Section 142(2) of the Income Tax Act
Income-tax Act, 2025: s.268
Section 142(2) falls under section 142 of the Income-tax Act, 1961, which corresponds to section 268 (Inquiry before assessment) of the Income-tax Act, 2025.
Read section 268 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 142(2) is Tata Industries Ltd. v. ITO (181 TTJ 600), cited in 29 of the 83 judgments on BharatTax that turn on this section.
Leading authorities on Section 142(2)
Disallowance under Section 14A cannot exceed the exempt income earned by the assessee. Even if interest expenditure is considered, it cannot be solely attributed to earning exempt dividend income as investors also consider potential capital gains.
An activity is considered business if it involves a continuous course of activity and is carried on with a profit motive.
A revised return filed beyond the period of limitation under section 139(5) can still be considered valid if it rectifies an omission, such as a discrepancy in turnover due to market price changes.
A notice issued under Section 143(2) is a jurisdictional notice, and the absence of such a notice renders the assessment order invalid. Failure to issue a valid notice under Section 143(2) cannot be cured by subsequent actions or findings.
Penalty under section 271(1)(b) cannot be imposed for each and every notice issued under section 143(2) that remains uncomplied with; it should be restricted to the first default only.
A change in the method of accounting cannot be a valid reason for filing a revised return of income under Section 139(5) of the Income-tax Act.
