December 17, 2021

A lot of questions are due regarding Section 142 and Section 143 of Income Tax Act 1961. Yet, they remain some of the most under-discussed topics. So, in this article, we will discuss Section 142 and Section 143 of Income Tax Act 1961.

Section 142(1): Preliminary Enquiry before an assessment

You will get a notice of preliminary enquiry in case the return is not filed on time. Alternatively, if the Assessing officer (AO) would like to go through the documentary proof to verify your claim in Income Tax Return then he may ask you to furnish the documents for assessment purpose.

The time limit to serve the notice u/s 142(1) is before the end of the relevant assessment year. This timeline is not valid in case the return is not filed by the assessee. If AO is satisfied with the produced documents or return, he may not start with the assessment process.

If assessee does not comply with the provisions of this section:

  • It may result in Best Judgment Assessment u/s 144, or

  • Penalised under Sec 271(1)(b) i.e. Rs10,000 for each failure, or

  • Prosecution under Sec 276D which may extend upto 1 year with or without fine.

Notice under Section 143(1) – Letter of Intimation

Three types of notices can be sent under section 143(1):

1. Intimation where the notice is to be simply considered as final assessment of your returns since the AO has found the return filed by you to be matching with his computation under section 143(1).

2. A refund notice, where the officer’s computation shows amount excessively paid by the assessee.

3. Demand Notice where the officer’s computation shows shortfall in your tax payment. The notice will ask you to pay up the tax due within 30 days.

Time limit for the notice to be served is up to 1 year after completion of relevant assessment year.

How to reply to notice received under section 143(1):

1. If details provided by the taxpayer and as verified by the Income Tax department match. Then the notice will serve as final assessment of the return with nothing to be done on part of the taxpayer and the department. Just a printout of the same shall be taken and kept along with the income tax file.

2. If you are getting Refund, wait for the cheque or transfer into your account.

3. If there is a tax demand then this intimation becomes Notice of Demand under section 156. The notice says “In case of Demand, this intimation may be treated as Notice of demand u/s 156 of the Income Tax Act, 1956. Accordingly, you are requested to pay the entire Demand within 30 days of receipt of this intimation”.

Section 143(1)(a)

Notice will be issued under this section if-

If there is a difference in income or deductions between Form 16 & returns filled. This is the reason you need be very serious when you declare tax deductions before the starting of the financial year and then at the end of the financial year. Any deviation of more than 10% is not good.

The reasons can be difference in tax rebate claim under 80C, Sec 24, Sec 80CCD, Sec 80E, Sec 80DD, Sec 80 DDB, Sec 80TTA or Sec 10 Exemptions.

You have to respond within 30 days. Just see what they are asking for. If you agree, accept it provide the information. You can upload related documents on e-filing portal.

Section 143(2): Follow up to the notice u/s 142(1)

If the AO is not satisfied with the response of the assessee or assessee fail to provide the documents against income tax notice u/s 142(1) as explained in the earlier point then you will receive notice u/s 143(2). In this scenario, the case is called for detailed scrutiny. The AO may ask the assessee to either attend his office in person or produce supporting, particulars and evidence in support of his claim.

The timeline to serve notice u/s 143(2) is before the expiry of six months from the end of FY in which the return is furnished.

For example, return for FY 2015-16 was filed in FY 2016-17 on or before 5th Aug 2016. End of FY 2016-17 is 31st Mar 2017. Six months from the end of FY 2016-17 is 30th Sep 2017. Therefore, notice can be served till 30th Sep 2017.

So, that was all we had to share about Section 142 and Section 143 of Income Tax Act 1961. For further queries, please contact us.

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