The Income Tax Department may issue a notice under Section 142(1) for multiple reasons, such as non-filing of tax returns, income mismatches, or requesting additional documents for verification. Ignoring this notice can lead to penalties, scrutiny, or legal action.
📌 Why is a Notice Issued Under Section 142(1)?
When an Assessing Officer (AO) sends this notice, they may request the following:
📌 1. Filing of Income Tax Return (Section 142(1)(i))
The AO may issue this notice if:
- A taxpayer fails to file ITR on time.
- A person must file ITR on behalf of someone else (legal guardian, deceased person’s representative).
📌 2. Submission of Special Documents (Section 142(1)(ii))
Documents that may be requested include:
✔️ Income proofs (Salary slips, bank statements, invoices)
✔️ Business expense records
✔️ Tax deduction details
📌 3. Additional Information (Section 142(1)(iii))
AOs can demand financial reports like:
✔️ Balance sheets & profit/loss statements
✔️ Tax computation details
✔️ Other financial records
📑 Inquiry & Opportunity to be Heard (Section 142(2) & 142(3))
✔️ Inquiry by AO (Section 142(2)) – The AO may gather financial data from external sources.
✔️ Opportunity to Respond (Section 142(3)) – Taxpayers must be allowed to explain discrepancies before assessment (except in Section 144 cases).
📑 Special Audit Under Section 142(2A) to 142(2D)
The AO may order an audit if:
✔️ The accounts are too complex.
✔️ There are doubts about accuracy.
✔️ Transactions are very high in volume.
✔️ The business requires specialized assessment.
📌 Audit Report: Must be submitted in Form No. 6B (extendable up to 180 days). The Central Government bears the audit costs.
🚨 Consequences of Ignoring Section 142(1) Notice
⚠️ Best Judgment Assessment under Section 144.
⚠️ ₹10,000 penalty for non-compliance.
⚠️ Search & Seizure Operations under Section 132.
⚠️ Imprisonment up to 1 year with/without fine.
💡 Faceless E-Assessment Under Income Tax Act
With the Faceless Assessment Scheme, 2019, there is minimal taxpayer-AO interaction, ensuring fair assessments. If the AO is unsatisfied with the response to Section 142(1) notice, they may proceed with a faceless assessment.
📌 Learn More: Income Tax Department Website
🏠 Property Valuation Under Section 142A
✔️ The AO can appoint a Valuation Officer to determine fair market value.
✔️ If the taxpayer refuses to cooperate, the officer may estimate the value.
✔️ The AO will consider the valuation report before making an assessment.
✅ Conclusion – How to Respond to Section 142(1) Notice?
If you receive an Income Tax Notice under Section 142(1), do not ignore it. Follow these steps:
✔️ File pending ITR immediately.
✔️ Submit requested documents before the deadline.
✔️ Comply with audit requirements if applicable.
✔️ Seek CA assistance to avoid penalties.
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