Why Income tax department send notices Under Section 142(1) ?

income tax notice 142(1)

Section 142(1) notices is one of the important and frequently sent notices to the assesses it is one of the important notice sent requiring assessee to furnish the return of income or provide such other documents required to be submitted.

The discussion of 142 notices in this article mainly considers proprietorship business, partnership firm, and private limited company other forms of persons are not considered for simplicity of discussion.

Before going in to why income tax department send 142 notices let me explain 139(1) income tax act provision.

Section 139(1) and section 142(1)

Section 139(1) states that following persons are required to file the return of income
(i). Every Company and Firm
(ii). Every person other than company and Firm if Total income exceeds the maximum amount not chargeable to tax.
(iii).Every other person covered under special cases – NOT COVERED IN THIS ARTICLE.

As per section 139(1) we are required to file return of income for the FIRM and COMPANY irrespective of the operations of the business, the entity is required to file the return of income even if there is no business carried out by the firm.

Similarly in case of Individuals Return of income is required to be filed only if the Total income crosses  basic exemption limit.

When and why section 142(1)(i)  notice is sent ?

Section 142(1)(i) notice is sent by the assessing officer when the return of income is not filed by the assessee for the assessment year within the due date allowed under section 139(1). Even if the total income is Less than basic exemption limit assessee is required to file return of income in response to Notice under Section 142(1)(i). This notice can also be issued even after the expiry of time limit for filing belated return. In case notice is issued under section 142(1)(i) return of income shall be furnished in response to notice under section 142(1) and not against 139(4).

What should be done when we receive 142(1)(i) Notice ?

Section 142(1)(ii) notice issued by the assessing officer requiring the assessee to furnish accounts, documents, various other information and also a statement of assets and liabilities whether included in the accounts or not.

Officer can issue notice only for last 4 financial years following notice under section 143(2), 144, 148 . Thus notice under section 142(2)(ii) cannot be issued separately and  it is always followed by aforementioned three types of notices of assessment.

In this case where the notice is issued the assessee shall file the response within time limit allowed or seek adjournment mentioning genuine reason. In the case where there is no business for the specific period the assesse shall submit the necessary document in proof of the same and validate with any other additional documents available.

How to avoid 142(1)(i) and 142(1)(ii) notice ?

Notices under this section is generally issued on basis of previous year income, information available  based on annual information system and by data submitted by various financial institutions. For example in the case where there is interest income reported by the bank the assessing officer has grounds to believe that assessee is having greater than basic exemption limit.

Similarly in case of another scenario if the assessee had declared house property income in previous financial year and failed to file return of income in current financial year declaring the house property income there shall be only three genuine situations

Situation 1  : Property Sold – When property is sold the assessee is liable to file return of income of capital gains.

Situation 2 :  Property is Inherited – When the property is transfered by way of Inheritance the same shall be conveyed after filing return of income on receiving 142(1)(i) notice.

Situation 3 : Rental amount received is less than basic exemption limit

Important 5 points on 142(i) notice

  1. Provide required documents within due date allowed or seek adjournment
  2. As the responses to income tax notices requires good knowledge seek assistance of a expert in the field.
  3. If return of is required to be filed provide response after filing return of income.
  4. Have a track on the process untill the status is updated as closed.
  5. Providing response in terminology required as per income tax act enables quick closure of the case and helps assessing officer to understand the case better.





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