What is a Notice Under Section 142(1) of the Income Tax Act?

Section 142(1) of the Income Tax Act, 1961 authorizes income tax authorities to request further information or clarification regarding a filed return. If a return has not been submitted, the section allows the authorities to demand relevant details in a prescribed format.

Who Can Issue a Notice Under Section 142(1)?

A notice under Section 142(1) can be served regardless of whether an individual has filed their income tax return under Section 139(1).

If the return is not filed within the deadline mentioned in Section 139(1), the Assessing Officer has the power to issue a notice asking the taxpayer to file the return within a specified period.

Such a notice can also be issued after the relevant Assessment Year has ended.

Even if a person is not obligated to file a return under any section of the Income Tax Act, 1961, they must still respond to a notice under Section 142(1)(i) by submitting a return as instructed.

When is a Notice Under Section 142(1) Issued?

A notice under Section 142(1) of the Income Tax Act can be issued in two scenarios: whether you have filed your income tax return under Section 139(1) or have failed to file it within the prescribed timeline.

If the taxpayer (assessee) has not submitted their return within the allotted time, the Assessing Officer (AO) has the authority to issue a notice requiring the return to be filed within a timeframe specified in that notice. This type of notice may also be issued even after the conclusion of the relevant Assessment Year.

In situations where an individual is otherwise not obligated to file a return under any provision of the Income Tax Act, 1961, receiving a notice under Section 142(1)(i) still legally binds them to submit a return in compliance with the notice.

This notice can also be issued when the Income Tax Department requires further details—whether or not the return has been filed. It helps the department seek clarity or verify disclosures made in the return.

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Notice to File Income Tax Return

If a taxpayer misses the deadline to file their income tax return, either within the due date or before the end of the applicable Assessment Year, they may be served a notice under Section 142(1). This functions both as a reminder and a legal directive, compelling the individual to fulfill their tax filing duties.

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Request for Specific Documents and Accounts

After receiving and reviewing a filed income tax return, the Assessing Officer may ask the taxpayer to provide specific books of accounts or documents that are relevant to the assessment process. This might include supporting documentation for deductions claimed, invoices related to reported expenses, or records associated with income from various sources such as business or profession.

Additional Information, Notes, or Workings as Required by the Assessing Officer

The Assessing Officer (AO) may ask you to provide specific details in writing, in a prescribed format, on particular points relevant to your assessment. These may include information that isn’t part of your books of accounts. For example, you may be asked to submit a detailed statement showing your assets and liabilities.

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Purpose of Issuing a Notice Under Section 142(1)

The main aim of a notice under Section 142(1) of the Income Tax Act is to:

• Request essential records and documentation to aid in the proper assessment of tax.
  
  

• Seek written explanations or details on specific financial matters, including a comprehensive list of the taxpayer’s assets and liabilities as of a certain date.
  
  

• Gather information not only about the taxpayer’s own income but also income that the taxpayer is legally responsible for, such as in the case of a legal guardian or representative of a deceased person.
  
  

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Penalty for Ignoring a Notice Under Section 142(1)

Failure to respond to a notice issued under Section 142(1) can lead to serious consequences, including:

• A penalty of ₹10,000 under Section 271(1)(b) for non-compliance.
  
  

• Assessment under Section 144, known as “Best Judgment Assessment,” where the AO will proceed based on available data without your input.
  
  

• Prosecution under Section 276D, which could result in imprisonment for up to one year, with or without a fine.
  
  

• In certain cases, the AO may also issue a warrant under Section 132 to carry out a search and seizure operation.
  
  

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Received a Notice Under Section 142(1)?

There’s no need to panic. If you’ve been served a notice under this section, it’s important to respond promptly and accurately. Expert tax professionals, like those at KMG CO LLP, can help you understand the notice and guide you in preparing a proper response.

How Can Taxpayers Protect Themselves?

Taxpayers can take certain precautions and be aware of their rights under Section 142(1) to ensure fair treatment during an income tax inquiry.

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Request for Financial Statements and Records

Under Section 142(1)(i), the Assessing Officer is permitted to ask for financial records, documents, and a statement detailing assets and liabilities—even if such details are not part of the official books of accounts.

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Requirement of Prior Approval

To safeguard taxpayers from potential misuse, the Assessing Officer must first obtain approval from the Joint Commissioner before requesting asset and liability statements that are not recorded in the taxpayer’s books. This step is aimed at preventing arbitrary or excessive demands.

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Time Limit for Requesting Records

There is a clear time restriction under Section 142(1)(i). The Assessing Officer cannot demand account details that pertain to a period earlier than three years prior to the relevant previous year. This ensures that only recent and pertinent information is requested.

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Applicable to All Types of Taxpayers

A notice under Section 142(1)(i) can be issued to any individual, regardless of whether they have filed their income tax return or not. This underscores the wide applicability of the section and the importance of responding properly, whether you're a compliant filer or not.

How to Respond to a Notice Under Section 142(1)

If you’ve received a notice under Section 142(1) of the Income Tax Act, you can respond through the Income Tax Department’s online ‘e-Proceedings’ service. Follow these steps to submit your response:

1. Log in to the Income Tax e-Filing portal.
   
   

2. Navigate to the “Pending Actions” tab and select “e-Proceedings.”
   
   

3. Click on “View Notices” to see the notice issued.
   
   

4. Choose “Submit Response” to open the response page.
   
   

5. Click on “Select Response Type for Notice.”
   
   

6. Select either “Partial Response” or “Full Response” depending on the information you’re ready to provide.
   
   

7. Submit the response after uploading the required details or documents.
   
   

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How KMG CO LLP Assists You in Handling Income Tax Notices

Received a tax notice and not sure what to do? KMG CO LLP is here to help you navigate the process with ease. Here’s what we offer:

• Expert Support: Get one-on-one assistance from our team of experienced Chartered Accountants and tax professionals.
  
  

• Clear Understanding: We break down the notice to explain what the Income Tax Department is asking for.
  
  

• Document Preparation: We help you collect and organize all necessary supporting documents.
  
  

• Well-Drafted Replies: Our experts prepare accurate and timely responses that comply with all legal requirements.
  
  

• Full Legal Compliance: We make sure your reply is aligned with tax laws to avoid any penalties or further notices.