After you file your income tax return online, the Income Tax Department reviews it. If the assessing officer (AO) needs more information about any detail, they may send you a notice under Section 142(1) of the Income-tax Act.

Purpose of Notice under Section 142(1)

When a notice under Section 142(1) is issued, the Assessing Officer (AO) may ask the taxpayer to:

• File their income tax return if it hasn’t been filed on time. This can also include filing a return for someone else, like a minor or a deceased person, if the taxpayer is responsible.
  
• Submit accounts or documents needed for the assessment.
  
• Provide other information or statements as requested, such as a list of their assets and liabilities on a specific date.
  

Compliance with Section 142(1) is Compulsory

You must respond to a notice under Section 142(1), even if you believe the documents asked for are not relevant. If you don’t comply:

• The Income Tax Officer can complete your assessment based on their own judgment under Section 144.
  
• You may have to pay a penalty of ₹10,000 for each instance of non-compliance under Section 271(1)(b).
  
• You could also face prosecution under Section 276D, which can lead to up to one year in jail and a fine.
  

If the Assessing Officer (AO) is satisfied with your documents, return, or other evidence, they may accept your filing as complete and close the case without further action.

E-Assessment Scheme, 2019

The Central Board of Direct Taxes (CBDT) has announced that the ‘E-Assessment Scheme, 2019’ will now be called the ‘Faceless Assessment Scheme, 2019’. Under this scheme, most income tax assessments will be done without any face-to-face meetings. The CBDT has also said that the National e-Assessment Centre (NeAC) will issue all assessment orders through this faceless system.

Procedure for Conducting Faceless Assessment

Here’s how the Faceless Assessment process works:

1. The National e-Assessment Centre (NeAC) sends a notice to the taxpayer, who must reply within 15 days.
   
2. NeAC assigns the case to an Assessment Unit (AU) in a Regional e-Assessment Centre (ReAC) using an automated system.
   
3. If needed, the AU asks NeAC to collect more information, conduct an inquiry through the Verification Unit (VU), or get technical help from the Technical Unit (TU).
   
4. NeAC then sends notices to the taxpayer, VU, or TU to gather the required documents or reports and forwards everything to the AU.
   
5. If the taxpayer doesn’t respond, NeAC issues a notice under Section 144, asking why the assessment should not be completed using best judgment.
   
6. If there is still no response, NeAC may finalise the draft assessment order based on risk management guidelines and automation tools. It may also either:
   
   • Finalise the assessment,
     
   • Give the taxpayer another chance to respond if modifications are proposed, or
     
   • Send the draft to a Review Unit (RU) for review.
     
7. The Review Unit checks the draft order:
   
   • If they agree, they inform NeAC.
     
   • If they suggest changes, NeAC reassigns the case to a different AU.
     
8. The new AU considers the suggested changes and sends a revised draft order to NeAC.
   
9. NeAC then finalises the assessment order based on the review and suggestions.
   
10. If a show-cause notice (SCN) is issued:
    
    • If the taxpayer responds, NeAC forwards it to the AU for preparing the final draft.
      
    • If no response is received, NeAC finalises the assessment as per the draft.
      
11. If the final changes are not harmful to the taxpayer’s interest, NeAC completes the assessment.
    If they are harmful, NeAC gives the taxpayer a chance to be heard before finalising.
    

The NeAC handles the response following the same process, where the Assessment Unit (AU) prepares a draft assessment order and the procedure continues.

Sample of a Notice under Section 142(1) of the ITA

How to File a Response

You must respond to a notice under Section 142(1) electronically through the ‘e-Proceedings’ option in your registered ‘e-Filing’ account. There is no need to visit the Income Tax Office or meet any officer in person.

Here’s the step-by-step process:

1. Log in to the Income Tax Portal: www.incometax.gov.in
   
2. Go to the ‘Pending Actions’ tab and click on ‘E-Proceedings’.
   
3. Select ‘View Notices’ and then click on ‘Submit Response’.
   
4. You will be taken to a page asking you to ‘Select Response Type for Notice’.
   
5. Choose between ‘Partial Response’ or ‘Full Response’ as applicable.
   

Note: Attachments can be uploaded in PDF, Excel, or CSV formats.

After uploading your response:

1. Click on ‘Continue’.
   
2. Tick the checkbox for ‘Declaration’ and then click ‘Submit’.
   
3. You will see a confirmation message saying ‘Submitted Successfully’.
   
4. You can also download the acknowledgement for your records.
   

Frequently Asked Questions

1. Is there a limit on how many years of information an AO can ask for under Section 142(1)(ii)?
Yes, the AO can only ask for information or documents from the last 3 years.

2. When should you file a partial response to a notice under Section 142(1)?
If the deadline is approaching and you don’t have all the required details, it’s better to submit a partial response. This shows that you’ve started the process and need more time to provide the rest. The Income Tax Department will send another notice allowing you to submit additional documents later.

3. What extra powers does the Income Tax Officer have when issuing a notice under Section 142(1)?
Depending on the complexity of your accounts or business, the officer may ask you to:

• Have your books of accounts audited by a Chartered Accountant.
  
• Get a stock valuation done by a Cost and Works Accountant.