The notice under Section 143(2) of the Income Tax Act is issued within three months from the end of the financial year in which the return was filed, if discrepancies are found in the income tax return. Notices can be received via email, uploaded on the income tax portal, or sent by post. Procedures involve submitting arguments and documents, with different types of scrutiny possible. If the notice is ignored, penalties and legal action may follow. Additionally, the time limit for issuing the final assessment order varies based on the assessment year. Lastly, the summary includes answers to common queries related to notice u/s 143(2).
The notice under Section 143(2) can be issued after an income tax return has been filed but within a period of three months from the end of the financial year in which the return was filed.
When the income tax department finds discrepancies, minor or major, in your income tax returns, a notice will be issued under Section 143(2). The discrepancies can be under-reporting income or over-reporting losses. The notice is issued to make sure that you have not underpaid tax in any way.
What You Should Know About the Notice?
- You may receive a notice in the form of a PDF via email to your registered email address. It will also be sent to the postal address.
- Under the Faceless Assessment Scheme, income tax notices are uploaded directly on the income tax portal, which you can check by logging into your account. You will also receive an e-mail intimation and an SMS to your registered e-mail ID and registered mobile number about the issue of such notices.
- If you have not filed returns for the financial year, the assessing officer cannot issue a notice u/s 143(2). He must first issue a notice u/s 142(1), asking you to first file returns.
- For those who have filed their return, the officer can issue a 142(1) notice calling for further information basis which return has been filed which can include documents supporting the deductions, exemptions, allowances, reliefs, and other claims made while filing the returns.
- You must provide proof related to all your income sources.
- The assessing officer does a detailed enquiry.
How Does this Work?
Step 1: Your income tax return has been filed.
Step 2: A notice is issued under Section 143(2) by the assessing officer.
Step 3: You and/or your tax representative will place your arguments in front of the assessing officer and submit documents, and declarations as required.
Step 4: After considering all submissions, a final order will be passed u/s 143(3) confirming whether the income shown in the income tax return has been accepted or whether there are any further additions to the returned income. You also come to know if there is any additional tax payable.
Types of Notices u/s 143(2)
You will receive one of the following notices under Section 143(2):
Limited Scrutiny
This is a Computer-Assisted Scrutiny Selection (CASS) where cases are selected based on set parameters. These are cases with inaccurate returns information or mismatches. The scrutiny will be limited to the particular area of return mentioned in the notice such as the claim of foreign tax credit or sale of a property or mismatch of income between income shown in the income tax return and income appearing in Form 26AS.
Complete Scrutiny
Complete scrutiny will be carried out on the return filed and all supporting documents. The cases will be flagged based on CASS. Though the scope of scrutiny is not limited to this type, the assessing officer cannot verify documents beyond the particular assessment year.
Manual Scrutiny
Cases are selected for complete scrutiny based on the criteria defined by the Central Board of Direct Taxes; the criteria may vary every year.
Time Limit to Issue the Notice
The notice under Section 143(2) can be issued after an income tax return has been filed but within a period of three months from the end of the financial year in which the return was filed. For example, say, Mr Ram filed his returns on 31 July 2023 for the financial year 2022-23. The assessing officer can issue a notice under Section 143(2) only within 30 June 2024. This is because he can only issue the notice within a period of three months from the end of the financial year 2023-24, the financial year in which Mr Ram filed the returns.
What Happens if You Fail to Respond?
You cannot take the notice lightly and ignore it. If you do not respond to the department within the stipulated time period,
- You may be subject to a penalty of Rs.10,000 under Section 272A for each failure to respond.
- The assessment officer may close the assessment with the information he has with the best judgment under Section 144.
- A higher taxable income can be considered, resulting in a higher tax and penalty payable by you.
- If you choose to dispute the higher tax demand, a minimum of 20% of the tax due must be paid before you file an appeal with higher authorities.
- It may lead to prosecution; if found guilty, it may result in imprisonment.
Time Limit to Issue the Final Assessment Order
| Assessment Year (AY) | Time limit from the end of the (AY) |
| 2017-18 or before | 21 months |
| 2018-19 | 18 months |
| 2019-20 onwards | 12 months |
Taxpayers Ask Queries
What is notice u/s 143(2) of The Income Tax Act?
If the Income Tax Department finds discrepancies or mistakes in the ITR, a notice will be issued under 143(2) before issuing an assessment order under 143(3).
Is notice u/s 143(2) mandatory?
Yes. Notice u/s 143(2) is mandatory before issuing an order of scrutiny assessment u/s 143(3).
What is the time limit to issue notice u/s 143(2)?
The notice u/s 143(2) to be issued within 3 months from the end of the financial year in which the return was filed.