Notice under Section 142(1) — what can be asked, and what refusing costs

Short answer: a notice under Section 142(1) is an inquiry before assessment. The Assessing Officer can use it to require a return where none was filed, to call for accounts or documents, or to ask for information on specified points. It is a step in the process, not an accusation — but ignoring it triggers best-judgement assessment, a penalty for each default, and potential prosecution.

What the officer can require

The section permits three things:

Most notices to salaried and small-business taxpayers fall under (b) and (c): produce bank statements, supporting documents for a claim, details of a transaction reflected in the department's own data.

The limits on that power

Two constraints are worth knowing, because they are real and are sometimes exceeded.

Accounts cannot be called for beyond three years. The officer cannot require production of accounts relating to a period more than three years prior to the previous year in question. A requisition reaching further back can be objected to on that ground.

A full statement of assets and liabilities needs approval. Where the officer requires a statement of all assets and liabilities not included in the accounts, the prior approval of the Joint Commissioner is required. That is a safeguard rather than a formality, and where such a statement is demanded it is reasonable to confirm the approval exists.

Beyond these, the general position applies: the notice should specify what is being asked. A notice framed so broadly that it cannot meaningfully be complied with is itself objectionable, and the right response is to seek specificity, on the record, rather than to guess or to ignore it.

What non-compliance actually costs

This is the part worth being blunt about, because non-compliance is the one course with no advantage.

1. Best-judgement assessment under Section 144. The officer may complete the assessment on their own estimate of your income. A best-judgement assessment must still be honest and rational, based on material with a proper nexus rather than being capricious — but it is made without your figures, and unwinding it afterwards is far harder than answering the notice was.
2. Penalty of ₹10,000 for each failure. Each default is separately penalised, so repeated non-response compounds.
3. Prosecution under Section 276D for wilful failure to produce accounts and documents.

Where the time given is genuinely insufficient, the answer is an adjournment requested on the record with reasons, not silence. A documented request for more time is a materially different position from no response at all.

Special audit under Section 142(2A)

A direction for special audit is the more serious use of the section, and it has its own safeguards.

The officer may direct that your accounts be audited by an accountant nominated by the department, having regard to the nature and complexity of the accounts, the volume, doubts about their correctness, multiplicity of transactions, or the specialised nature of the business, and the interests of revenue. It requires the prior approval of the Principal Commissioner or Commissioner, and you must be given an opportunity of being heard before the direction is made.

Those conditions matter. A direction issued without a hearing, or without the recorded satisfaction the section contemplates, is open to challenge — and because a special audit extends the assessment timeline and imposes real cost, it is worth testing rather than accepting.

How this fits the assessment sequence

A 142(1) notice usually sits at one of two points:

• Before scrutiny. Information is called for, and the matter may then proceed to a notice under Section 143(2) and an assessment under Section 143(3). What that involves is set out in the scrutiny assessment guide.
• Where no return was filed. The notice requires the return, and if it is not filed, the officer proceeds to best-judgement assessment under Section 144.

It is distinct from an intimation under Section 143(1), which is the automated output of processing rather than an inquiry — see the Section 143(1) guide for that distinction.

Responding well

• Answer what was asked, item by item, in the order asked. A reply that reorganises the questions invites a second round.
• Produce documents rather than assertions. Bank statements, agreements, invoices and certificates carry weight that a narrative does not.
• Where something cannot be produced, say so and why, rather than leaving a gap. An explained absence is far better than an unexplained one.
• Keep the acknowledgement. Responses are filed through the e-proceedings facility, and the acknowledgement is what establishes compliance if the point is later disputed.
• Note anything that looks like a fishing inquiry — a requisition unconnected to any identified issue, or reaching beyond the three-year limit. It may not be worth an immediate objection, but it should be recorded.

Under the Income-tax Act 2025

The section mapping guide covers the wider renumbering.

This note sets out the general position on inquiry notices under Section 142(1). What must be produced in a particular case depends on the notice and the year concerned, and should be assessed against them before a response is filed.