Tag: Notice u/s 142(1) – Inquiry Notice before Assessment

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Notice Under Section 142(1) of the Income Tax Act, 1961

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Section 142(1): Inquiry Before Assessment

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

Notice u/s 142(1) can be issued by the Income Tax Department for the following reasons:

1. To ask the assessee to file the Income Tax Return:

If the assessee has not filed a return within the specified period of time or before the end of the relevant assessment year, then the assessee might receive notice u/s 142(1) asking to file the return.

Note: The taxpayer must e-verify the return within 30 days of filing the income tax return. Failure to do so within the specified time limit will result in the return being considered an Invalid Return. Moreover, in such a case, it will be deemed that the taxpayer has not even filed their return for the relevant financial year.

2. Producing specific accounts and documents:

If the assessee has already filed an income tax return, the Assessing Officer (AO) may ask the assessee to produce such specific accounts and documents as required by them. For example, the department can ask the assessee to provide evidence of deductions claimed, invoices of expenses claimed under business incomes, etc.

3. Any other information, notes, or workings as desired by the AO:

The Assessing Officer may require the assessee to furnish in writing and in the prescribed manner the information, notes, or workings on specific points as required by him which may or may not form part of books of accounts. For example, A statement of assets and liabilities.

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

Consequences of non-compliance

If a taxpayer receives a notice under section 142(1), they must respond to it. Failing to do so can lead to the following consequences:

E-assessment

The Central Board of Direct Taxes (CBDT) has launched the ‘Faceless Assessment Scheme, 2019‘ to carry out all income tax assessments in a faceless manner, with a few exceptions. Therefore, if the Assessing Officer (AO) is not satisfied with the response given in reply to the notice issued under section 142(1), they will move ahead with a scrutiny assessment under this scheme.

How to file a response against notice

The reply to the notice can be submitted online by following steps:

  1. Log in to the Income tax e-filing portal
  2. Select Pending Action
  3. Click on E-Proceeding
  4. Choose the View Notices
  5. Submit a Response to proceed to the new page
  6. Click on the Select Response type for Notice
  7. Select between Partial Response and Full Response and submit your reply accordingly

What do I do when I receive a 142(1) notice from the income tax department?

You may receive a notice under section 142(1) in two circumstances. One is when you fail to file an income tax return, in which case you need to file the return. The second circumstance is when you have filed a return but AO wants to verify the accounts or documents. In such a case, you need to submit documents as asked by AO.

What can I expect after the submission of my ITR u/s 142(1)?

Once you submit the return, the processing department will process it. If the AO finds your response satisfactory, they will move forward with processing the ITR. And no further action is required. However, if the AO is not satisfied with your reply, they may issue a notice under section 143(2) for scrutiny assessment.

What happens if I don’t file a return or don’t respond to the notice u/s 142(1) received?

In this case, you will fall under “Best Judgement Assessment.” The assessing officer will evaluate all the relevant information available and make an assessment based on their best judgment.

What is the time limit to issue the notice under section 142(1)?

There is no time limit mentioned for issuing the notice, so it can be issued even after the relevant assessment year.

What is the difference between notice u/s 142(1) and 143(2)?

When an AO needs to verify specific accounts and documents, they issue a notice under section 142(1) which is also termed as an inquiry before the assessment. If there are any doubts regarding the accuracy of the documents, then the AO will issue a notice under section 143(2) for scrutiny assessment.

Section 142(1) of Income Tax Notice

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:

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).

Income Tax Notice Under Section 142(1)

Income Tax Act, 1961, is a key piece of legislation that regulates the collection, administration, and enforcement of income taxes in India. One of its important provisions, Section 142(1), grants tax authorities the power to issue notices to taxpayers requesting additional information or clarification for accurate tax assessment. This provision plays a crucial role in ensuring compliance and transparency in the tax filing process.

This article explores the nuances of Section 142(1), explaining the circumstances under which these notices are issued, the procedures that follow, and the potential consequences for taxpayers who fail to comply. Understanding the purpose and implications of Section 142(1) can help individuals and businesses navigate their tax obligations with greater clarity and confidence.

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

Section 142(1) of the Income Tax Act empowers the Assessing Officer (A.O.) to issue a notice to a taxpayer requesting additional information or documents required for the proper assessment of their income. This provision applies regardless of whether the taxpayer has filed their income tax return under Section 139(1) or has failed to file it altogether. The notice under Section 142(1) acts as a mechanism for tax authorities to gather comprehensive financial data directly from the taxpayer, ensuring accurate and complete tax assessments. It is an important tool to maintain compliance and transparency in the tax process.

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

The Income Tax Act’s Section 142(1) allows for the issuance of a notice in the following situations:

  1. Non-Filing of Return: If a taxpayer fails to file their income tax return within the prescribed time under Section 139(1), the Assessing Officer (A.O.) may issue a notice requiring them to furnish the return within a specified period.
  2. Filed Returns: Even when a taxpayer has already filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to request additional information or clarification to verify the accuracy and completeness of the filed return.
  3. Post Assessment Year: This notice can be issued even after the end of the relevant assessment year, enabling tax authorities to gather necessary information retrospectively for proper assessment and compliance.

Purpose of Notice under Section 142(1)

The primary objective of issuing a notice under Section 142(1) is to facilitate a comprehensive and accurate tax assessment. The notice serves several purposes, including:

  1. Filing of Income Tax Return: This applies to the taxpayer’s own income and, in certain cases, the income of another person for whom the taxpayer is legally responsible, such as a legal guardian or representative of a deceased individual.
  2. Provision of Accounts and Documents: The notice can require the taxpayer to provide various accounts and documents necessary for the assessment process.
  3. Detailed Financial Information: The taxpayer may be asked to furnish written information on specific matters, including a detailed statement of assets and liabilities as of a particular date.

Safeguards for Taxpayers

To prevent harassment and ensure fairness, the law includes several safeguards:

  1. Prior Approval Requirement: Before demanding a statement of assets and liabilities that are not part of the accounts, the Assessing Officer must seek prior approval from the Joint Commissioner.
  2. Time Limitation: The Assessing Officer cannot request accounts related to a period more than three years prior to the previous year, ensuring that the information sought is relevant and recent.
  3. Application to All Taxpayers: Notices under Section 142(1)(i) can be issued to both taxpayers who have filed their returns and those who have not, underscoring its comprehensive scope.

Procedure of Conducting Faceless Assessment

In recent years, the Indian government has introduced the faceless assessment scheme to enhance transparency and efficiency in tax assessments. Under this scheme, assessments are conducted without any physical interaction between the taxpayer and tax authorities. Here’s how the process works:

  1. Issuance of Notice: The notice under Section 142(1) is issued electronically through the income tax portal.
  2. Submission of Response: Taxpayers are required to respond to the notice using the ‘e-Proceedings’ utility within their registered ‘e-Filing’ account.
  3. Review and Analysis: The submitted documents and information are reviewed and analyzed by a team of tax officials, who may request further clarification if needed.
  4. Final Assessment: Based on the provided information, the assessment is finalized and communicated to the taxpayer electronically.

Sample of a Notice under Section 142(1) of the ITA

A typical notice under Section 142(1) will include the following details:

Compliance under Section 142(1) is Mandatory

Responding to a notice under Section 142(1) is mandatory for all taxpayers. Non-compliance can lead to severe consequences, including penalties, prosecution, and a best judgment assessment by the tax authorities.

Penalty for Non-Compliance of Section 142(1) Tax Notice

Failure to comply with a notice under Section 142(1) can result in the following penalties and actions:

  1. Monetary Penalty: A penalty of Rs.10,000 may be levied on the taxpayer under Section 271(1)(b).
  2. Best Judgment Assessment: Under Section 144, the Assessing Officer can make an assessment based on their best judgment, using all relevant information available.
  3. Legal Prosecution: Under Section 276D, legal prosecution could be initiated, potentially leading to imprisonment for up to one year, with or without a fine.
  4. Search Warrant: A search warrant under Section 132 might be issued to conduct a search of the taxpayer’s premises.

How to Submit a Response to the Notice U/S 142(1)?

Responding to a notice under Section 142(1) involves using the ‘e-Proceedings’ utility on the income tax e-filing portal. Here is a step-by-step guide:

  1. Access the Income Tax Portal: Log in to your registered account on the income tax e-filing portal.
  2. Navigate to ‘Pending Actions‘: Go to the ‘Pending Actions‘ tab and select ‘E-Proceedings‘.
  3. View Notices: Click on ‘View Notices‘ to see the notice issued under Section 142(1).
  4. Submit Response: Click on ‘Submit Response’ and choose the response type (Partial or Full Response).
  5. Attach Documents: Attach the required documents in PDF, Excel, or CSV formats.
  6. Submit: Click ‘Continue‘, tick the ‘Declaration‘ box, and submit your response.
  7. Confirmation: Upon successful submission, a confirmation message will be displayed, and you can download the response acknowledgement for your records.

Read more at: Income Tax Notice Section 142(1): Inquiry Before Assessment

FAQs for Section 142(1) of Income Tax Act

Is there any upper limit on the number of years of information or related documents that an AO can seek under Section 142(1)(ii)?

Yes, under Section 142(1)(ii) of the Income Tax Act, the Assessing Officer (AO) is restricted in terms of the number of years for which they can seek accounts or documents. The AO cannot request accounts or information related to a period more than three years prior to the previous year. This limitation ensures that the inquiries remain relevant and focused on recent financial activity, protecting taxpayers from being asked for outdated records.

When is it recommended to file a partial response to a notice under Section 142(1)?

It is recommended to file a partial response to a notice under Section 142(1) when the taxpayer can provide some of the requested information but is unable to furnish all of it within the stipulated time. Submitting a partial response demonstrates the taxpayer’s intention to comply with the notice and can help avoid penalties or negative consequences. The remaining information should be submitted as soon as it becomes available, and it is advisable to communicate with the Assessing Officer about the delay in providing the full response.

Who can serve notice under section 142 for making any inquiry before the assessment?

The Assessing Officer (AO) is authorized to serve a notice under Section 142(1) of the Income Tax Act. The purpose of this notice is to gather necessary information, documents, or clarifications from the taxpayer before proceeding with the assessment of their income. This inquiry ensures that the AO has all the required details to conduct an accurate and thorough assessment.

What is the time limit for issuing section 142(1) notice?

There is no specific time limit prescribed for issuing a notice under Section 142(1) of the Income Tax Act. However, the notice is typically issued during the assessment or reassessment process to gather additional information or clarifications from the taxpayer, ensuring that the Assessing Officer has all the necessary details for accurate tax evaluation before the completion of the assessment.

What is Inquiry Before Assessment in Income Tax?

An inquiry before assessment in income tax refers to the process where the Assessing Officer (AO) seeks additional information or clarification from the taxpayer to ensure that the income declared and taxes paid are accurate. This is typically done under provisions such as Section 142(1) of the Income Tax Act, where the AO issues a notice requesting further documentation, details, or explanations regarding the income tax return filed by the taxpayer. The purpose of this inquiry is to verify the accuracy of the taxpayer’s financial records, identify discrepancies, and gather any missing information before finalizing the tax assessment. This ensures transparency, fairness, and compliance in the tax assessment process.

Read more at: Types of Income Tax Notice & Documents required to reply to an Income Tax Notice

Income Tax Demand Notice: Types, Reasons, and How to Respond

Any notice that is received from the Income Tax Department might be alarming and frightening to the recipient. However, there is no reason to be disturbed when an income tax notice is received. On receiving an income tax notice, the taxpayer must understand the nature of notice, the request or order in the notice and take steps to comply. Some of the common reasons for receiving an income tax notice is as follows:

Notice u/s 143(1) – Intimation

This notice is an indication that ITR is being processed by the Income Tax Department. It intimates the receiver of any numerical faults or modifications to be made. The notice is usually sent in the form of an e-mail from the Income Tax Department. If an intimation is received under section 143(1), it is no reason for panicking, it is not an inspection or order sent forth by the Income Tax Department.

Common reasons for receiving income tax notice under Section 143(1) are

Notice u/s 139(9) – Defective Income Tax Return

A return is termed defective when the IT Department identifies any contradiction or faults or any misplaced information in ITR. An assessee must rectify the flaws within 15 days and if the flaw is not rectified, it would be considered as an invalid return. Once the income-tax returns are filed, the particulars provided in the ITR are checked and processed.

Notice u/s 142(1) – Inquiry Notice before Assessment

This notice is addressed to the assessee when the return is already filed and further details and documents are required from the assessee to complete the process. This notice can also be sent to necessitate a taxpayer to provide additional documents, as required by the tax officer.

This notice is mostly received when there are discrepancies in the taxpayer tax return and an investigation of certain documents or information is required. The taxpayer is given time for submission of documents and a judicious chance of being heard before the conclusion of the process.

Notice u/s 143(2) – Scrutiny Assessment Notice

This applies when the tax is filed by the assessee himself (Self-Assessment) or in retort to a notice u/s 142(1). This notice is attended by the Assessing Officer in order to confirm that the assessee has not minima-listed the income, computed undue damage or tax had been short-paid. It is expected of him/her to execute the following:

  • Be present or signify before the Assessing Officer (AO) to provide proofs
  • Make written proposals for providing details
  • Produce proof to validate the income/profits/gains/losses.

Notice u/s 156 – Demand Notice

This type of income tax notice is issued by the Income Tax Department when any tax, interest,  fine or any other sum is owed by the taxpayer.  All demand tax notice will stipulate the sum which is outstanding and due on the part of the taxpayer. The amount mentioned in the demand notice must be deposited by the taxpayer within 30 days or any other date mentioned on the tax notice.

Notice u/s 148 – Commence Proceedings

This notice is released for the purpose of reopening a case that has already been evaluated previously by an officer. The case is re-opened if the officer trusts that any actionable income is not stated in the return. Prior to undertaking this course of action, the Assessing Officer (AO) has to deliver a notice under section 148 by creating a valuation or re-assessment. The Assessing Officer (AO) should have a binding motive to re-open the case and must record the purpose of dispensing the notice.

Notice u/s 245 – Intimation to set off Demand and Refunds

This tax notice is issued by the income tax department to an assessee for whom the Income Tax Department owes a refund from a previous assessment year, while the taxpayer is supposed to pay the tax demanded currently. At this juncture, the Assessing Officer can setoff a refund against the tax demand which is unresolved from the taxpayer. As per Section 245, the modification of reimbursement and petition could be provided after an appropriate issue of notice to the taxpayer. The taxpayer will be given the opportunity to rectify the inaccuracy identified by raising or altering the claim.

Responding to Demand Notice

Responding to an income tax demand notice has now become easier, thanks to the digitization of the Income Tax portal and introduction of E-Assessment under the Centralised Communication Scheme, 2018. This takes away the time-consuming and painstaking manual processes of the past. Taxpayers can now view the outstanding tax demand by following the procedures listed below:

Step 1: Log in to the e-filing portal of the official website of the Income-tax department. If you do not have a username and password, please create a new user identification on the website.

Step 2: On the drop-down menu of My Accounts Section, choose the option ‘Respond to Outstanding Tax Demand’.

Income-Tax-Demand-Notice
Income Tax Demand Notice

Step 3: Details pertaining to the Assessment year, Section Code, Demand Identification Number (DIN), Date of issue of demand will be displayed. Select the income tax demand from the list to which you would like to respond.

List-of-Demands
List of Demands

Step 4: The taxpayer, after clicking ’Submit’ is entitled to choose the response among the options available:

  • Demand is correct
  • Demand is partially correct
  • Disagree with demand
  • Demand is not correct but agree for adjustment

Now, let us examine the procedures based on the status of demand chosen by the taxpayer.

Demand is Correct

Choosing this option prohibits you from disagreeing with the demand later. To start the process under this choice, click on ‘Submit’. A success message will be displayed. If you are eligible for a refund, the outstanding amount along with interest will be adjusted against the refund due. If not, the dues should be immediately remitted. For payment of dues, click on the hyperlinked option ‘Pay Tax’, and then click on ‘Confirm’. You will be redirected to the TIN website of NSDL, where your outstanding taxes can be paid. Now click on ‘submit to bank’ option on the page to the payment.

Demand is Partially Correct

On selecting this option, two amount fields will be displayed on the screen. You must enter the correct and incorrect amount. In addition to it, you will have to choose the reason cited in the portal. You will be required to provide additional information based on the selected choice.

The following reasons are cited in the portal, among which the choice should be made:

  • Demand paid.
  • Demand paid and challan has CIN.
  • Demand paid and challan has no CIN.
  • Demand already reduced by rectification/revision.
  • Demand already reduced by the Appellate order but appeal effect to be given.
  • Appeal has been filed.
  • Stay petition filed with.
  • Stay granted by.
  • Instalment granted by.
  • Rectification/Revised return filed at Central Processing Centre (CPC).
  • Rectification filed with Assessing Officer (AO).
  • Others.
Demand-is-Partially-Correct
Demand is Partially Correct

Additional Documents to be Submitted

Any taxpayer who chooses the “Demand is Partially Correct” option would have to provide additional information as provided below:

Reason Demand is Partially CorrectAdditional Information
Demand paid and challan has CINBSR CodeDate of paymentSerial NumberAmountRemarks
Demand paid and challan has no CINDate of paymentAmountRemarksUpload Copy of Challan
Demand already reduced by rectification / Revision Date of OrderDemand after rectification/ revisionDetails of AOUpload Rectification / Giving appeal effect order passed by AO
Demand already reduced by Appellate Order but appeal effect to be givenDate of OrderOrder passed byReference Number of Order
Appeal has been filed: Stay petition has been filedDate of filing of appealAppeal Pending withStay petition filed with
Appeal has been filed: Stay has been grantedDate of filing of appealAppeal Pending withStay granted byUpload copy of Stay
Appeal has been filed: Instalment has been grantedDate of filing of appealAppeal Pending withInstalment granted byUpload copy of stay/instalment order
Rectification / Revised Return filed at CPCFiling Typee-Filed Acknowledgement No.RemarksUpload Challan CopyUpload TDS CertificateUpload Letter requesting rectification copyUpload Indemnity Bond

Demand is not Correct

This option can be selected if you have apprehensions on the correctness of the demand, after which you will be required to choose among the many options specified in the option “Demand is partially correct”. Some of the option that can be selected for citing demand is not correct include:

  • Demand paid
  • Demand already reduced by rectification/revision
  • Demand already reduced by Appellate Order but appeal effect to be given
  • Appeal has been filed
  • Rectification / Revised Return Filed at CPC
  • Rectification filed with AO
  • Others

Demand is not Correct but Agree for Adjustment

In this case, you will have to specify the reasons for your disagreement with the demand, which again could be any of the following:

  • Demand paid
  • Demand already reduced by rectification/revision
  • Demand already reduced by Appellate Order but appeal effect to be given
  • Appeal has been filed
  • Rectification / Revised Return Filed at CPC
  • Rectification filed with AO
  • Others

Tracking Status of Response

After completing all the above procedures and successfully submitting the information to the Income Tax department, a transaction ID will be generated. The response can be checked by clicking on the ‘transaction ID’ on the income tax e-filing portal.

Transaction-ID
Transaction ID

The demand position will be updated every day. Further, interest demand u/s 220(2) is linked to the principal demand of the same assessment year. This indicates that principal demand is already adjusted/ paid and interest demand is the only outstanding value. Hence does not require any confirmation.