Income Tax Taxation

Section 143(2) – Notice for Scrutiny and how to Response 

We file Income Tax Return by assessing our income on the basis of income received. However, there are chances of minor or major discrepancies depending upon how we report our income or losses. In this situation, Notice under section 143(2) comes into the picture. As we also deserve a chance to correct or justify ourselves. A Notice under section 143(2) is a chance provided by the Income Tax Department to defend them and clear out the irregularities with the supporting documents. Also, note that failure to reply to this notice may lead to severe circumstances.

What is Notice under Section 143(2)?

Notice under section 143(2) means the income tax return filed by you has been taken by the assessing officer for scrutiny assessment or detailed assessment under section 143(3)

In simple words, Scrutiny Assessment or Detailed Assessment means scrutiny is being carried out to confirm the correctness or genuineness of the various deductions or claims made, etc. while filing your Income Tax Return. However, the basic purpose is to ensure that the income tax return is filed showing correct income.

Objective of Scrutiny

1. To check whether you have not understated the income
2. To check whether you have not computed the excessive loss
3. To check whether you have not underpaid the tax in any manner

Time Limit for Issuance if Notice under Section 143(2)

A Notice under Section 143(2) for scrutiny assessment shall be issued up to a period of six months from the end of the financial year is the year in which the return is filed.

For example, Mr. Rahul has filed his return on 25.07.2018 for the financial year 2017-2018. In this case, notice under section 143(2) shall be issued to Mr. Rahul only up to 30.09.2019 for the financial year 2017-2018.

Steps involved in replying to the Notice under Section 143(2)

Step 1: A notice u/s 143(2) is issued by the Assessing Officer within 6 months from the end of the financial year in which return was filed to carry out scrutiny of your income tax return u/s 143(3)

Step 2: You or your representative will appear before the Assessing Officer to place your arguments and evidence as required by him.

Step 3: After considering all explanations and evidences a final order under section 143(3) is issued to tax payable or tax refundable^[1]

Types of Notices under Section 143(2)

There are 3 types of notices issued under section 143(2):

1. Partial Scrutiny (Computer Assisted Scrutiny Selection): Cases where Income Tax Department as per the parameters which have been flagged for limited scrutiny due to mismatch or inaccurate reporting. In such a case scope of scrutiny is limited.

• Complete Scrutiny (Computer Assisted Scrutiny Selection): Cases where the Income Tax Department which is to be scrutinized on the complete basis of the return filed and all the relevant documents. In such a case the scope of the AO is limited to a particular assessment year.

• Manual Scrutiny: Some specific cases are selected for detailed scrutiny based on the predefined criteria issued by the CBDT periodically.

Some important points you should know about Scrutiny Notice

1. This notice can be issued up to expiry of 6 months from the end of the financial year in which the return is filed.
2. If the notice under section 143(2) is issued the AO may ask you to produce the documents in support of the deductions or exemptions claimed or other claims of loss you have made to prove all the sources of income.
3. Section 143(2) allows the assessing officer to make a regular assessment after a detailed inquiry.
4. As per Section 292BB, the scrutiny assessment notice will be served will be valid if no objections are raised on the notice served or improper issuance of a notice or invalid service.

Recent Amendments

1. Last Year the procedure of issuing a notice under section 143(2) has changed from offline mode to electronic mode.
2. The supporting documents which are required by the Assessing Officer are required to be submitted online.
3. All the processing is done online except in case of the following situations:
4. Examination of Books of Account
5. Third-Party Investigations are required to be carried out
6. Examination of the Witnesses.
7. A personal hearing request by the taxpayer to explain the case.

What are the penal consequences for not complying with the notice under section 143(2)?

If you receive the notice and you do not comply with the same in such a case, you will be liable to penal consequences as follows:

1. Penalty u/s 272A amount of Rs. 10000 and even prosecution
2. The Best judgment assessment under section 144
3. This may increase your taxable income which in turn increases your tax liability with a penalty. If you want to dispute the taxable amount you will require to pay an additional 20% of the disputed amount before you file an appeal against the higher authorities

Read our article:File the Income Tax Refund with the Help of Experts

FAQ’s on Section 143(2)

1. What is the final order under Section 143(3)?

If a notice is issued under section 143(2) and upon receiving the notice the Assesse produce to the AO, the required and supportive evidence then the AO will make the assessment of the total income or loss and determine the tax payable or refundable by passing an under section 143(3)

2. Is there any time limit for issuance of an order under section 143(3)?

The AO has to issue the final order with 21 months from the end of the relevant assessment year. This is the latest amendment applicable from A.Y.2017-2018. Previously it was of 2 years.

3. How will you receive notice under section 143(2)?

Generally, the Notice under section 143(2) is issued via email in the PDF format registered with the Income Tax Department. Also, it is also sent to your Postal Address.

4. If I have not filed any return can I get a notice under section 143(2)?

No, since no return is filed you cannot receive notice under section 143(2). However, in certain cases, AO can first issue a notice under section 142(1) asking you to file Income Tax Return. In such a case if you fail to respond AO can issue “Best Judgment assessment under Section 144.

5. Received a Scrutiny Notice under Section 143(2)?

Receiving a Notice from the Department is not a good surprise. But the concern is to respond and reply to it time to avoid penal consequences. To ensure a 100% solution to your notice consult our team of experts to get instant Reply, Contact Enterslice.

Read our article:Know About the Filing of Income Tax Return