Enquiry before Assessment
Introduction
The Assessing Officer (AO) is empowered to conduct an enquiry to obtain complete information regarding a taxpayer’s income or loss. The AO can issue notices, direct special audits, or refer matters to a Valuation Officer. These powers are exercised in a faceless manner.
Powers of the Assessing Officer
- Notice to File Return [Section 142(1)(i)]
o If a taxpayer fails to file a return within the due date, the AO may issue a notice requiring submission of the return within a specified time.
- Notice to Produce Documents or Accounts [Section 142(1)(ii)]
o The AO can ask a taxpayer to produce books of accounts or documents. However, books older than three years from the relevant previous year cannot be demanded, though documents can be required without any time restriction.
- Notice to Furnish Information [Section 142(1)(iii)]
o The AO may require the taxpayer to furnish a statement of all assets and liabilities, whether included in the accounts or not, with prior approval from the Joint Commissioner.
- Making Inquiries [Section 142(2)]
o The AO may gather information necessary for assessment. Before using such material against the assessee, an opportunity to be heard is provided, except in best judgment assessments under Section 144.
- Direction for Special Audit [Section 142(2A)]
o If books of accounts are complex or require further verification, the AO may direct:
A Chartered Accountant to audit the accounts.
A Cost Accountant to value inventory.
- Estimation of Asset Value by valuation officer [Section 142A]
o The AO may refer an asset, property, or investment for valuation by a Valuation Officer, irrespective of doubts about the correctness of the accounts.
- Faceless Proceedings
o Section 142B allows the government to implement a Faceless Inquiry or Valuation Scheme, ensuring automated allocation of cases using artificial intelligence and machine learning.
o The Faceless Inquiry or Valuation Scheme, 2022, was notified vide Notification No 19/2022 dated 30-03-2022 to conduct these proceedings digitally.