Getting a notice from the Income Tax Department seems common and scary. But you don’t need to worry unless you have all your proof in hand and reply to the notice on time. There are many reasons why the Income Tax Notice is issued, such as non-filing of returns, discrepancies in tax returns, incomplete information, underreported income, tax evasion suspicions, etc.
Notice under section 142(1) is served when a return is not filed or if further information is required by the department about your finances. This article provides insight into Section 142 (1) and the necessary steps.
What is Section 142 (1) Income Tax Act?
When an Assessing Officer (AO) is unsatisfied with your Income Tax Filing, they can issue a notice to taxpayers seeking additional clarifications regarding a filed return. Information may be asked whether or not you’ve already filed your tax return. There is no time limit for issuing a notice under section 142(1) of the Income Tax Act. It can be issued even after the assessment year ends.
Purpose of Section 142(1) of Income Tax Act
The purpose of section 142(1) of the Income Tax Act is as follows:
File the Income Tax Return: Any taxpayer left to file an ITR is asked to file their return before the end of the relevant assessment year. Verifying the return within 30 days after filing the ITR is mandatory.
Request for Accounts and Documents: If the taxpayer has filed a return, the Assessing Officer (AO) issues a notice asking them to provide specific accounts or documents.
Information– AO needs more information and may ask the taxpayer to provide information when writing notes or calculations on specific issues. (like a statement of assets and liabilities)
When Do You Get a Notice u/s 142(1) of the Income Tax Act?
Here, given below is the list of reasons to get notice u/s 142(1) of the Income Tax Act:
Non-Filing of Return: When an income tax return isn’t filed within the prescribed deadline under Section 139(1), the assessing officer issues a notice under Section 142(1) asking to file the return.
Scrutiny: The AO scrutinizes your return to verify its accuracy and completeness; hence, the notice is issued.
Errors or Discrepancies: If there is any mismatch in the reported income, such as TDS details, bank statements, etc., a notice under Section 142(1) can be issued to clarify the issues.
Assessment Procedure: Any additional facts might be needed to properly assess your income and tax liabilities. Here, notice is issued under Section 142(1).
Verification of Compliance– The AO might issue a notice under Section 142(1) of the Income Tax Act to confirm the details in the return or request further documents and explanations.
Consequences of Non-Compliance to Notice u/s 142(1)
Taxpayers must adhere to such notices under Section 142(1) or face the following consequences:
Penalty under Section—When a taxpayer fails to comply with the notice issued under Section 142(1), a penalty of Rs 10,000 will be levied under Section 271(1)(b) for each non-compliance.
Best Judgment Assessment- The Assessing Officer (AO), based on all the available information on the taxpayer’s income and liability, will make a Best Judgment Assessment under Section 144 of the Income Tax Act.
Prosecution—Taxpayers who fail to comply with the Income Tax Act will face prosecution under Section 276D and imprisonment for one year with or without a fine.
Search and Seizure- The tax authorities may issue a search warrant under Section 132 if they suspect non-compliance or concealment of income.
E-Assessment Under the Income Tax Act in India
The Central Board of Direct Taxes (CBDT) introduced faceless assessment on 13 August 2020. In Faceless Assessment, all assessments will be done faceless, meaning through an online portal using the taxpayer’s registered account in the designated portal. Taxpayers would not need to visit the Income Tax office physically.
How to Avoid Getting a Notice Under Section 142(1)?
Nobody wants to deal with the frustration of getting a notice. Here are some tips you can follow to avoid being served a notice under Section 142(1) of the Income Tax Act:
- File Your Income Tax Return (ITR) On Time
- Double-check for Accuracy
- Respond to Notices Promptly
- Maintain Complete Records
- Understand Your Filing Status
- Being aware of the time limitations
- Keep Updated on Tax Regulations
- Seek Professional Help if Needed
How to Respond to a Notice Under Section 142(1)?
Responding to a Notice is very important. Here is the step you need to follow while replying to a notice:
- Go to official website of income tax filing and log in to your account
- Click on the tab Pending Actions and then e-proceedings. Here, you will know if any notice is issued to you.
- There you will find a ‘View Notice’ option. Once you click View Notice, you will see all the notices sent to you.
- If you want to file a response, click ‘Submit Response.’
- You have two options: Partial Option or Full Response
- Select and submit your reply accordingly
Replying to income tax notices is no more a matter of worry with our experts. We ensure that the entire process will take place in a streamlined way and you will be able to save your time and money.
Case Law: V. Chaitanya, Hyderabad Vs Department of Income Tax
The assessing officer issued a notice under Section 142(1) on August 29, 2007, asking the assessee to file their income tax return. Here, the relevant assessment year ended on March 31, 2006. The assessee argued that the notice was issued late and was invalid. The changes to the law (effective from April 1, 2006) pointed out that any notice issued after the end of the assessment year is valid.
A similar case (Smt. Kausari Begum) was referred, which held that notices under Section 142(1) could be issued as long as the delay is within a reasonable period. The Tribunal agreed with this view, and the case was reviewed, considering all legal changes and precedents.
Conclusion
To avoid notice, providing the right information and fulfilling the tax obligations is crucial. If you receive a notice, it should be given serious consideration and not be taken lightly. Section 142(1) of the Income Tax Act is considered an important provision as it is a foundation of the tax assessment process, providing tax authorities the power to ensure accuracy and compliance in the reporting of income. Replying to a notice can be done simply by logging into an e-filing portal.
You may visit our official website Taxeye for further queries and services related to income tax in India.
Frequently Asked Question
What is Section 142(1) of the Income Tax Act?
Section 142(1) empowers the Assessing Officer (AO) to issue taxpayer notices for filing returns or provide additional information if required.
What is the deadline for responding to a notice u/s Section 142(1)?
The deadline for responding to a notice under section 142(1) of the Income Tax Act is usually 30 (thirty) days from the date of receipt.
Can a notice under Section 142(1) be issued if I have filed my return?
Yes, a notice under section 142(1) of the Income Tax Act can be issued even if you have filed your return, especially if the AO (Assessing Officer) requires additional information or documentation.
What is faceless assessment?
Faceless assessment is a system where the assessment process is conducted online through a portal, eliminating the need for physical visits to the Income Tax office.
Can I appeal a penalty for non-compliance with a Section 142(1) notice?
Yes, you can appeal against penalties and assessments as per the procedures laid down under the Income Tax Act.