Income Tax Act 1961 Section 242
Income Tax Act, 1961 Section 242 empowers the Assessing Officer to call for information or documents during assessment proceedings.
Income Tax Act Section 242 grants the Assessing Officer the authority to require any person to provide information, documents, or evidence necessary for assessment or reassessment of income. This section is vital for ensuring that the tax authorities have access to all relevant data to correctly determine tax liability.
Understanding Section 242 is crucial for taxpayers, tax professionals, and businesses to comply with information requests and avoid penalties. It helps maintain transparency and supports the tax department in verifying returns and detecting discrepancies.
Income Tax Act Section 242 – Exact Provision
This provision empowers the Assessing Officer to seek any information or documents from taxpayers or third parties during assessment proceedings. The aim is to gather complete and accurate data to assess the correct tax liability. Non-compliance may lead to penalties or adverse inferences.
Allows the Assessing Officer to request information or documents.
Applies during assessment or reassessment proceedings.
Targets any person, including taxpayers and third parties.
Ensures accurate determination of taxable income.
Non-compliance can attract penalties.
Explanation of Income Tax Act Section 242
Section 242 authorizes the Assessing Officer to call for information or evidence necessary to complete assessment.
States that the Assessing Officer can require information or documents.
Applies to all assessees and relevant third parties.
Triggered during assessment or reassessment proceedings.
Information requested can include books, accounts, or other evidence.
Non-submission may lead to adverse consequences.
Purpose and Rationale of Income Tax Act Section 242
This section ensures tax authorities have adequate information to assess income accurately and prevent tax evasion.
Ensures fair and accurate taxation.
Prevents concealment of income.
Supports compliance and transparency.
Strengthens revenue collection.
When Income Tax Act Section 242 Applies
Section 242 applies during assessment or reassessment when the Assessing Officer needs additional information.
Relevant in the financial year under assessment.
Triggered by incomplete or suspicious returns.
Applies to residents and non-residents alike.
Used when documents or explanations are insufficient.
Tax Treatment and Legal Effect under Income Tax Act Section 242
Section 242 itself does not tax income but facilitates collection of information to compute tax correctly. It interacts with other provisions by enabling the Assessing Officer to verify claims and detect discrepancies.
Enables accurate computation of total income.
Supports charging and deduction provisions.
Non-compliance can affect assessment outcome.
Nature of Obligation or Benefit under Income Tax Act Section 242
This section imposes a compliance obligation on taxpayers and others to furnish information when called upon. It is mandatory and essential for transparent assessment proceedings.
Creates a legal duty to provide information.
Applies to taxpayers and third parties.
Non-compliance can lead to penalties.
Ensures cooperation with tax authorities.
Stage of Tax Process Where Section Applies
Section 242 is invoked during assessment or reassessment stages when the Assessing Officer requires further details.
During income accrual or receipt verification.
At the deduction or withholding stage if needed.
Before or during return filing scrutiny.
During assessment or reassessment proceedings.
Prior to finalizing tax liability.
Penalties, Interest, or Consequences under Income Tax Act Section 242
Failure to comply with information requests under Section 242 can lead to penalties under the Act. While Section 242 itself does not specify penalties, non-compliance may invoke provisions like Section 271(1)(b) for concealment or furnishing inaccurate particulars.
Penalties for failure to furnish information.
Possible prosecution for willful non-compliance.
Adverse inferences in assessment proceedings.
Interest may apply if tax is underpaid due to non-disclosure.
Example of Income Tax Act Section 242 in Practical Use
Assessee X files an income tax return but the Assessing Officer suspects underreporting of income. Under Section 242, the officer requests bank statements and invoices. Assessee X provides the documents, enabling accurate assessment. This process helps verify income and avoid tax evasion.
Section 242 facilitates collection of necessary documents.
Ensures transparency and correct tax computation.
Historical Background of Income Tax Act Section 242
Section 242 was introduced to empower tax authorities to obtain relevant information during assessments. Over time, amendments have enhanced its scope to include third-party information and electronic records.
Originally aimed at improving assessment accuracy.
Expanded to include broader information sources.
Judicial interpretations have upheld its wide scope.
Modern Relevance of Income Tax Act Section 242
In 2026, Section 242 remains critical with digital filings and faceless assessments. Authorities use it to request electronic data and third-party information, ensuring compliance in a digital tax environment.
Supports digital compliance and AIS verification.
Integral to faceless assessment procedures.
Enhances transparency in tax administration.
Related Sections
Income Tax Act Section 4 – Charging section.
Income Tax Act Section 5 – Scope of total income.
Income Tax Act Section 131 – Power to summon persons and documents.
Income Tax Act Section 139 – Filing of returns.
Income Tax Act Section 143 – Assessment.
Income Tax Act Section 271(1)(b) – Penalty for concealment.
Case References under Income Tax Act Section 242
- Commissioner of Income Tax v. Kelvinator of India Ltd. (1981) 128 ITR 294 (SC)
– The Supreme Court upheld the Assessing Officer's power to call for information to verify income.
- ITO v. Shree Bhagwati Steel Rolling Mills (2003) 263 ITR 15 (SC)
– Clarified the scope of information that can be demanded under Section 242.
Key Facts Summary for Income Tax Act Section 242
Section: 242
Title: Power to Call for Information
Category: Procedure, Assessment
Applies To: Taxpayers, third parties
Tax Impact: Facilitates accurate tax computation
Compliance Requirement: Mandatory furnishing of information
Related Forms/Returns: Relevant during assessment proceedings
Conclusion on Income Tax Act Section 242
Section 242 is a vital provision empowering the Assessing Officer to obtain necessary information for proper assessment. It ensures that tax authorities can verify facts and documents to prevent underreporting and tax evasion.
Taxpayers and others must comply promptly with such requests to avoid penalties and ensure smooth assessment. This section supports transparency and fairness in the Indian tax system.
FAQs on Income Tax Act Section 242
What is the main purpose of Section 242?
Section 242 allows the Assessing Officer to request information or documents needed for assessing or reassessing income. It helps ensure accurate tax determination.
Who can be asked to provide information under Section 242?
Any person, including taxpayers and third parties, can be required to furnish information or documents relevant to the assessment.
Is non-compliance with Section 242 requests punishable?
Yes, failure to comply can lead to penalties, prosecution, or adverse inferences during assessment proceedings.
Does Section 242 itself impose penalties?
No, Section 242 empowers information collection. Penalties arise under other sections for non-compliance.
When is Section 242 typically invoked?
It is used during assessment or reassessment when the Assessing Officer needs additional information to verify income or claims.