Section 142(1) — Inquiry Before Assessment

Section 142(1) of the Income-tax Act, 1961 empowers the Assessing Officer (AO) to make inquiries before completing an assessment. This section is significant as it allows the AO to gather necessary information and documents from the taxpayer to ensure accurate assessment of income. The AO may issue a notice under this section requiring the taxpayer to furnish a return of income, produce accounts or documents, or provide any other information deemed necessary. The burden of proof lies with the taxpayer to comply with the notice and provide the requested information. This section is crucial in practice as it helps in detecting discrepancies and ensuring compliance with tax laws. Failure to comply with a notice under Section 142(1) can lead to best judgment assessment under Section 144, where the AO assesses the income based on available information.

Common Litigation Flashpoints

1. Non-compliance with notice issued under Section 142(1)
2. Dispute over the scope of information requested by the AO
3. Challenges to the validity of the notice issued
4. Timing and manner of response to the notice

Judgments on Section 142(1) — Inquiry Before Assessment

• Hexaware Technologies Limited vs Assistant Commissioner of Income Tax — HC,
  Reassessment notices issued after 1st April 2021 must comply with the amended provisions of the Income Tax Act, 1961, and cannot rely on the erstwhile provisions.
• Pawan Sachdeva vs Income-Tax Officer, Ward 19(3), Delhi & Anr. — HC,
  Issuance of notice within the limitation period is sufficient for jurisdiction, even if the service occurs later or with errors.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Ananta Landmark Pvt. Ltd. vs Deputy Commissioner of Income Tax — HC,
  Reopening of assessment after four years requires both conditions of income escaping assessment and failure to disclose material facts to be satisfied.
• PR. COMMISSIONER OF INCOME TAX CENTRAL-2 NEW DELHI vs MEETA GUTGUTIA PROP. M/S FERNS 'N' PETALS — HC,
  Completed assessments can be interfered with by the AO under Section 153A only on the basis of some incriminating material unearthed during the course of search.