Income Tax Scrutiny Notice —
Section 143(3) Guide
Why your return is picked for scrutiny, how to respond on the faceless e-proceedings portal, the documents you need, the deadlines that protect you and the penalties to avoid.
A notice under Section 143(2) means your ITR is selected for scrutiny, and the assessment order is finalised under Section 143(3). It is not a penalty — the department wants to verify specific items in your return. Do not ignore it. Respond through the faceless e-Proceedings facility before the deadline; non-response triggers a best-judgment assessment under Section 144, which is almost always worse.
What Is a Scrutiny Assessment Under Section 143(3)?
Scrutiny is a detailed examination of your return by the department. It is different from the automated Section 143(1) intimation that every processed return receives. A full scrutiny runs through three touchpoints:
- Section 143(2) notice — informs you the return is selected. It must be served within 6 months from the end of the financial year in which you filed.
- Section 142(1) notice — the detailed questionnaire listing specific queries, documents or accounts to be produced.
- Section 143(3) order — the final order accepting the return, or making additions to income or disallowing deductions.
Since AY 2020-21 almost all scrutiny is handled through the Faceless Assessment Scheme on the e-filing portal — you generally do not appear in person before an Assessing Officer, and hearings, if any, are conducted over video on the portal.
A 143(1) intimation is an automated summary sent for every return and is not scrutiny. A 143(3) assessment is a manual, detailed verification following a 143(2) selection notice. Getting a 143(1) is routine; getting a 143(2) means your return has actually been picked for examination.
Why Was My Return Selected for Scrutiny?
Returns are picked either by CASS (Computer Assisted Scrutiny Selection) — an algorithm that flags anomalies and third-party data mismatches — or under CBDT mandatory criteria notified each year. A notice does not imply wrongdoing; it means something needs verification.
| Selection Basis | Typical Trigger | Risk |
|---|---|---|
| CASS (algorithmic) | Large deduction claims, sharp income drop, cash deposits vs income | High |
| AIS / Form 26AS mismatch | Interest, dividend or sale in AIS not shown in the ITR | High |
| High-value transactions | Property buy/sell, big FDs, large share/MF transactions | Medium |
| Foreign assets or income | Schedule FA entries, DTAA claims, foreign remittances | High |
| CBDT mandatory criteria | Categories notified each year (trusts, survey/search cases) | Fixed |
| Third-party information | SFT from banks/registrars/SEBI, CIB intelligence inputs | Medium |
Reconciling your ITR with your AIS and Form 26AS before filing removes the most common triggers.
A limited-scrutiny 143(2) notice restricts the AO to the specific flagged item(s); the scope cannot be widened without approval. A complete-scrutiny notice opens every head of income and deduction. Read the notice to know exactly what is being questioned before you reply.
Not sure why your return was picked or what the notice covers?
Get My Notice Reviewed →How to Respond to a Scrutiny Notice
Everything happens on the e-filing portal under Pending Actions → e-Proceedings. Respond query-by-query, with evidence, before the deadline shown in the notice.
- Log in to the income-tax portal (eportal.incometax.gov.in) and open e-Proceedings to see every pending notice and its deadline.
- Read each query carefully and list the exact items the AO is questioning — do not reply generically.
- Gather documents for each query (bank statements, Form 16, investment proofs, capital-gains working, property papers), organised query-wise.
- Draft a written reply per query — state the facts, cite the relevant section, attach the evidence, keep the tone factual.
- Upload and submit the response before the deadline and save the acknowledgement.
- Attend the video hearing if scheduled and answer any follow-up within the given time.
- Review the draft order (show-cause) if issued — you can object before the final 143(3) order is passed.
Documents to keep ready
- Bank statements for all accounts
- Salary slips & Form 16
- 80C / 80D and other deduction proofs
- Capital-gains computation & contract notes
- Property purchase / sale deeds
- Books of accounts & balance sheet
- AIS / Form 26AS reconciliation
- Foreign income & Schedule FA details
- Loan & interest certificates
- High-value transaction proofs
If you do not respond, the AO passes a best-judgment assessment under Section 144 — your income is estimated as the officer sees fit, usually with large additions and penalties. Always file a reply, even a partial one, before the deadline, and seek an adjournment on the portal if you need more time.
Facing a detailed questionnaire or a large proposed addition?
Get Expert Representation →Penalties If Scrutiny Ends in a Tax Demand
If the assessment adds to your income, penalty and interest can apply on top of the extra tax. The severity depends on whether the department treats it as under-reporting or intentional misreporting.
| Nature of Addition | Provision | Penalty |
|---|---|---|
| Under-reporting of income (bona fide) | Section 270A | 50% of tax |
| Misreporting of income (intentional) | Section 270A | 200% of tax |
| Failure to maintain books | Section 271A | Up to ₹25,000 |
| Interest on additional tax | Sections 234A/B/C | 1% per month |
| Ex-parte best-judgment order | Section 144 | AO’s estimate |
Penalty under Section 270A is charged on the tax on the under/mis-reported income, not on the income itself. Sections cited are from the Income-tax Act, 2025 framework applicable from AY 2026-27; verify on the portal for your year.
A 143(2) notice served after 6 months from the end of the FY of filing is time-barred, and the 143(3) order must be passed within 12 months from the end of the assessment year. If a notice reaches you outside these windows, flag it — a time-barred assessment can be challenged.
How to Reduce the Chance of a Scrutiny Notice
- Reconcile the ITR with AIS & Form 26AS before filing
- Declare all bank interest, even under ₹10,000
- Report every capital gain and loss on shares / MF
- Claim deductions only with valid proofs
- Maintain books if you run a business or profession
- File the ITR before the due date
- Disclose foreign assets in Schedule FA accurately
Most scrutiny triggers are simple mismatches. Use the income tax calculator and a careful AIS reconciliation before you file, and check the current slabs so your tax working matches your return.
Income Tax Scrutiny — Frequently Asked Questions
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