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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