Income Tax Scrutiny Notice — Section 143(2) Explained

Section 143(2) is the provision under which the department issues a scrutiny notice. It is served when the department wants to make sure you have not under-reported income or over-claimed deductions or losses. Receiving it does not by itself mean you have done anything wrong — many cases are picked by system-based (CASS) selection on risk parameters.

Section 143(1) is a routine intimation generated automatically after your ITR is processed — it compares your return with department data and may show a refund, a demand or no change. Section 143(2) is a scrutiny notice — a detailed examination of all or specific aspects of your return by an Assessing Officer or the faceless unit. A 143(2) is far more serious and needs a documented response.

There are three broad types. Limited scrutiny is restricted to specific issues (for example, a single mismatch or an unusually high deduction). Complete scrutiny covers your entire return — all income sources, deductions and tax liability. CASS (Computer-Assisted Scrutiny Selection) is system-driven selection based on risk parameters, which can be limited or complete.

Limited scrutiny is confined to the specific issue(s) mentioned in the notice — the Assessing Officer cannot examine anything beyond them without converting it to complete scrutiny with approval. If the mismatch is minor and you can explain it clearly with documents, limited scrutiny is often the easiest type to close. Reply only to the flagged issue and do not volunteer unrelated information.

Faceless assessment means the entire scrutiny is conducted digitally through the National Faceless Assessment Centre with no physical meetings. Notices are served on the e-Filing portal and by email and SMS, and every reply is filed online through e-Proceedings. Cases are allocated randomly across the country, which removes any local interface with a specific officer.

Common triggers include large cash deposits inconsistent with income, mismatches between your ITR and AIS or Form 26AS (TDS, interest, capital gains, SFT data), undisclosed capital gains, foreign assets or foreign income not disclosed, deductions that look disproportionate to income, and a history of under-reporting. CASS also selects returns on risk-based parameters and CBDT issues compulsory-scrutiny guidelines each year.

A large or unusual refund relative to your income and TDS pattern can attract attention, especially if it is driven by deductions that are not supported by AIS or third-party data. The safest protection is to reconcile your return with AIS and Form 26AS before filing and to keep proofs for every deduction you claim.

Log in to incometax.gov.in, go to Pending Actions and open e-Proceedings, and read the notice to see whether it is limited or complete scrutiny. Gather the relevant documents — bank statements, Form 16, Form 26AS, AIS, investment proofs, capital-gains statements — then upload them with a written explanation for each query and submit before the deadline. For complex cases, engage a CA to draft and file the response.

Typically bank statements for all accounts, salary slips and Form 16, Form 26AS and the AIS download, investment and deduction proofs (80C, 80D), capital-gains statements from brokers and mutual-fund platforms, property purchase or sale documents, foreign income or asset details, and any business income and expense records. Provide only what supports the issue raised — do not flood the file with unrelated papers.

The reply window is stated in the notice itself and is commonly 15 to 30 days from the date of the notice. If you genuinely need more time you can request an adjournment through e-Proceedings, but you should file at least an acknowledgement and interim response within the given period rather than let it lapse.

For a limited scrutiny involving a single mismatch you can clearly explain with documents, you can reply yourself through the portal. For complete scrutiny, CASS cases, or notices involving capital gains, foreign income or large cash transactions, a Chartered Accountant is strongly recommended. A CA can frame the reply correctly, represent you before the faceless unit, and avoid inadvertent admissions that increase your liability.

The department must serve the scrutiny notice within three months from the end of the financial year in which the return was filed. A notice served after that date is time-barred, and any scrutiny built on it is invalid. Always check the service date on your notice against this limit.

The assessment order must generally be passed within twelve months from the end of the relevant assessment year. In practice the faceless unit issues further questionnaires under Section 142(1) during this period, so keep engaging and responding until the assessment is completed and the order is served.

Ignoring a 143(2) notice is a serious mistake. The Assessing Officer proceeds to a best-judgement assessment under Section 144, estimating your income from available information, disallowing claimed deductions and usually raising a large demand with penalty under Section 270A for under-reporting, plus interest and possible prosecution. Your only remedies then are rectification or a costly appeal.

Yes. If you disagree with the assessment order, you can file an appeal before the Commissioner of Income Tax (Appeals) under Section 246A, generally within 30 days of receiving the order. However, appeals are slow and expensive — replying properly during scrutiny is almost always cheaper than litigating the resulting demand afterwards.