings, the Income Tax Department had issued a revised format for all the notices under Section 143(2). However, until recently, all the notices under Section 142(1) were majorly sent by regular mail. On February 2018, the Central Board of Direct Taxes (CBDT) declared that all the pending scrutiny assessments would be carried out through an online method exclusively.
• Further, search related evaluations, and any other existing pending scrutiny assessments would be an exception under this declaration. Eventually, the CBDT also issued that there would be a new format for sending out notices under Section 142(1) and the same would be used in all e-proceeding cases.
• As a result of these notifications, the notices for Inquiry Before Assessment under Section 142(1) would be issued in an electronic format by delivering the same to the e-filing account of the taxpayer along with an intimation via E-mail and SMS.
• For cases where a notice under Section 142(1) was already issued to a taxpayer in the past in the outdated format, then an intimation via SMS or E-mail would be initiated to inform them about the new procedure for submitting the required proofs or documents on the official e-filing website.

Key Notes of Online Submission

The following key points must be kept in mind during online submission of response to an Income Tax notice:

• The taxpayer would receive the notice under Section 142(1) in their e-filing account on the e-filing portal.
• The Assessing Officer would sign all the notices or communications with the help of Digital Signatures.
• The documents or proofs that were mentioned in the Income Tax notice issued by the Assessing Officer must be submitted before the end of the working hours on the issued deadline for submission.
• The facility for submission of requested documents would be closed in seven days after the completion of the proceedings unless in the case of an extension in extraordinary circumstances.
• Manual submission of documents would be granted in rare circumstances such as:
  • To examine the books of accounts.
  • When third party investigated are required to be carried out.
  • To examine the witnesses.
  • To hold a personal hearing that was requested by the taxpayer in order to explain their case or situation.

Consequences of ignoring the Notice

• If a taxpayer who receives the notice under Section 142(1) does not respond to the same in the given time, the Assessing Officer would make the adjustments according to the details available to the Officer and would move to close the assessment.
• The taxpayer would have no further opportunity to refuse the Assessing Officer's judgement except through an appeal under Section 246 of Income Tax Act, as a result of failure to respond to the notice and to furnish the proof requested on time.
• However, the Assessing Officer has the power to treat the ignorance of response as a willful failure to respond and may levy a penalty under Section 272A of INR 10,000 per failure. The penalty will be levied on the taxpayer if they fail to comply with any notice issued under Section 142(1), Section 143(2) or a direction under Section 142(2A).