Section 142(1) of Income Tax Act

Section 142(1) of the Income Tax Act is a provision in the Indian Income Tax Act that pertains to the powers of the income tax authorities to conduct inquiries and investigation. It states that the income tax authorities have the power to inquire into any matter that is relevant for assessing a person’s tax liability or to verify the correctness of the tax return filed by that person.

Under this section, the income tax authorities can require a person to produce any documents or records. It may be relevant to the inquiry or investigation to examine any person who has knowledge of the matter being inquired into.

It is important to note that the powers granted under this section are subject to certain limitations and safeguards. It includes the requirement that inquiries and investigations be conducted fairly and reasonably.

See also: Section 269SS of Income Tax Act

Purpose of notice under Section 142(1) 

Section 142(1) of the Income Tax Act allows the Income Tax Department to issue a notice to a taxpayer requiring them to furnish a return of income or any other documents or information as the department may require. This notice may be issued to verify the information provided by the taxpayer in their income tax return or for any other purpose that the department considers necessary to assess the taxpayer’s income.

Objective of Section 142(1) of Income Tax Act

This provision empowers the Income Tax Department to gather information and assess the tax liability of taxpayers. The notice may be issued to individuals, companies, firms, or any other person or entity required to file a tax return.

There are several reasons why the Income Tax Department may issue a notice under Section 142(1) of the Act. Some common reasons include the following:

• Inaccuracies or discrepancies in the taxpayer’s income tax return: If the department believes that there are errors or discrepancies in the information provided by the taxpayer in their return, they may issue a notice under section 142(1) to seek clarification or additional information.
• Suspected tax evasion: If the department has reason to believe that a taxpayer is evading tax, they may issue a notice under section 142(1) to gather the information that will help them to determine the taxpayer’s actual income and assess the appropriate amount of tax.
• Verification of deductions and exemptions: The department may issue a notice under section 142(1) to verify that the deductions and exemptions claimed by a taxpayer are legitimate and under the provisions of the Income Tax Act.
• Incomplete or defective returns: If the department determines that a taxpayer’s return is incomplete or defective, they may issue a notice under section 142(1) to request the necessary information or documents to complete the assessment.
• Requiring information from third parties: The department may also issue a notice under section 142(1) to third parties, such as banks or employers, to obtain information or documents relevant to assessing a taxpayer’s income.

It is important to note that receiving a notice under Section 142(1) does not necessarily imply that the taxpayer has done anything wrong. It is simply a request for information or documents that the Income Tax Department requires to assess the taxpayer’s tax liability.

See also about: Section 16

Compliance under Section 142(1) is mandatory

Under section 142(1) of the Income Tax Act, 1961, the Assessing Officer (AO) can issue a notice to taxpayers requiring them to furnish certain information or documents.

Penalty for non-compliance with Section 142(1) tax notice

If the taxpayer does not comply with the notice, they may be liable for a penalty. The penalty for non-compliance with a notice under section 142(1) is specified in section 272A of the Act.

According to section 272A(2)(c), if a taxpayer fails to comply with a notice under section 142(1) without a reasonable cause, they may be liable to pay a penalty that is equal to the amount of tax sought to be evaded or a sum of up to Rs. 10,000, whichever is higher. The penalty may also be imposed for failure to comply with other requirements under the notice, such as failure to produce books of account or documents or for giving false or incomplete information.

It is important to note that the penalty for non-compliance with a notice under section 142(1) is in addition to any other penalty that may be levied for non-compliance with other provisions of the Act. It is advisable for taxpayers to fully comply with notices issued under section 142(1) to avoid any penalties. If a taxpayer is unable to comply with a notice for any reason, they should explain the circumstances to the AO and seek to resolve the issue as soon as possible.

FAQs