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Income tax

Understanding the Notice under Section 142(1) of the Income Tax Act

Section 142(1) of the Income Tax Act empowers the Assessing Officer to issue notices to taxpayers in certain situations to obtain more information or clarification before completing the tax assessment. This blog provides a comprehensive understanding of Section 142(1), including when the AO can issue a notice, the information that can be sought, the consequences of non-compliance, and the steps taxpayers should take to respond effectively. It also highlights the safeguards in place to prevent misuse and ensure fairness in the tax assessment process. By understanding their rights and obligations under Section 142(1), taxpayers can navigate the tax assessment process more effectively and avoid potential penalties.

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Section 142(1) of the Income Tax Act

Section 142(1) of the Income Tax Act empowers the Assessing Officer (AO) to issue a notice to a taxpayer in certain situations to obtain more information or clarification before completing the tax assessment.

When can the AO issue a notice under Section 142(1)?

The AO can issue a notice under Section 142(1) in the following cases:

  1. When the taxpayer has not filed the income tax return
    If the AO believes that the taxpayer was required to file an income tax return but has not done so, they can issue a notice under Section 142(1) asking the taxpayer to file the return within the time specified in the notice.
  2. When the filed income tax return is incomplete or unsatisfactory
    If the AO is not satisfied with the income tax return filed by the taxpayer, they can issue a notice under Section 142(1) asking the taxpayer to provide additional information, documents, or clarification. The AO may issue this notice if they find discrepancies, inconsistencies, or suspect underreporting/overreporting of income in the taxpayer's return.

What information can the AO seek under Section 142(1)?

Under Section 142(1), the AO can ask the taxpayer to:

  • Furnish a written statement of the taxpayer's accounts
  • Provide a statement of the taxpayer's assets and liabilities as of a specified date
  • Furnish any other information the AO deems necessary for the purposes of assessment

The AO can also ask the taxpayer to appear in person to provide clarification or additional details.

What are the consequences of non-compliance?

If the taxpayer fails to comply with the notice issued under Section 142(1), they may be liable for penalties under Section 272A of the Income Tax Act. The penalties can range from ₹10,000 to ₹100,000 depending on the nature and extent of non-compliance.

How to respond to a notice under Section 142(1)?

When responding to a notice under Section 142(1), taxpayers should:

  • File a complete and accurate income tax return, if not filed earlier, within the time specified in the notice.
  • Provide all the requested information, documents, and clarifications to the AO in a timely manner.
  • Seek professional assistance, if needed, to ensure a proper and comprehensive response.

It is crucial to comply with the notice to avoid penalties and further complications with the tax authorities.

Conclusion

In conclusion, the notice under Section 142(1) is an important tool used by the tax authorities to ensure accurate tax assessments. Taxpayers should understand their rights and obligations under this provision and respond promptly and accurately to avoid any adverse consequences.

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Krishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.


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Krishna Gopal Varshney

An editor at Myitronline

Krishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.

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