Section 142 of the Income-tax Act is a foundational provision that empowers income-tax authorities to conduct inquiries before making an assessment. It ensures that the assessing authorities have adequate powers to collect information and call for necessary documents from taxpayers. This section is a pivotal mechanism used to enforce compliance and verify the correctness of income reported in returns.
Within this section, clause (i) of sub-section (1) holds particular importance. It authorizes an Assessing Officer to issue a notice to an assessee requiring them to file their return of income if they have not done so voluntarily. This enables the authorities to bring non-filers into the tax net and ensure compliance with return filing obligations.
Empowerment of Assessing Officers under Section 142(1)(i)
Section 142(1)(i) empowers an Assessing Officer to issue a notice to an individual, firm, or company who has failed to file their return within the prescribed time limits. The notice mandates the assessee to furnish their return of income by a specified date, thereby initiating the process of assessment.
This provision is essential for ensuring that all eligible taxpayers submit their returns. It serves as a deterrent against non-compliance and forms the first step in the enforcement mechanism. When an Assessing Officer identifies a non-filer, whether through internal data analytics or third-party reports, they can invoke Section 142(1)(i) to demand submission of the return.
The scope of this provision is broad, encompassing individuals, partnerships, corporations, and other entities. Its objective is not punitive at the initial stage but to give the assessee an opportunity to comply before proceeding to more stringent enforcement actions.
The Government’s Push for Faceless and Digital Processes
Over recent years, the Government of India has consistently pursued a policy of digitizing tax administration. The core idea behind this transformation is to reduce human intervention, enhance transparency, and eliminate scope for discretion in assessments and enforcement.
The faceless assessment scheme was introduced to ensure that assessments are conducted in a transparent and technology-driven environment. By leveraging automation and centralization, the government aims to minimize person-to-person interactions between taxpayers and tax officials. This initiative is designed to foster objectivity, reduce harassment, and build trust in the system.
Centralized issuance of statutory notices is an integral part of this strategy. The traditional process, which relied on manual issuance of notices by local assessing officers, was prone to inconsistencies and delays. By shifting to a centralized digital system, the government is ensuring uniformity, efficiency, and greater accountability in compliance enforcement.
Finance Act, 2021: Introduction of the Second Proviso to Section 142(1)(i)
To facilitate the vision of a faceless and automated compliance environment, the Finance Act of 2021 introduced a significant amendment to Section 142(1)(i). A new second proviso was added to empower a ‘prescribed income-tax authority’ to issue notices centrally and in an automated manner.
Prior to this amendment, the issuance of notices under Section 142(1)(i) was limited to jurisdictional Assessing Officers. This decentralized approach created administrative challenges, with varying interpretations and procedural inconsistencies across different regions.
The second provision created a legal foundation for centralizing this process. It authorized the Central Board of Direct Taxes to designate a specific income-tax authority that would be responsible for issuing such notices across the country, ensuring a uniform and system-driven approach.
The primary objective of this legislative amendment was to empower the department to leverage technology for compliance enforcement while reducing manual intervention.
CBDT’s Notification: Designating the Authorized Income-tax Authority
Pursuant to the legislative amendment introduced by the Finance Act, 2021, the CBDT issued a notification specifying the rank and designation of officers authorized to issue notices under the second provision to Section 142(1)(i).
According to this notification, the prescribed authority for issuing notices shall be an income-tax authority not below the rank of an Income-tax Officer. Furthermore, such officers must be specifically authorized by the CBDT to act in this capacity. This step was crucial in ensuring that the process of notice issuance remains within the purview of adequately trained and competent officers while aligning with the centralized, automated workflow.
The CBDT’s move effectively bridges the gap between legislative intent and operational execution. By designating specific officers to manage the centralized issuance process, the board ensures that procedural rigor is maintained without compromising the objectives of efficiency and transparency.
Centralized Notice Issuance: Operational Workflow and Digital Infrastructure
The operational workflow of centralized notice issuance under Section 142(1)(i) is designed to be seamless, automated, and free from manual intervention. The process begins with data aggregation, wherein various sources of information are analyzed to identify potential non-filers.
The Income-tax Department’s integrated information systems consolidate data from the Annual Information Statement, Form 26AS, GSTN, MCA21, and other third-party reporting agencies. Based on this consolidated data, advanced analytics and risk assessment algorithms are employed to flag instances where an individual or entity has not filed their return despite having taxable income.
Once a non-filer is identified, the system generates a notice in a standardized format. The notice is assigned a digital reference number and is dispatched electronically to the assessee’s registered email address and e-filing portal account. The system also maintains a real-time tracking mechanism to monitor responses and ensure follow-up actions where necessary.
Responsibilities of Authorized Income-tax Authorities in the Centralized Framework
While the issuance process is largely automated, the authorized income-tax authorities designated by the CBDT play a critical supervisory role. Their responsibilities include:
- Monitoring the functioning of the centralized issuance system to ensure compliance with statutory timelines.
- Reviewing system-generated notices for accuracy and procedural consistency.
- Addressing technical glitches, grievances, and system-related queries raised by taxpayers.
- Coordinating with the National Faceless Assessment Centre for subsequent proceedings, if required.
- Ensuring timely escalations in cases where taxpayers fail to respond to the issued notices.
The supervisory role of these authorized officers is pivotal in maintaining the integrity of the compliance framework while leveraging the benefits of automation.
Advantages of Centralizing the Issuance of Notices under Section 142(1)(i)
The transition to a centralized, automated notice issuance system offers several advantages to the tax administration and taxpayers alike.
Uniformity and Consistency
Centralized issuance ensures that notices are generated in a consistent format, eliminating regional variations and subjective interpretations. This uniformity fosters greater clarity for taxpayers and minimizes the scope for disputes arising from procedural inconsistencies.
Enhanced Operational Efficiency
Automation significantly reduces the administrative burden on field officers, allowing them to focus on more critical functions such as assessments, verifications, and grievance redressals. It streamlines workflows and improves overall efficiency in compliance enforcement.
Transparency and Accountability
Digital issuance of notices ensures a complete audit trail, enhancing transparency in taxpayer interactions. Every notice issued, response received, and subsequent action is recorded in the system, thereby ensuring accountability at every stage of the process.
Objective and Data-Driven Approach
The system-driven identification of non-filers based on integrated data analytics ensures that notices are issued objectively, free from human discretion or bias. This reduces the likelihood of arbitrary actions and fosters a more equitable compliance environment.
Improved Compliance Monitoring
With centralized issuance, the department can monitor compliance at a macro level, identify trends, and deploy targeted interventions to enhance voluntary compliance rates. The system also facilitates timely reminders and escalations in cases of non-response, thereby improving overall compliance monitoring.
Taxpayer’s Responsibilities Upon Receiving a Notice under Section 142(1)(i)
When a taxpayer receives a notice issued under Section 142(1)(i), they are legally obligated to furnish their return of income within the specified timeframe mentioned in the notice. The notice clearly outlines the details required, deadlines for submission, and the mode of filing.
Failure to respond to such a notice can have serious consequences, including the initiation of best judgment assessment proceedings under Section 144. Additionally, non-compliance may attract penalties, interest, and other enforcement actions as provided under the Income-tax Act.
With the digital interface in place, taxpayers can conveniently access the notice on the e-filing portal, submit their returns electronically, and receive acknowledgment of compliance. The structured format of communication ensures that taxpayers are well-informed about the compliance requirements and the steps they need to take.
Impact on Tax Professionals and Advisors
The shift to centralized issuance of notices also impacts tax professionals, Chartered Accountants, and compliance advisors who manage clients’ tax filings. The standardized format and digital dispatch of notices enable advisors to streamline their workflow, manage multiple clients’ notices efficiently, and ensure timely compliance.
Moreover, the elimination of jurisdictional variations simplifies advisory services, as professionals no longer need to navigate the procedural nuances of different assessing officers. This uniformity in process enhances service quality and reduces administrative overheads.
Centralized Compliance Enforcement Mechanism
The centralized issuance of notices under Section 142(1)(i) is a critical step in transforming India’s income-tax compliance landscape. This shift aims to replace manual, jurisdiction-based processes with an automated, system-driven model that ensures uniformity and operational efficiency. By automating the identification of non-filers and issuing notices centrally, the government has reinforced its commitment to making tax processes more transparent, objective, and technology-enabled.
It delves into the detailed procedural workflow, responsibilities of authorized authorities, taxpayer response mechanisms, and the overall implications of this centralized compliance model.
Identification of Non-filers through Data Aggregation and Analytics
The cornerstone of the centralized issuance process is a robust data aggregation system that consolidates financial and transactional information from multiple sources. These include Annual Information Statements, Form 26AS, Goods and Services Tax Network data, corporate filings with the Ministry of Corporate Affairs, and third-party reports from financial institutions.
By leveraging advanced data analytics, the system cross-references this information to detect discrepancies and identify individuals or entities that have not filed their returns despite having taxable income. The algorithm-driven approach ensures that non-filers are identified objectively, without relying on manual scrutiny or subjective interpretation.
The use of risk-based profiling models enhances the system’s ability to prioritize cases that require immediate attention, ensuring that notices are issued to non-filers with significant tax exposure first, thereby optimizing resource allocation.
Automated Generation and Issuance of Notices under Section 142(1)(i)
Once a non-filer is flagged by the system, an automated workflow is triggered to generate a notice under Section 142(1)(i). The notice is prepared in a standardized format, detailing the requirement for filing the return, relevant assessment year, statutory references, timelines for compliance, and instructions for electronic submission.
Each notice is assigned a unique Document Identification Number (DIN) to ensure traceability and authenticity. The DIN system also helps taxpayers verify the legitimacy of the notice through the e-filing portal, thereby eliminating concerns about fraudulent communications.
Notices are dispatched electronically to the taxpayer’s registered email address and made available on their e-filing account dashboard. This digital delivery ensures prompt communication and eliminates delays associated with physical postal correspondence.
Role and Responsibilities of Authorized Income-tax Authorities
Even though the process is largely automated, authorized income-tax authorities play a crucial supervisory and facilitative role in the centralized issuance model. Officers not below the rank of an Income-tax Officer, as designated by the Central Board of Direct Taxes, are entrusted with the following responsibilities:
- Monitoring System Integrity: Ensuring that the automated workflow functions smoothly, with no data anomalies or procedural lapses.
- Addressing Technical Glitches: Acting as a point of contact for technical escalations, system errors, or taxpayer grievances related to notice delivery.
- Coordinating with Faceless Assessment Centres: Liaising with assessment units for cases that require further inquiries or escalation beyond the notice issuance stage.
- Ensuring Compliance Oversight: Tracking response rates, identifying instances of non-response, and initiating appropriate follow-up actions.
- Policy Feedback Loop: Providing feedback to policy-makers on operational challenges, system improvements, and taxpayer experience.
By clearly defining these roles, the system ensures a balance between automation and necessary human oversight to maintain procedural integrity.
Taxpayer’s Response Workflow: From Receiving Notice to Filing Return
The centralized issuance model simplifies the taxpayer’s response process by providing clear, structured communication and a seamless digital interface. Upon receiving a notice under Section 142(1)(i), the taxpayer is required to log into their e-filing account to view the notice details.
The response workflow includes the following steps:
- Verification of Notice: Taxpayers can verify the authenticity of the notice by entering the Document Identification Number on the e-filing portal.
- Understanding Compliance Requirements: The notice specifies the due date by which the return must be filed, along with relevant assessment year details and instructions.
- Preparation of Return: Taxpayers are required to prepare their return using the prescribed ITR forms, ensuring that all income details, deductions, and other necessary information are accurately reported.
- Filing and Submission: The return must be submitted electronically through the e-filing portal, and an acknowledgment of compliance is generated.
- Uploading Additional Documents (if required): In some cases, the notice may also call for specific documents or clarifications, which can be uploaded directly to the portal.
- Tracking Compliance Status: Taxpayers can monitor the status of their compliance submission through the e-filing dashboard, ensuring that their response is recorded in the system.
Consequences of Non-compliance with Section 142(1)(i) Notices
Failure to respond to a notice issued under Section 142(1)(i) has significant repercussions. If a taxpayer does not file the return within the specified timeframe, the Income-tax Department is authorized to proceed with a best judgment assessment under Section 144.
Under this provision, the Assessing Officer determines the tax liability based on available information, third-party reports, and presumptive figures. Such assessments often result in higher tax demands due to the absence of accurate data from the taxpayer’s side.
In addition to best judgment assessments, penalties for non-filing may be levied under Section 271F. Persistent defaulters may also face prosecution under relevant sections, particularly if deliberate evasion is established. The automated tracking of responses ensures that cases of non-compliance are flagged for immediate escalation and enforcement actions.
Advantages of a Centralized Digital Compliance Model
The centralized and automated issuance of notices under Section 142(1)(i) offers multiple advantages for both the Income-tax Department and taxpayers.
Enhanced Transparency and Auditability
Every notice issued, response submitted, and action taken is recorded in a digital audit trail. This ensures that both taxpayers and tax officials have complete visibility into the status of each compliance interaction, fostering a transparent and accountable process.
Uniformity and Standardization
The use of standardized notice formats eliminates inconsistencies that often arose from manual, jurisdiction-based issuance. All taxpayers receive notices with identical language, structure, and compliance instructions, reducing ambiguity and promoting procedural fairness.
Increased Operational Efficiency
Automation reduces the time and resources required to identify non-filers and issue notices. Field officers are relieved of routine tasks, allowing them to focus on more complex assessments, investigations, and taxpayer support functions.
Objective Enforcement Mechanism
Algorithm-driven identification and automated issuance eliminate subjectivity in the selection of cases, ensuring that actions are based solely on data-driven risk assessments. This objectivity enhances the credibility of the enforcement mechanism.
Simplified Taxpayer Experience
Taxpayers benefit from a streamlined process where notices are delivered electronically, response mechanisms are clearly defined, and compliance submissions can be tracked in real-time. This reduces procedural friction and encourages voluntary compliance.
Integration with Other Compliance Initiatives
The centralized issuance of notices under Section 142(1)(i) is not a standalone initiative. It is part of a broader compliance ecosystem that includes faceless assessments, pre-filled returns, AI-driven anomaly detection, and seamless data exchange with other regulatory bodies.
For instance, data from the Goods and Services Tax Network, corporate filings, banking transactions, and financial statements are integrated into a centralized repository. This data is continuously analyzed to detect patterns of non-compliance, enabling proactive issuance of notices and timely interventions. The integration of compliance processes across multiple platforms enhances the department’s ability to monitor, track, and enforce compliance on a real-time basis.
Impact on Tax Professionals and Advisory Services
The transition to a centralized compliance enforcement model also impacts tax professionals, Chartered Accountants, and advisory firms who assist taxpayers in managing their tax obligations. The uniformity in notice formats and digital delivery simplifies advisory workflows, as professionals no longer need to navigate jurisdiction-specific procedural nuances.
Moreover, the structured timelines and automated tracking ensure that tax professionals can manage multiple client compliances with greater efficiency. The elimination of manual correspondences and physical visits to tax offices allows for a more streamlined advisory process, reducing administrative overheads and focusing on strategic compliance support.
Advisors are also positioned to play a critical role in educating clients about the importance of timely responses to notices, implications of non-compliance, and best practices for managing their tax filings within the centralized framework.
Challenges and Considerations in the Centralized Issuance Process
While the centralized issuance model brings numerous benefits, it is not devoid of challenges. Some of the key considerations include:
Data Accuracy and Validation
The effectiveness of automated identification of non-filers hinges on the accuracy of the underlying data. Inaccurate or outdated information could lead to erroneous issuance of notices, causing undue compliance burdens on taxpayers.
System Downtime and Technical Glitches
As the process relies heavily on technology, any system outages, technical glitches, or server downtimes could disrupt the issuance workflow and delay communication with taxpayers.
Adaptability for Taxpayers in Remote Areas
Taxpayers residing in remote areas with limited internet connectivity may face challenges in accessing notices, responding within stipulated timelines, and navigating the digital compliance interface.
Grievance Redressal Mechanism
An efficient grievance redressal framework is essential to address issues related to erroneous notices, technical problems, and procedural clarifications. A robust support system must be in place to assist taxpayers in resolving such issues promptly.
Continuous System Updates
The dynamic nature of financial transactions and compliance data necessitates regular updates to the system’s algorithms and data repositories to ensure that the identification of non-filers remains accurate and relevant.
Reinforcing Compliance Culture through Centralized Mechanisms
The centralized issuance of notices under Section 142(1)(i) represents a major shift in India’s tax compliance framework. It is not merely an administrative change but a strategic intervention aimed at fostering a stronger compliance culture. By automating the identification of non-filers and ensuring timely issuance of notices, the system acts as a deterrent against deliberate non-compliance.
This approach ensures that every potential non-filer is brought under the compliance radar, thereby strengthening the tax ecosystem. The message is clear: filing of returns is not optional and lapses will be systematically identified and addressed through a centralized, technology-driven framework.
Boosting Voluntary Compliance with Predictability and Transparency
One of the key objectives behind the CBDT’s move to centralize the issuance of notices is to enhance voluntary compliance. By removing discretion and subjective intervention from the process, the system builds predictability. Taxpayers are aware that non-filing will automatically trigger a notice, without waiting for manual scrutiny.
This predictable enforcement mechanism encourages individuals and businesses to file their returns proactively to avoid system-generated notices and subsequent enforcement actions. The transparency of the system, which ensures that notices are based on data analytics and not arbitrary selections, builds trust and promotes responsible taxpayer behavior. Voluntary compliance, when achieved through an environment of clarity and fairness, reduces the burden on enforcement resources and contributes to better revenue collections.
Reducing Human Interface: A Step Towards Faceless Compliance Enforcement
One of the primary motivations behind centralizing notice issuance under Section 142(1)(i) is to minimize human interface in routine compliance functions. Traditionally, the issuance of notices involved jurisdictional officers manually identifying cases, preparing notices, and dispatching them physically. This process was not only time-consuming but also prone to delays, inconsistencies, and subjective biases.
The centralized, automated system removes these challenges by leveraging data-driven algorithms to identify non-filers and issue notices in a uniform manner. This aligns with the broader objective of making tax administration faceless, where interactions are governed by systems rather than individuals. Reducing human interface enhances procedural fairness, eliminates scope for personal discretion, and ensures that all taxpayers are treated uniformly.
Technological Backbone of the Centralized Compliance Framework
The success of the centralized issuance model is heavily dependent on the robustness of its technological infrastructure. Advanced data analytics, machine learning algorithms, and automated workflow engines are at the heart of this system.
Data from multiple sources such as the Annual Information Statement, Form 26AS, financial institutions, and inter-departmental databases are consolidated into a unified repository. This data is continuously analyzed to identify patterns of non-compliance, enabling real-time detection of non-filers.
Machine learning models are deployed to enhance the accuracy of identifications by learning from historical compliance data. These models refine their selection criteria over time, ensuring that notices are issued to the right cases, thereby reducing false positives. The entire issuance process, from identification to dispatch and response tracking, is managed through an integrated digital platform that ensures operational efficiency and transparency.
Strengthening Compliance Monitoring with Real-time Tracking
One of the significant advantages of centralized issuance is the ability to monitor compliance in real-time. The system tracks every notice issued, records taxpayer responses, and monitors deadlines for compliance. Automated reminders are sent to taxpayers who fail to respond within the stipulated time, ensuring that follow-up actions are timely and effective.
Non-responses are automatically flagged for escalation, enabling enforcement units to initiate further proceedings under Sections 144 or 271F. This real-time monitoring enhances the department’s ability to manage compliance efficiently and ensures that cases of persistent non-compliance are addressed promptly. The audit trail maintained by the system also ensures that every action, from issuance to response and escalation, is documented and traceable.
Enhancing the Role of Professional Advisors in a Centralized Environment
The centralized issuance model has a profound impact on how professional advisors and compliance consultants manage their clients’ obligations. The uniformity in notice formats, digital delivery mechanisms, and standardized response workflows streamline the advisory process.
Tax professionals no longer need to coordinate with multiple jurisdictional offices, as the notices are system-generated and follow a consistent structure. This allows advisors to manage a larger client base efficiently, ensuring that notices are promptly addressed and compliance deadlines are met.
Advisors also play a crucial role in educating clients about the importance of responding to notices within timelines, implications of non-compliance, and navigating the e-filing portal for submission of responses. Their role becomes increasingly strategic in a digital compliance environment where procedural clarity is paramount.
Challenges in Implementing Centralized Compliance Systems
While the centralized issuance of notices brings several benefits, it also presents operational challenges that need to be addressed to ensure seamless implementation.
Data Quality and Integration Challenges
The effectiveness of the centralized system is contingent on the quality and completeness of data. Inaccurate or outdated information from third-party sources could lead to erroneous issuance of notices, causing unnecessary compliance burdens on taxpayers. Continuous data validation and integration processes are critical to maintain data integrity.
Technical Infrastructure and System Downtime
Given the scale of data processing and volume of notices issued, the system’s technological infrastructure must be robust and resilient. Downtime, server overloads, or technical glitches can disrupt the issuance process and delay communication with taxpayers. Regular system audits and capacity enhancements are essential to ensure uninterrupted operations.
Accessibility Issues for Small and Remote Taxpayers
While the digital model simplifies compliance for urban and tech-savvy taxpayers, individuals in remote areas with limited internet access may face challenges in receiving and responding to notices. Targeted initiatives such as mobile-based solutions and dedicated helpdesks are necessary to bridge this digital divide.
Grievance Redressal Mechanism
An efficient grievance redressal framework is vital to address issues related to erroneous notices, technical problems, and procedural clarifications. A robust support system that enables taxpayers to resolve their queries and grievances promptly will enhance the credibility and effectiveness of the centralized system.
Potential for Expansion to Other Compliance Functions
The centralized model introduced for notices under Section 142(1)(i) serves as a blueprint for extending similar mechanisms to other compliance-related functions. Processes such as scrutiny notices, refund processing, verification of high-value transactions, and handling taxpayer grievances can also be transitioned to a centralized, automated environment.
As the system matures, it can integrate predictive analytics that anticipates compliance gaps and proactively guides taxpayers towards corrective actions even before deadlines are missed. Such proactive compliance interventions will redefine the tax administration landscape, reducing litigation and enhancing overall compliance levels.
Long-term Impact on Compliance Behavior and Revenue Mobilization
The centralized issuance of notices is expected to bring about a significant behavioral shift among taxpayers. The awareness that non-filing will automatically trigger system-generated notices acts as a strong deterrent against deliberate non-compliance. Over time, this is likely to foster a culture of timely and voluntary compliance.
The increased compliance rates will directly contribute to widening the tax base, improving revenue collections, and reducing the dependency on coercive enforcement actions. By emphasizing transparency, predictability, and procedural fairness, the system enhances taxpayer confidence, leading to better long-term engagement with the compliance ecosystem.
Building a Trust-based Tax Ecosystem
One of the underlying objectives of transitioning to a centralized, faceless compliance model is to build a trust-based relationship between taxpayers and the administration. By eliminating discretion, reducing subjectivity, and ensuring uniformity, the system seeks to create an environment where taxpayers feel assured of fairness and transparency.
This shift from enforcement-centric administration to a compliance-facilitative approach aligns with global best practices in tax governance. It emphasizes empowering taxpayers with clarity and simplicity while ensuring that enforcement actions are objective, data-driven, and consistent.
Future Roadmap for Technological Enhancements
As the centralized issuance framework evolves, there are several technological enhancements that can further strengthen its effectiveness:
- Integration with Artificial Intelligence: AI-based models can enhance risk profiling, enabling the system to prioritize cases with a higher probability of tax evasion.
- Predictive Compliance Alerts: Predictive analytics can be used to alert taxpayers about potential compliance lapses, prompting them to take corrective actions before formal notices are issued.
- Unified Compliance Dashboard: A single-window dashboard for taxpayers to view notices, file responses, track compliance status, and seek clarifications will enhance user experience.
- Mobile App-Based Notifications: Expanding communication channels through mobile app-based notifications will improve outreach, especially in regions with limited internet penetration.
- Automated Grievance Handling Bots: AI-driven chatbots for preliminary grievance redressal can ensure that routine queries are addressed instantly, reducing response times.
Collaborative Compliance through Stakeholder Engagement
The success of a centralized compliance framework depends on active collaboration between the administration, taxpayers, professional advisors, and technology providers. Regular stakeholder consultations, feedback loops, and training programs can ensure that the system remains user-centric and adaptive to emerging needs.
Professional bodies, industry associations, and advisory firms play a pivotal role in disseminating information, educating taxpayers, and providing feedback on operational challenges. A collaborative approach will ensure that the system evolves in a manner that balances enforcement rigor with taxpayer convenience.
Conclusion
The Central Board of Direct Taxes’ initiative to centralize the issuance of notices under Section 142(1)(i) marks a transformative shift in India’s compliance enforcement landscape. By leveraging technology to automate routine processes, the government has established a robust framework that ensures objectivity, transparency, and operational efficiency in bringing non-filers into the tax net.
Section 142 has always been a vital tool for income-tax authorities to initiate inquiries and gather information from assessees before assessment. However, the manual, jurisdiction-driven approach had inherent challenges of inconsistency, delays, and human discretion. The introduction of the second provision through the Finance Act, 2021, and the subsequent CBDT notification designating authorized income-tax authorities have laid the foundation for a centralized, system-driven issuance model.
This centralized mechanism is powered by advanced data analytics, risk-based profiling, and seamless digital workflows that ensure notices are issued uniformly, without manual intervention. By integrating multiple data sources and eliminating subjective selection of cases, the system enhances fairness, reduces procedural friction, and encourages voluntary compliance among taxpayers.
The shift to faceless, automated processes aligns with the government’s broader vision of creating a transparent and trust-based compliance environment. For taxpayers, it ensures clarity and predictability, where notices are issued based on data-driven triggers rather than arbitrary discretion. For the administration, it optimizes resource allocation, enabling officers to focus on complex assessments, investigations, and strategic enforcement actions.
Professional advisors, Chartered Accountants, and compliance consultants now have the advantage of managing their clients’ obligations through standardized processes, improving service efficiency and reducing administrative burdens.
However, as with any large-scale digital transformation, challenges related to data accuracy, system downtimes, accessibility in remote regions, and grievance redressal mechanisms need continuous attention. Strengthening the technological infrastructure, integrating AI-driven predictive compliance models, and ensuring effective stakeholder engagement will be critical to the long-term success of this initiative.
In the larger scheme, the centralized issuance of notices under Section 142(1)(i) is a significant step towards building a compliance ecosystem that is fair, transparent, and future-ready. It reinforces the importance of timely return filing, encourages voluntary compliance, and ultimately contributes to broadening the tax base, enhancing revenue mobilization, and fostering a culture of responsible taxpayer behavior. This initiative is not merely an administrative reform but a strategic move towards redefining the relationship between the taxpayer and the administration, setting a new benchmark for digital governance in the compliance landscape.