Notice under Section 142(1)

Non-Filing of Income Tax Return

Call Us
CONTACT US
The notice under Section 142(1) of the Income Tax Act is typically issued by the Income Tax Department to ensure compliance with tax regulations. This notice can be issued to any taxpayer to check the details filed in the tax return or, in some cases, to inquire why a return was not filed. Here’s a general breakdown of what this entails:

Purpose of the Notice

This notice is generally a preliminary inquiry before a more detailed scrutiny or assessment. It requires the taxpayer to furnish specific documents, details, or explanations regarding their income, tax returns, claims, etc.

Responding to the Notice

The taxpayer must respond by the date specified in the notice, providing all the requested information and documents. The response can often be submitted online through the e-filing portal.

Non-Filing of Income Tax Return

If the notice specifically mentions the non-filing of the income tax return, it means the department has information suggesting that you were required to file a return but did not. In such cases, it is essential to either file the overdue return or provide a valid reason for not filing.

Consequences of Non-Compliance

Ignoring the notice can lead to penalties or more severe legal actions, including tax assessment by the department based on the information they have, which can often lead to a higher tax liability than if the return had been filed voluntarily.

Pentalies for Notice under Section 142(1) - Non-Filing of Income Tax Return

When you receive a notice under Section 142(1) of the Income Tax Act for non-filing your income tax return, it’s essential to address it promptly to avoid potential penalties. Here’s an outline of the penalties and consequences you might face if you do not comply:

Penalty for Non-Compliance

If you fail to comply with the terms of a notice under Section 142(1), such as not providing the requested information or documents, the Income Tax Officer has the authority to impose a penalty under Section 271(1)(b) of the Income Tax Act. The penalty can be up to ₹10,000 for each failure. .

Penalty for Late Filing of Income Tax Return

If it is determined that you were required to file a return but did not do so within the deadlines, you might be subjected to a late filing fee under Section 234F. This fee is up to ₹5,000 if the return is filed after the due date but before December 31st of the assessment year, and ₹10,000 if filed later. However, if your total income does not exceed ₹5,00,000, the maximum penalty is limited to ₹1,000.

Best Judgement Assessment

If you fail to respond to the notice and do not file your tax return, the tax officer may proceed to make a 'best judgement assessment' under Section 144 of the Act. This involves the officer assessing your tax liability based on the information available, which can often lead to a higher tax demand than if you had filed the return yourself.

  • a. "Best judgment assessment" under the Indian Income Tax Act is conducted when a taxpayer fails to respond to the notices from the Income Tax Department, including the Notice under Section 142(1), especially concerning the non-filing of an income tax return. This process is outlined primarily under Section 144 of the Income Tax Act. Here’s how it works:
  • b. Circumstances for Invocation:
    i. When a taxpayer does not file the required return even after receiving a notice under Section 142(1).
    ii. Failure to comply with all the terms of a notice issued under Section 142(1), such as not providing the requested information or documents.
    iii. Failure to comply with a direction to get accounts audited.
  • c. Process of Assessment:
    i. The Assessing Officer (AO) proceeds to make an assessment to the best of his/her judgment regarding the taxpayer's income or loss. This judgement is based on all the relevant material the AO has gathered.
    ii. The AO may use data from records, external sources, industry averages, economic trends, or any other plausible source to estimate the taxpayer's income and tax liability.
  • d. Characteristics of the Assessment:
    i. The assessment is done unilaterally without any input or confirmation from the taxpayer, which can often result in a higher tax calculation than might have been the case if the taxpayer had filed the return.
    ii. This assessment often results in additional taxes, interest, and penalties due to the presumption of under-reported income or over-reported deductions.
  • e. Consequences:
    i. The outcome of the best judgment assessment is typically less favorable to the taxpayer because they still need to provide substantiated declarations.
    ii. Taxpayers retain the right to appeal against the assessment if they believe it unfair or incorrect. However, this must be done within a specified timeframe and involves presenting clear and compelling evidence to counter the AO’s assessment.

Interest on Tax Payable

Sections 234A, 234B, and 234C may be levied on the tax payable as determined by the assessment. This interest can be significant depending on the amount of tax and the length of the delay in payment.

  • a. Section 234A - Interest for Delay in Filing the Income Tax Return:
    i. When it applies: This section applies when there is a delay in filing the income tax return beyond the due date.
    ii. Rate of interest: The interest is charged at 1% per month or part of a month.
    iii. Calculation base: The interest is calculated on the tax payable on the returned income, which is the tax liability less any tax that has already been paid (as TDS, TCS, advance tax, etc.) from the due date of filing to the date of actual filing of the return.
  • b. Section 234B - Interest for Default in Payment of Advance Tax:
    i. When it applies: This interest is charged if the taxpayer has not paid at least 90% of the assessed tax through advance tax by the end of the financial year.
    ii. Rate of interest: The interest rate here is also 1% per month or part of a month.
    iii. Calculation base: It is based on the assessed tax minus the advance tax paid. The interest is charged from April 1 of the assessment year until the assessment date.
  • c. Section 234C - Interest for Deferment of Advance Tax:
    i. When it applies: This applies if the prescribed instalments do not pay advance tax. The Income Tax Act specifies that advance tax should be paid in four instalments during the year and prescribes the percentage of tax to be paid in each instalment.
    ii. Rate of interest: The interest rate is 1% per month or part of a month.
    iii. Calculation base: The interest is calculated as a shortfall from the advance tax required to be paid. It is computed for 3 months, except for the last instalment, calculated from the due date of the previous instalment until the end of the financial year.

Prosecution

Receiving a prosecution notice under the Income Tax Act for non-filing an income tax return is serious. Typically, prosecution for non-filing falls under Section 276CC of the Income Tax Act rather than directly under Section 142(1). Section 142(1) is primarily used for inquiry and document requisition. Let’s clarify the legal implications and the process:

    Section 276CC - Prosecution for Failure to Furnish Returns
  • Applicability: This section is invoked when a person willfully fails to file the return of income as required by the Income Tax Act within the prescribed due date and where the tax payable exceeds ₹10,000. It also applies if the person fails to file a return in response to a notice under Section 142(1).
  • Consequences: The consequences can be severe: If the amount of tax evaded exceeds ₹25 lakh, the punishment can be rigorous imprisonment for a term ranging from 6 months to 7 years, along with a fine. In other cases, the punishment can range from 3 months to 2 years, along with a fine.

If you've received such a notice, it might be advisable to consult with a tax professional to ensure you respond accurately and comprehensively. www.cfoangle.com is one such company where seasoned tax professionals help individuals and companies with Income tax-related matters.

Who Are We

CFO Angle provides specialized services in the areas of Business Finance, Banking, Legal and Insurance. We not only deliver high quality services, but also do it with utmost sensitivity to client’s constraints.

The trust and faith that our clients have in us means everything to us. Our success is defined by the quality of the relationships we build during the journey and the positive change we make in their businesses.

about us

Our Achievements so far

Projects Done
0
Active clients
0
Hours of Work
0
our work

Our Clients

Our success is defined by the quality of the relationships we build during the journey and the positive change we make in their businesses.

Know more
Untitled design (9)
Untitled design (10)
Untitled design (11)
get in touch

Contact Info

Contact CFO Angle AI Solutions for Advisory Services

Call Us: +91 98407 77207
Email: sachin@cfoangle.com

Linkedin Facebook-f
Send A Message

CFO Angle © 2023 All rights reserved