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Understanding Notice under section 142(1) of Income Tax Act

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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)

What is Notice under section 142(1)?

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.

By serving a notice under section 142(1) your AO may ask you to:

  • Furnish a return of income in respect of which you are assessable, where you have not filed your return of income within the normal time allowed (which may include return in respect to your own income or income of other person for which you are liable to be assessable), for e.g., in case of a legal guardian/ deceased person;
  • Produce accounts or documents which he may require for the purpose of making an assessment;
  • Furnish in writing any information on matters including your statements, for example, statement of your assets and liabilities on a particular date;
  • Compliance with this notice u/s 142(1) is mandatory.

Revised Procedure for Issuing Notice

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.

Some key points for online submission are as follows:

  • On the e-filing portal, the taxpayer will receive the notice in his/her e-filing account
  • The AO will sign all notices/communications using Digital Signatures
  • By the end of the working hours on the submission deadline issued, documents/proofs must be submitted.
  • Unless of an extension in special circumstances, the facility for submitting requested proofs will be closed seven days prior the completion of proceedings.
  • Manual submission may take place in rare circumstances such as:
    • Examination of book of accounts
    • Third party investigations need to be carried out
    • Examination of witnesses
    • Personal hearing request by the taxpayer to explain his/her case
  • From now on all records will also be filed electronically.

Click on the image below to download a sample notice under section 142(1)

sample notice u/s 142(1) image

Consequences of not responding to notice u/s 142(1)

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).

How H&R Block can help you?

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 Income Tax notices you receive are handled with care and attention to detail, consult your personal tax experts at H&R Block India to get instant Income Tax notice assistance.

  • Have you received an Income Tax Notice?
  • H&R Block can help you deal with notices issued u/s 139(9), 143(1), 143(2), 148, 156 & more
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  • Get legal guidance on tax matters by qualified and seasoned Tax Lawyers and CAs
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CA Madhuri Marne
Madhuri is a tax expert at H&R Block (India) with over a decade of professional experience. Having co-authored a book on economics for the ICAI exam, she now enjoys writing about tax-related topics in a simple and easy manner. Outside of work, Madhuri is passionate about teaching students who are appearing for professional exams.

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