Section 142 of ITA, 1961 : Section 142: Inquiry Before Assessment

Explanation using Example

Imagine a scenario where Mr. Sharma, a business owner, has not filed his income tax return for the financial year 2021-2022 within the due date prescribed under section 139(1) of the Income Tax Act, 1961. As a consequence, the Assessing Officer (AO) issues a notice to Mr. Sharma under Section 142(1) after the end of the assessment year.

The notice requires Mr. Sharma to:

1. Furnish a return of his income, verified in the prescribed manner, by a specified date.
2. Produce the books of accounts and other relevant documents that the AO may require for examination.
3. Provide a written statement detailing all his assets and liabilities, including those not reflected in his accounts, after obtaining the prior approval of the Joint Commissioner.

Additionally, due to the complexity of Mr. Sharma's business transactions, the AO, with the approval of the higher authorities, directs Mr. Sharma to get his accounts audited by a nominated accountant and to submit the audit report within the specified time frame under Section 142(2A). Mr. Sharma is also informed that the cost of this audit will be determined by the Commissioner and will be borne by the Central Government as per the amendment on June 1, 2007.

Mr. Sharma is given the opportunity to be heard regarding any material gathered from the inquiry or audit before it is used for the purpose of his assessment, in accordance with Section 142(3).