The last thing we expect when we file our tax returns is to receive a notice from the Income Tax Department(ITD), which can have us spiraling headfast, imagining the worst of huge penalties or jail time. The fear and anxiety we experience when we receive a notice from ITD is caused by lack of knowledge on the process of responding to the notice. When you receive a notice under section 142(1), it is the first step in the preliminary investigation into the discrepancy found by the assessing officer(A.O), who requires you to furnish more details/proofs. Failure to respond to this notice, will give your worst fears a place in reality.
Notice u/s 142(1) is usually served to call upon documents and details from the tax payers, and to take a particular case under assessment. This notice can be sent to assessee before or after assessment of his tax return.
Before a scrutiny assessment is carried out, a notice under section 142(1) of Income Tax Act can be sent to the taxpayer asking them to submit or produce their return (if not already filed) or certain documents, records and information which the AO thinks is necessary to make the correct assessment of income of the taxpayer.
To facilitate e-assessment proceedings, the tax department in early 2017 issued a revised format of notices under section 143(2). But until, recently, the notices u/s 142(1) were sent by regular mail. The CBDT recently issued instruction 01/2018 on February 12th, 2018, that all pending scrutiny assessments will be carried through online method only, with the exception of search related assessments and any other existing pending scrutiny assessments. The CBDT has also issued another letter on 19th March 2018 directing the officers, that henceforth the new format of sending notice u/s 142(1)(ii)&(iii)shall be used in all e-proceeding cases. As a result of both these instructions, now the notices of ‘Inquiry Before Assessment- u/s 142(1)’ will be issued in electronic manner by delivering it to e-filing account of the taxpayer followed by an intimation through email and/or SMS.
If a notice u/s 142(1) was already issued to the taxpayer in past in the old format, then an SMS/Email will be sent to inform them of the new procedure for submitting the proofs/documents on the e-filing website.
If you choose to not respond to this notice, then the assessing officer will make the adjustments as per the details available to him and close your assessment. You will have no further opportunity to refute his judgement except by an appeal u/s 246 of the Act, as you had failed to furnish the proof requested in the notice sent earlier. Moreover, the officer can treat it as willful failure to respond and can levy a penalty u/s 272A of Rs. 10,000 for each failure. This penalty is levied if a taxpayer fails to comply with any notice issued u/s 142(1) or section 143(2) or a direction u/s. 142(2A).
Receiving a scrutiny notice is never a pleasant experience and failure to respond to it correctly can result in further proceedings or penalties. To ensure any notices you receive are handled with care and attention to detail, consult your personal tax experts at H&R Block India to get instant tax notice assistance.