Notice u/s 143(2) for Income tax scrutiny assessment

Receiving a notice from the income tax department, particularly under Section 143(2) of the Income Tax Act, 1961 can be unsettling for any taxpayer. This notice signifies that the tax authorities have identified certain issues in your Income tax return  (ITR) on which further clarification is required and intend to conduct a scrutiny assessment u/s 143(3). In this article, we will discuss all about Sec 143(2) notice issued under Faceless Assessment scheme, about assessment order, timelines to issue notice and order etc.

1. What is Notice u/s 143(2) and why you have received this notice?

When the department select your Income tax return for detailed scrutiny assessment u/s 143(3), they issue a notice under Section 143(2). The scrutiny assessment is carried out by department to confirm the correctness and genuineness of various deductions, claims etc. made by the taxpayer in the ITR. Common reasons for receiving Notice u/s 143(2) such as Errors related to TDS, under-reporting of income, over-reporting of losses, mismatches in income figures, incorrect claims for deductions or exemptions, High value transactions, defects in ITR or sometimes general issues on which clarification is required. It serves as a preliminary step before the final assessment under Section 143(3) is conducted. The assessment unit may request documents and proofs related to your income sources, deductions, exemptions, and other claims made in your return by issuing questionnaire notice u/s 142(1).

Under the Faceless Assessment Scheme, notices are uploaded directly on the income tax portal, with intimation sent through email and SMS. However, it may also be sent to your postal address. To download notice u/s 143(2), follow the following steps:

• Navigate to Income tax portal (https://eportal.incometax.gov.in/iec/foservices/#/login), login the portal with your credentials.
• Go to Pending action tab and click on e-Proceedings tab
• Look for Assessment Proceeding u/s 143(3) tab for your relevant assessment year (AY) and click on View Notices/Orders
• Inside this tab, you will find notice issued under section 143(2) and order issued u/s 143(3)
• Click on Notice/Letter pdf and then click on Download button to download the notice or order.

2. Time limit to issue notice u/s 143(2)

The notice under Section 143(2) must be issued within three months from the end of the financial year in which the tax return is filed.

Time Limit to issue notice u/s 143(2)

Time limit to issue notice u/s 143(2)

3 months from the end of the financial year (FY) in which ITR is filed

For example, the assessee has filed his return for FY 2022-23 in June’23 i.e in FY 2023-24 then time limit to issue notice u/s 143(2) in this example is within 3 months from end of FY 2023-24 i.e 30th June 2024.

3. How to Respond to a Notice issued u/s 143(2)?

Responding to the notice promptly and accurately is crucial to avoid penalties and ensure a fair assessment. Normally, The taxpayer is allowed 15 days’ time to respond to the notice issued under section 143(2) or section 142(1). Here are the major points to note while responding to notice issued u/s 143(2) or 142(1) for faceless scrutiny assessment:

• First step is to check if any specific discrepancies or issues highlighted by the income tax department and gather all relevant documents.
• If you have not received Sec 142(1) questionnaire notice then you may ask the department to issue such questionnaire for specific documents or clarification needed.
• Draft a comprehensive response addressing each point mentioned in the notice.
• Provide explanations supported by documents to clarify any discrepancies identified by the department.
• Submit your response along with all supporting documents to the income tax department within the stipulated timeframe mentioned in the notice under e-proceedings tab of e-filing portal.
• Keep track of any further communications or requirements from the department as in scrutiny assessment department issues many notices to seek clarifications.

To file online response to notice u/s 143(2), follow the following steps:

• Navigate to Income tax portal (https://eportal.incometax.gov.in/iec/foservices/#/login), login the portal with your credentials.
• Go to Pending action tab and click on e-Proceedings tab
• Look for Assessment Proceeding u/s 143(3) tab for your relevant assessment year (AY) and click on View Notices/Orders.
• Inside this tab, you will find notice issued under section 143(2) and order issued u/s 143(3)
• Click on Submit response button and then click on continue
• Inside this tab, select Partial response or full response as per available data and add written response/remarks, attach supporting documents.

4. What are the consequences of not complying with the notice issued u/s 143(2)?

If you receive a notice from the Income Tax Department, you should always reply to it and never ignore it. Failure to respond to the notice within the specified timeframe can lead to serious consequences, you may be liable for the following:

Penalties: A penalty of Rs. 10,000 may be imposed under Section 272A for each failure to respond.

Best judgment assessment u/s 144 can be made based on available information by assessing officer, potentially resulting in a higher taxable income and additional tax liabilities.

Legal Consequences: Non-compliance could lead to prosecution, including imprisonment in severe cases.

5. Time limit to issue final assessment order u/s 143(3)

The assessment unit shall evaluate the assessee’s Income tax return and evidences provided by the taxpayer to ensure the accuracy and correctness of the information and shall complete the scrutiny assessment determining Total Income and Tax liability within the timeline specified under section 153 and shall pass the final assessment order u/s 143(3). During scrutiny process, the assessing officer gives opportunity of being heard to assessee to submit clarification, supporting documents or evidences in support to their Income tax return.

Time Limits specified u/s 153 for completion of assessment u/s 143(3) are as below

For the AY 2017-18 or before	21 months from the end of the relevant assessment year (AY)
For the AY 2018-19	18 months from the end of the relevant assessment year  (AY)
For the AY 2019-20 onwards	12 months from the end of the relevant assessment year  (AY)

Note : For the purpose of completion of assessment u/s 143(3) in case of an updated return filed under section 139(8A), the time limit of 12 months shall be counted from the end of the financial year (FY) in which the updated return was filed.

Don’t panic when you receive a notice under section 143(2). If you have filed correct information in your ITR then you will not face any consequences. You just have to prove the genuineness of the information through a detailed response and documentary evidences. File an accurate response to ensure compliance with tax regulations and mitigate any potential penalties or legal actions. Remember, timely compliance and transparency are key to resolving any issues raised by the income tax department.

By: CA PINKY JAIN

C P Agrawal and Associates