The Income Tax notice u/s 143 (2) of Income Tax Act is issued with the aim of ensuring that the taxpayers have not understated any income or shown excessive loss, or have not paid lower tax.
To carry out an assessment under section 143(3), the Assessing Officer shall serve notice in accordance with provisions of section 143 (2) of Income Tax Act. The Assessment u/s- 143(3) is a scrutiny assessment, and a detailed assessment is carried out at this stage. Moreover, notice u/s 143(2) can only be issued if the taxpayer has filed an income tax return. In this article, we will explore the reasons for receiving an income tax notice u/s 143(2), what it means, and how to respond to it.
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When the income tax department identifies discrepancies in the ITR, whether minor or major, it can issue a notice u/s 143(2). The discrepancies in the ITR might include under-reporting of income or over-reporting of losses. It is a notice for scrutiny assessment. In other words, a scrutiny assessment notice signifies that the income tax authorities have identified certain issues in your ITR on which you need to provide further clarification. It is conducted to verify the correctness and genuineness of various deductions claimed by the taxpayer in the ITR.
Notice u/s 143(2) is issued to you by the Income Tax Department when your Income Tax Return is selected for scrutiny assessment or detailed assessment u/s 143(3).
In simple words, Scrutiny assessment or detailed assessment u/s 143(3) means scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by you in your Income Tax Return. The basic purpose of this scrutiny assessment is to ensure that you have filed the return with the correct income and paid the tax accordingly.
The objective of this scrutiny is to check that:
So, we can conclude to carry out scrutiny u/s 143(3) of the Income Tax Act, notice u/s 143(2) is issued by the Income Tax Department. Such notice can be issued within three months from the date on which the financial year ends.
For example, if the ITR was filed on 31st July 2024, then the financial year 24-25 will end on 31st March 2025. The notice under section 143(2) can be issued within 3 months of the end of the FY in which the ITR is filed. Therefore, the notice cannot be issued after 30th June 2025.
A notice u/s 143(2) of the income tax act for scrutiny assessment can only be issued up to a period of three months from the end of the financial year in which you furnished the return. (before 1 st April 2021, the limit was six months from the end of the financial year)
Step 1 A notice under section 143(2) is issued to you by the AO within 3 months from the end of FY in which a return was filed to carry out scrutiny of your income tax return u/s 143(3).
Step 2 You or your tax representative will appear before the AO to place your arguments and evidence as required by the assessing officer.
Alternatively, you can submit an online response to notice under section 143(2) by uploading your evidence and arguments.
Step 3 After hearing all the evidence, as produced by the assessee as per notice u/s 143(2), AO will pass an assessment order determining the total tax payable or refund to the assessee after taking into account produced evidence.
If notice under section 143(2) of the income tax act was issued upon you by the AO for the production of evidence on the specified day and after taking into account such evidence and hearing the same, the AO will assess your total income or loss and also determine any sum payable by you or due to you by passing the order u/s 143(3).
A notice under Section 143(2) can be issued after an income tax return has been filed but within three months from the end of the financial year in which the return was filed. For example, if Mr. Ram filed his return on July 31, 2023, for the financial year 2022-23, the assessing officer can issue a notice under Section 143(2) only until June 30, 2024. This is because the notice must be issued within three months from the end of the financial year 2023-24, the year in which Mr. Ram filed his return.
| Assessment Year (AY) | Time limit from the end of the (AY) |
|---|---|
| 2017-18 or before | 21 months |
| 2018-19 | 18 months |
| 2019-20 onwards | 12 months |
This includes a computer-assisted scrutiny selection (CASS). The scrutiny cases are selected based on set parameters. Only cases with inaccurate returns and information mismatches are selected. Also, limited scrutiny entails the scrutiny of a limited area, as mentioned in the notice, for example, the sale of property or foreign tax credit.
Complete scrutiny is carried out on the entire ITR filed, including the supporting documents. These cases are identified based on the reports of CASS. The scope of this type of scrutiny might also include checking the returns of previous years.
The cases for scrutiny are selected on the basis of the parameters defined by the Central Board of Direct Taxes (CBDT). These criteria keep changing and can vary frm year to year.
Generally, you will receive this notice via email in a PDF format on your email id registered with the Income Tax Department. However, it will also be sent to your postal address.
No, since you furnished no return, a notice u/s 143(2) cannot be issued to you, and no scrutiny of your records can be done. In such a case, section 144 shall apply to you for the best judgment assessment of your records. Also, an assessment can be done as per the provisions of section 147 in this case.
If you receive a notice from the Income Tax Department, you should always reply to it and never ignore it. But in case of any such default, you may be liable for the following:
A notice is issued to you u/s 142(1) for the production of books of accounts, income statement, and statement of assets and liabilities for preliminary investigation. If the AO is not satisfied with the information you reproduce, a notice u/s 143(2) may be issued to you for scrutiny of accounts.
Also, practically it is seen that whenever a taxpayer receives notice u/s 143(2), he also receives notice u/s 142(1) for submission of the necessary information/papers.
Have you received a tax notice u/s 143(2)? This is a scrutiny notice, and prompt response is important to avoid any further consequences.
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