Statutory notices are an important part of all the proceedings under the Income-tax Act, 1961. The proceedings are initiated by issue of proper notice and valid service of that notice and end with proper service of order. In case of any deficiencies in the issue or service of notice, the order may be scrapped on technical grounds by the appellate authority without going into the merits of the order.
Thus,
a notice functions as a tool for ensuring natural justice by giving the
assessee, in respect of whom any proceeding is proposed to be initiated, an
opportunity of being heard. Further, a notice issued to a third party also
serves as a means of obtaining information about the assessee and his
transactions.
The
various notices which the assessee may receive for any financial year are as
follows:
[1]
Notice under Section 142(1) – Power of Assessing Officer to make Inquiry
before assessment
Section 142(1) of the Income-tax act 1961, empowers Income-tax
authorities to issue a notice for making an assessment where return has been
filed or if return has not been filed then to furnish the required information
in the prescribed manner.
Notice
under section 142(1) is issued for:
(i) Filing of Income Tax Return:
If assessee has not filed his return
of income within the specified period of time or before the end of the relevant
assessment year, then the Assessing Officer may issue notice under section
142(1) asking him to file his return of income.
(ii) Producing specific accounts and documents
After filing income tax return,
Assessing Officer may ask assessee to produce such specific accounts and
documents as required by him by way of Notice under section 142(1).
(iii)
Any other information, notes or workings as desired by the Assessing Officer
Assessing Officer may require
assessee to furnish in writing and in the prescribed manner the information,
notes or workings on specific points as required by him which may or may not
form the part of books of accounts. For example, A statement of assets and
liabilities. However, prior approval of the Joint Commissioner is required.
If
the assessee does not comply with a notice under section 142(1):
(i)
It
may result in Best Judgement under section 144
(ii) Penalty under Section 272A(1)(d)
Ø If any person fails to comply with a notice
under section 142(1), he shall pay, by way of penalty, a sum of Rs. 10,000 for
each such default or failure.
NOTE
Under Section 271(1)(b) : As applicable up to Assessment year : 2016-17]
If
a person willfully fails to comply with the provisions of the notice served
under Section 142(1) regarding production of accounts, books or other
documents, he shall be punishable with rigorous imprisonment which may extend
upto one year and with fine.
(iv) A warrant may also be issued under
section 132 for conducting a search and seizure [Section 132]
Section
132(1)(a) : Any person to whom a notice under sub-section (1) of section 142 of
this Act was issued to produce, or cause to be produced, any books of account
or other documents has omitted or failed to produce, or
Section 132(1)(b) : cause to be
produced, such books of account or other documents as required by such notice
or any person to whom a summons or notice as aforesaid has been or might be
issued will not, or would not, produce or cause to be produced, any books of
account or other documents which will be useful for, or relevant to, any
proceeding under the Income-tax Act, 1961.
[2]
Notice under Section 143(2) – Scrutiny Notice
Sub section (2) of Section 143 provides that where a return
has been furnished under section 139, or in response to a notice 142(1), the
Assessing Officer or the prescribed income-tax authority, as the case may be,
if, considers it necessary or expedient:
v
to ensure that the
assessee has not understated the income or has not computed excessive loss or
has not under-paid the tax in any manner, shall serve on the assessee a notice
requiring him, on a date to be specified therein, either:
(a)
to attend the office of
the Assessing Officer or
(b)
to produce, or cause to
be produced before the Assessing Officer any evidence on which the assessee may
rely in support of the return:
Consequences of not complying with the notice
issued under section 143(2)
(i)
Penalty for failure to comply with notice issued
under section 143(2) [Section 272A(1)(d)]
If the taxpayer fails to comply with notice
issued to him under section 143(2), then as per section 272A he shall be liable
for a penalty of Rs. 10,000 for each failure.
(ii) Assessing Officer will complete the assessment under section 144 (Total income shall be calculated by Assessing Officer to the best of his judgment and determine the tax payable by the assessee on the basis of such judgement
[3]
Issue of notice under section 148 where income has escaped assessment [Section
148]
Section 147 allows the Assessing Officer to assess or
reassess or re-compute any income escaping assessment for any assessment year
(called relevant assessment year). Before such assessment or reassessment or re-computation,
a notice is required to be issued under section 148 of the Act, which can be
issued only when there is information with the Assessing Officer which suggests
that the income chargeable to tax has escaped assessment in the case of the
assessee for the relevant assessment year. Prior approval of specified
authority is also required to be obtained before issuance of such notice by the
Assessing Officer.
Consequences of not complying with the notice
issued under section 148
(i)
Prosecution
- Wilfully fails to furnish returns of income [Section 276CC]
If
a person wilfully fails to furnish the return of income which he is required to
furnish under section 148, he shall be punishable,—
(a) in
a case where the amount of tax, which would have been evaded if the failure had
not been discovered, exceeds twenty-five hundred thousand rupees, with rigorous
imprisonment for a term which shall not be less than six months but which may
extend to seven years and with fine;
(b) in any other case, with imprisonment for a term which shall not be less than three months but which may extend to two years and with fine:
(ii) Interest for defaults in furnishing return of income [Section 234A(3)]
Where
the return of income for any assessment year, required by a notice under
section 148 or after the completion of an assessment under sub-section (3) of
section 143 or section 144 or section 147, is furnished after the expiry of the
time allowed under such notice, or is not furnished, the assessee shall be liable
to pay simple interest at the rate of one per cent for every month or part of a
month comprised in the period commencing on the day immediately following the
expiry of the time allowed as aforesaid, and,—
(a) where the return is furnished after the
expiry of the time aforesaid, ending on the date of furnishing the return; or
(b)
where no return has been furnished, ending on the date of completion of the
reassessment or recomputation under section 147 or reassessment under
section 153A,
[iii) Interest for defaults in payment of advance
tax [Section 234B(3)]
Where,
as a result of an order of reassessment or recomputation under section 147 or
section 153A, the amount on which interest was payable in respect of shortfall
in payment of advance tax for any financial year under sub-section (1) is
increased, the assessee shall be liable to pay simple interest at the rate of
one per cent for every month or part of a month comprised in the period
commencing on the 1st day of April next following such financial year and
ending on the date of the reassessment or recomputation under section 147 or
section 153A, on the amount by which the tax on the total income determined on
the basis of the reassessment or recomputation exceeds the tax on the total
income determined under sub-section (1) of section 143 or on the basis of the
regular assessment as referred to in sub-section (1), as the case may be on the
amount by which the tax on the total income determined on the basis of such
reassessment or recomputation exceeds the tax on the total income determined
under sub-section (1) of section 143 or on the basis of the earlier assessment
aforesaid.
[4] Issue of Summons [Section 131(1)/131(1A)]
§
Summons
may be issued under Section 131(1) of the Income Tax Act, 1961 to enforce the
attendance of an assessee or witness or to compel production of books of
accounts and other documents on a specified date.
§
A
reasonable period of time should be granted for compliance. The summons is
served in the same manner as a notice.
§
The
person to whom a summon is issued may appear through an authorized
representative, unless his personal attendance is specified in the summons.
Section
131(1A) works with empowering the officers related to the investigation wings.
The notice under section 131(1A) can be used even if there is no proceeding
pending. Following situations, which make use of Section 131(1A) and allow the Income-tax authorities to have notices issued –
- The income tax office can issue a notice before he goes ahead with
taking any action under clauses (i) to (v) of Section 132;
- The Income-tax authorities can issue a notice, even if he or she
has a reason to suspect that there is a concealment of the income earned
by the person;
- The Income-tax authorities can even issue a notice, even if there
are no proceedings currently withstanding with respect to that person or
even a group of people.
Consequences of not complying with the summons issued
under section 131(1)
(i) A warrant may also be issued under section 132
for conducting a search and seizure [Section 132]
Section 132(1)(a) : Any person to
whom a summons under section 131(1) of the
Income-tax Act, was issued to produce, or cause to be produced, any books of
account or other documents has omitted or failed to produce, or cause to be
produced, such books of account or other documents as required by such summons,
or
Section 132(1)(b) : any person to
whom a summons as aforesaid has been or might be issued will not, or would not,
produce or cause to be produced, any books of account or other documents which
will be useful for, or relevant to, any proceeding under the Indian Income-tax
Act, 1961
(ii) Penalty for
failure to comply with the provisions of section 131(1) [Section 272A(1)(c)]
If the taxpayer fails to comply with a
Summons issued to him under section 131(1), then as per section 272A(1)(c), he
shall be liable for a penalty of Rs. 10,000 for each failure.
[5]
Issue of Commission [Section 131(1)(d)]
If the person to whom summon is
issued shown his/her inability to appear due to any reason , commission under
sections 131(1) (d) may be issued.
An Assessing
Officer can issue a commission to another officer, which will empower him
to call for and examine books of accounts relevant to any proceeding pending
before the former. The issue of commission is as per Order 26 of the Civil
Procedure Code. While issuing a commission the following points may be kept in
mind:
(i) A commission can be issued both
within the local limits of the jurisdiction of the Assessing Officer or outside
the jurisdiction of the Assessing Officer.
(a) A witness who is exempted from
personal attendance.
(b) A witness who is unable to
attend due to sickness or infirmity.
[6] Notice under Section 156 - Notice of Demand
If any demand
for tax, interest, penalty, fine or any other sum is raised by the Assessing
Officer as per the provision of Income Tax Act, 1961 then he shall serve a
notice of such demand to the assessee under section 156 specifying the amount
payable.
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