The Income Tax notice under section 143(2) is sent to make sure that taxpayers haven’t reported less income, claimed too many losses, or paid too little tax.
To start an assessment under section 143(3), the tax officer must send this notice according to the rules of section 143(2). This assessment is more detailed and thorough. Importantly, a notice under section 143(2) can only be sent if the taxpayer has filed a tax return.
In this article, we will look at why you might get an income tax notice under section 143(2), what it means, and how you should respond to it.
What does a notice under section 143(2) mean for a taxpayer?
When the income tax department finds mistakes in your tax return (ITR), whether they are small or large, it can send you a notice under section 143(2). These mistakes might include reporting less income than you actually earned or claiming more losses than you should.
This notice indicates that the tax authorities want to take a closer look at your tax return. Essentially, it means they have found specific issues that you need to explain further. The purpose of this scrutiny is to check if the deductions you claimed are accurate and legitimate.
When is a tax notice under section 143(2) issued to a taxpayer?
A notice under section 143(2) is sent by the Income Tax Department when your Income Tax Return (ITR) is chosen for a closer examination, known as a scrutiny assessment or detailed assessment under section 143(3).
In simple terms, this means the tax authorities want to check the accuracy of the claims and deductions you made in your tax return. The main goal of this scrutiny is to ensure that you reported your income correctly and paid the right amount of tax.
The reasons for this scrutiny include:
- Checking that you haven’t reported less income than you earned.
- Ensuring you didn’t claim more losses than you should.
- Verifying that you haven’t underpaid your taxes.
- Looking for any mismatches in your income figures.
- Reviewing any high-value transactions.
- Identifying any other errors in your tax return.
To sum up, the Income Tax Department issues a notice under section 143(2) to begin the scrutiny process under section 143(3). This notice can be sent within three months after the end of the financial year.
For example, if you filed your ITR on July 31, 2024, the financial year 2024-2025 ends on March 31, 2025. Therefore, the notice under section 143(2) can be issued until June 30, 2025. After that date, they cannot issue this notice for that financial year.
What is the maximum time limit for issuing a notice under section 143(2)?
A notice under section 143(2) of the Income Tax Act for a scrutiny assessment can only be issued within three months after the end of the financial year in which you submitted your tax return.
For example, if you filed your return for the financial year that ended on March 31, 2025, the notice must be sent by June 30, 2025.
It’s important to note that before April 1, 2021, this time limit was six months instead of three.
What should a taxpayer know about a tax notice under section 143(2)?
- Format of the Notice: You might receive the notice in PDF format through email.
- Filing Requirement: If you haven’t filed your Income Tax Return (ITR), you won’t receive a notice under section 143(2). Before that, the assessing officer will send a notice under section 142(1), asking you to file your return.
- Faceless Assessment Scheme: Under this scheme, income tax notices are directly uploaded to the income tax portal. You can check these notices by logging into your account. You’ll also get an email notification and an SMS when a notice is issued.
- Document Submission: After receiving a notice under section 143(2), you need to provide all documents that support your deductions, reliefs, allowances, exemptions, and any other claims you made in your return.
- Proof of Income: You must show evidence for all sources of income you reported.
- Detailed Inquiry: The assessing officer will conduct a thorough investigation based on the notice you received.
Understanding these points will help you respond appropriately to the notice.
How does a tax notice under section 143(2) work in India?
Step 1: The Assessing Officer (AO) sends you a notice under section 143(2) within three months after the end of the financial year in which you filed your tax return. This notice is for a detailed examination of your income tax return under section 143(3).
Step 2: You or your tax representative must meet with the AO to present your arguments and provide any necessary evidence. Alternatively, you can respond online by uploading your evidence and arguments directly to the tax portal.
Step 3: After reviewing all the evidence you provided in response to the notice under section 143(2), the AO will issue an assessment order. This order will determine how much tax you owe or if you are due a refund, based on the evidence presented.
This process ensures that your tax return is thoroughly reviewed and any discrepancies are addressed.
What is the final order under section 143(3)?
When the Assessing Officer (AO) issues a notice under section 143(2), they ask you to provide evidence on a specific date. After reviewing the evidence you present and listening to your explanations, the AO will assess your total income or loss. They will then issue a final order under section 143(3) that states how much tax you owe or if you are due a refund.
Is there a time limit for issuing the final assessment order under section 143(3)?
Yes, there is a time limit for issuing the final assessment order. A notice under section 143(2) can be issued after you file your income tax return, but it must be done within three months after 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 AO can issue a notice under section 143(2) until June 30, 2024. This is because the notice must be issued within three months from the end of the financial year 2023-24.
Additionally, the time limits for final assessment orders are as follows:
- For the assessment year 2017-18 or earlier: 21 months
- For the assessment year 2018-19: 18 months
- For the assessment year 2019-20 and onwards: 12 months
These time limits help ensure that assessments are completed in a timely manner.
What are the types of notices under section 143(2) that can be issued?
Limited Scrutiny
This type involves cases selected through a system called Computer-Assisted Scrutiny Selection (CASS).
Only cases with specific issues, like inaccuracies in returns or mismatched information, are chosen.
The scrutiny focuses on a limited area specified in the notice, such as the sale of a property or claims for foreign tax credits.
Complete Scrutiny
This involves a thorough review of the entire Income Tax Return (ITR), including all supporting documents.
These cases are also identified by CASS.
The scope can extend to checking past years’ returns to ensure accuracy.
Manual Scrutiny
In this case, the scrutiny is based on criteria set by the Central Board of Direct Taxes (CBDT).
The parameters for selection can change from year to year, meaning different criteria may apply each time.
Each type of scrutiny serves to ensure that tax returns are accurate and comply with the law.
FAQs on Notice Under Section 143(2) for Scrutiny Assessment
How will I receive this notice?
You will typically get the notice via email as a PDF sent to the email you registered with the Income Tax Department. It will also be mailed to your home address.
What if I haven’t filed my tax return? Will I still get a notice?
No, you won’t receive a notice under Section 143(2) if you haven’t filed a return. In this case, the department may assess your taxes based on available information under different rules.
What happens if I ignore the notice?
It’s important to respond to any notice you receive. Ignoring it could lead to penalties of up to ₹10,000 and possibly legal action. The department may also assess your taxes based on their best judgment.
Is the Section 143(2) notice related to Section 142(1)?
Yes, a notice under Section 142(1) is typically sent first to ask for your financial records. If the tax officer has further concerns, they will then send you a notice under Section 143(2) to review your accounts more closely.
What does it mean if I receive a notice under Section 143(2)?
Receiving this notice means the tax authorities have found issues in your tax return and want to investigate further.
What’s the time limit for issuing a Section 143(2) notice?
The notice must be issued within three months after the end of the financial year in which you filed your tax return.
What is the process for scrutiny assessment under Section 143(3)?
The tax officer will examine your claims and deductions in detail. They will first send you a notice under Section 143(2) before starting this process.
What is limited scrutiny?
Limited scrutiny means the review will only focus on specific issues identified by the tax authorities.
What is the assessment order under Section 143(3)?
This is a detailed review of your tax return to verify the accuracy of your claims and deductions.
What is the meaning of intimation under Section 143(1)?
This is an initial review of your tax return that summarizes the assessment without an in-depth examination.
What happens if I don’t respond to the notice within 30 days?
If you fail to respond, the tax department may proceed with processing your return and could make adjustments based on their own judgment.
Is the notice under Section 143(2) mandatory?
Yes, this notice must be issued before the tax department can conduct a detailed assessment under Section 143(3).
