Income Tax Notice Section 142(1): Key Aspects and Ways to Respond

In the evolving landscape of tax compliance, understanding and responding to regulatory notices has become essential for every taxpayer. One such crucial tool is the Income Tax Notice under Section 142(1). Far from being a mere administrative formality, this notice serves as an important checkpoint, enabling tax authorities to request additional information or missing returns from taxpayers. In this article, you will understand Income Tax Notice Section 142 1 functions, its implications for both individuals and businesses and the necessary steps to address it effectively.

What is Income Tax Notice Section 142(1)?

Section 142(1) of the Income Tax Act empowers the Assessing Officer to call upon taxpayers to provide information or documents necessary for making an accurate assessment. The primary purpose of this provision is to ensure that all taxpayers furnish complete and correct details, enabling the department to maintain compliance and assess taxes appropriately.

Types of Notices Issued

Two main types of notices can be issued under Section 142 1:

• For Non-Filers: This notice requires taxpayers who have not yet filed their income tax returns to submit them within a specified time frame.
• For Filers: In cases where taxpayers have already filed their returns, the Assessing Officer may still issue a notice under this section to request additional information, documents, or explanations to verify the accuracy of the filed return.

Who Needs to Respond to Section 142(1) Notice?

A notice under Section 142(1) can be sent to anyone, whether they have filed their income tax return or not. Listed below are the ones who need to respond to section 142 1 of the Income Tax Act:

• For Those Who Have Filed Returns: If you have already filed your tax return under Section 139(1), you still need to respond if the Assessing Officer (AO) asks for more information or documents.
• For Those Who Have Not Filed Returns: If you did not file your return by the due date mentioned in Section 139(1), the AO can ask you to file it within the time given in the notice.
• Compulsory Compliance: Anyone receiving a notice under Section 142(1)(i) must file their return, even if they were not required to file it earlier.

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

Listed below are the purposes of the notice under section 142 1 of the Income Tax Act:

• Request to File Your Return

If you haven’t filed your income tax return on time, the department may send you this notice asking you to file it. Remember: after filing, you also need to e-verify your return within 30 days, or else it will be treated as if you didn’t file it at all.

• Ask for Supporting Documents

Even if you've already filed your return, the Assessing Officer (AO) may ask you to share extra documents. These could include bills, receipts, or proof of the deductions you claimed in your return.

• Provide More Explanations

The AO might ask you to explain certain parts of your financial details, even if they’re not included in your main accounts. For example, you may need to provide a detailed statement of your assets, liabilities, or other financial activities.

Consequences of Non-Compliance with a Section 142(1) Notice

Listed below are the consequences of Non-compliance with section 142 1 of the income tax act:

• Penalty Under Section 271(1)(b)

A penalty of ?10,000 may be imposed for each instance of non-compliance, reinforcing the statutory requirement to furnish the requested details.

• Best Judgment Assessment under section 144

The Assessing Officer (AO) is empowered to proceed with a "Best Judgment Assessment" under Section 144. In such cases, the AO will assess the taxpayer’s liability based on the available information and material evidence, without relying on the taxpayer’s filed return or representations.

• Prosecution Under Section 276D

Non-compliance can escalate to criminal prosecution under Section 276D, which carries the potential for imprisonment of up to one year. The court may also impose a fine, adding to the legal consequences faced by the taxpayer.

• Issuance of a Warrant

In severe instances, the authorities may invoke powers under Section 132 to issue a warrant, authorising a search of the taxpayer’s premises to secure the necessary documents and data.

Essential Steps to Comply with a Section 142(1) Income Tax Notice

Listed below are the essential steps to comply with income tax notice section 142(1):

Step 1: Read the Notice Carefully

Examine the notice thoroughly to see what the Income Tax Department wants from you. It usually mentions whether you need to file your return, provide certain information, or explain details already given in your return. Understand every line to avoid confusion or missed details.

Step 2: Determine the Required Action

Identify what the notice expects from you. If it asks you to file a return, you must start preparing it without delay. If it wants clarifications or specific information, check what exactly you need to submit. Make sure you address each point clearly to avoid future queries.

Step 3: Compile Relevant Information

Review your financial records and collect everything relevant to the questions raised in the notice. Ensure you include details such as income figures, financial transactions, and any data that can support the explanations required. Keep all records accurate to avoid mistakes that could lead to further notices.

Step 4: Prepare and Submit the Response

Draft your response in a clear and structured way. Use the format and procedure specified in the notice. Ensure the details match your earlier submissions to avoid contradictions. Maintain transparency in your explanations to make the process smoother.

Step 5: Meet the Deadline

Take note of the deadline given in the notice and ensure you respond within that period. Delayed replies can result in penalties or a “best judgment assessment” where the officer decides your tax liability without your input. Acting within the deadline is crucial for your case.

Step 6: Seek Professional Assistance if Required

If you find the notice difficult to understand or the information asked is not clear, consult a qualified tax professional. Expert help ensures that your response meets all legal requirements and prevents unnecessary disputes.

How to File a Response to Income Tax notice Section 142 1

Listed below are the steps to file a response to Income Tax Notice section 142(1):

Step 1: Log In to Your e-filing Account

You need to start the process by visiting the official income tax e-filing portal. Use your valid user ID and password to access your account. This step ensures secure access to your personal tax information and notices issued to you. Only registered users can proceed with responses, so make sure your login credentials are correct.

Step 2:  Access the E-Proceedings Section

After logging in, locate the ‘Pending Actions’ area on your dashboard. This section lists all notices and tasks that require your attention. Select the ‘E-Proceedings’ option to open a workspace where you can view and respond to notices. This section acts as a central hub for managing your tax-related communications electronically.

Step 3: View the Notice

In the E-Proceedings area, click on ‘View Notices’ to display the details of the notice sent under Section 142(1). Read the notice carefully to understand the specific requests or instructions from the Income Tax Department. Once reviewed, select the ‘Submit Response’ option to initiate your reply process.

Step 4: Choose the Response Type

The system prompts you to select whether you want to provide a partial or full response. A partial response allows you to submit some of the requested information immediately while reserving the rest for a later date. A full response means you submit all the required information and documents in one go. This choice depends on your readiness and availability of the requested data.

Step 5:  Attach Supporting Documents

Upload the required documents as per the formats accepted by the portal, such as PDF, Excel, or CSV. These documents should directly address the queries or data requested in the notice. Ensure that the files are complete and organized to avoid delays or further notices. Proper documentation strengthens your compliance and supports your claims.

Step 6: Submit Your Response

After uploading the files, proceed to the declaration section where you confirm that the information you provide is accurate and truthful. Once you check the declaration box, submit your response. This action officially sends your reply to the Income Tax Department and marks your compliance with the notice.

Step 7: Obtain Confirmation and Acknowledgement

Upon successful submission, the portal displays a confirmation message stating your response has been accepted. You need to download and save the acknowledgement receipt for your records. This receipt serves as proof that you have responded within the stipulated time and protects you from future compliance issues related to this notice.

E-Assessment Under the Faceless Assessment Scheme, 2019

The Central Board of Direct Taxes (CBDT) launched the Faceless Assessment Scheme in 2019 to make income tax assessments more transparent and efficient. This scheme eliminates the need for face-to-face meetings between taxpayers and Assessing Officers (AOs), except in rare situations.

When you respond to a notice issued under Section 142(1), and the AO finds the information insufficient or unsatisfactory, your case may move to a scrutiny assessment under this faceless system. The entire process happens electronically, with your documents and information reviewed remotely.

This approach ensures your case receives an unbiased and standardised assessment, as the decision is based solely on the records you provide, without any personal interaction influencing the outcome.

Ways to Safeguard Yourself Against Income Tax Notice Section 142 1

Listed below are the ways to safeguard yourself against Income Tax Notice Section 142(1):

1. File Returns Timely

Ensure you submit your income tax return before the due date. Delays can attract scrutiny and increase the chances of receiving notices. After filing, complete the e-verification process within 30 days to validate your return. Missing this step may invalidate your return and invite a best-judgment assessment.

2. Maintain Accurate Records

Keep your financial documents well-organised and up-to-date. This includes receipts, invoices, bank statements, and all supporting papers related to your income and deductions. Proper documentation enables you to substantiate your claims if the Assessing Officer requests proof.

3. Respond Promptly and Thoroughly to Notices

When you receive a notice, especially under Section 142(1), reply within the stipulated timeline. Quick and detailed responses reduce the risk of escalation to a Section 144(1) notice. Provide honest, complete information to clarify any discrepancies.

4. Stay Informed and Monitor Your Tax Account

Understand the different types of notices and assessments under the Income Tax Act to know what to expect. Regularly check your Income Tax e-filing account for updates, pending actions, or communication from tax authorities.

5. Seek Professional Help When Needed

If you find the process complex or unclear, consult a qualified tax professional or chartered accountant. Expert guidance ensures accurate compliance, helps maintain proper documentation, and supports you in drafting timely, effective responses to any notices.

Conclusion

To sum up, in the ever-evolving landscape of tax compliance, understanding the nuances of Income Tax Notice Section 142(1) is essential. Timely filing of returns, maintaining precise records and responding to notices accurately protect you from severe legal and financial implications. While the process demands vigilance, the right professional guidance simplifies the journey. Among other service providers, Online Legal India ensures seamless navigation through these notices, offering expert assistance for prompt and compliant responses.