1) Rationale behind introduction of Section 142 in the Act:
♦ Assessee fails to file the ROI within due date u/s 139(1) is expose to risk of Best Judgment Assessment us 144 of the Act.
♦ It would be unfair for him if after the due date revenue directly proceed for assessment us 144 without giving any further opportunity to file the ROI, typically when law itself allows the Assessee to file the ROI upto the end of Relevant Assessment Year.
♦ It is not mandatory for AO to issue notice us 142(1) to all those assessee who failed to file the ROI us 139(1)
♦ Practically these notices are issued in those cases where department intended to make assessment under Income Tax Act, 1961.
♦ If an assessee hadn’t furnished the ROI within due date mentioned u/s 139(1) then by issuing this notice assessing officer can call for Return of Income to be furnished within such time mentioned in this notice.
♦ Further Assessment in Income Tax can be made even if assessee file the ROI like 143()/147 etc.
♦ But for making any kind of assessment books of accounts, information, statements of assets & liabilities are prerequisite requirement.
♦ However, by issuing notice for assessment like Section 143(2)/148/153A etc. AO can’t call for Books of accounts etc.
♦ Therefore, AO issue this notice & call for books of accounts, information, statement of assets & liabilities etc. from the assessee.
♦ This notice can be issued even before the end of the relevant assessment year or after the end of the relevant assessment year.
♦ By issuing this notice alone AO can’t make assessment. This notice is served along with Notice us 143(2)/144/148/153A.
♦ Broadly this notice is divided into two parts:
(i) Part A- Notice u/s 142(1)(i) – By issuing notice under this clause only Return of Income can be called upon by Assessing Officer. Hence this notice can be issued only to those assessees who hasn’t file the Return of Income neither u/s 139(1) nor u/s 139(4).
(ii) Part B- notice u/s 142(1)(ii) & (iii) – By issuing notice under this clause books of accounts, informations, statement of assets & liabilities whether included in books of accounts or not, have been called upon by AO.
♦ If assessee file ROI in pursuance of notice u/s 142(1)(i) then this ROI is known as ROI us 142(1)(i)
2) Special Consideration of Notice u/s 142(1)(i)
A) Notice us 142(1)(i) can be issued even before the end of the relevant Assessment Year
To Understood the larger impact, consider the example given below.
Example (1) – For Assessment Year 2019-20 X Limited didn’t file the ROI within due date i.e. 30th September, 2019. X Limited incurred a net loss of Rs 56 Lacs which comprises of Rs 40 Lacs from Long-Term Capital Gains & Balance from House Property. Assessee on 5th October, 2019 get the notice us 142(1)(i) to file the ROI upto 30th October, 2019. Assessee filed the ROI on 25th October, 2019. On 04/11/2019 it realized that actual losses of House property were Rs 25 Lacs & Capital gains was Rs 52 Lacs. Comment.
Example – 2: Assessee didn’t filed its ROI us 139(1). Income from Business was Rs 60 Lacs. Receive notice us 142(1)(i) to file the ROI within 30 days on 10th October, 2019. Assessee filed the ROI on 5/10/2019. Can assessee file Revised return to claim the reduce profits of Rs 40 Lacs on:
Case A – 31/12/2019
Case B – 04/04/2020
Example 3: For AY 2019-20, Assessee get the notice us 142(1)(1) on 30/11/2019 to file the ROI upto 15/12/2019. Assessee filed the ROI on 12/02/2020. Discuss the consequences.
B) Notice us 142(1)(i) can be issued even after the end of the relevant Assessment Year. Further there is no maximum time limits of issue of notice us 142(1)(i) of the Act. However, following points are worthy to note:
Example – 1: For AY 2017-18, Mr X get the notice us 142(1)(i) on 10/06/2018 to file the ROI within 30 days. Mr X filed the ROI within due date & declare total Income of Rs 68 Lacs. Later he realizes that he had overstated the income by Rs 5 Lacs. Because he forgot to claim the Business expenditure of Rs 15 Lacs. He knows that he can’t revise his return. What is possible remedy available to him?
Example-2: Decide whether notice u/s 142(1)(i) can be issued in the different case given below on 2/04/2019:
Case A – Relevant Assessment Year is 2017-18. Case is pending us 143(3).
Case B – Relevant Assessment year is 2015-16, notice us 148 already issue to file the ROI.
Case C – Relevant Assessment year is 2016-17 no ROI is filed at all. Department want to open the case us 147 of the Act.
Case D – Relevant Assessment Year 2017-18. No ROI is filed within due date. Notice us 142(1) was issued on 25/12/2017 to file the ROI upto 15/01/2018. Assessee filed it within date. Department on 15/06/2020 want to give notice u/s 142(1)(i) for filing of the ROI again for AY 2017-18.
Case E – Relevant Assessment Year 2018-19. ROI not upto end of relevant Assessment Year. Notice u/s 142(1)(i) was issued on 10th April, 2019 to file the ROI upto 30th April, 2019. Assessee didn’t file return. Before making 144 department wants to give another opportunity to file ROI by issuing notice u/s 142(1)(i) on 30th September, 2019.
Case F – Assessee file ROI for AY 2018-19 with due date us 139(1). But fails to file the ROI for AY 2019-20 upto 31st March, 2020. Can notice u/s 142(1)(i) on 5th June, 2020 issue by AO?
Case A – Notice u/s 142(1)(i) can’t be issued. Since the case is pending u/s 143(3). Regular Assessment is not possible until the assessee filed any Valid return of income either u/s 139 or u/s 142(1)(i). It means he had already filed the ROI. Therefore, AO can’t issue notice u/s 142(1)(i) in the given case.
Case B – Notice u/s 142(1)(i) is not required to issue at all. Since while issuing the notice us 148 department itself ask for filing of the ROI. Therefore 142(1)(i) will not issued in such a case.
Case C – If department want to open Section 147 then notice us 148 is required. Notice us 148 is issue to call for ROI. Therefore, no need to issue separate notice of 142(1)(i).
Case D – Since assessee already file the ROI for AY 2017-18 u/s 142(1)(i). If revenue want to issue again a notice u/s 142(1)(i) for the same Assessment year i.e. 2017-18 it will tantamount to asking for revising the Return that already filed us 142(1)(i). Revision of Return which was filed us 139(1) & 139(4) is possible us 139(5). However, Revision us 139(5) is not possible for ROI that was filed us 142(1)(i). Therefore, Revenue can’t issue notice u/s 142(1)(i) second time for the same Assessment Year.
Case E – In this case Assessee hadn’t file the ROI under any section of the Act. Neither u/s 139 nor in response to notice u/s 142(i)(i). hence department can issue second notice to assessee on 30th
September, 2019 to file the return of income. Additionally, assessee is also liable for penalty u/s 272A which will be Rs 10,000/- for each failure.
Case F- Revenue can give notice u/s 142(1)(i) for Assessment year 2019-20 & not for AY 2018-19 since ROI was already filed for that year.
3) Special consideration for notice u/s 142(1)(ii) & 142(1)(iii) of the Act.