A notice under section 143(2) of the Income-tax Act, 1961 means your return has been selected for scrutiny assessment. It is not an allegation of wrongdoing, but it does mean the department will examine the return in detail, and the outcome depends heavily on how well you respond. This guide explains what to do from the day the notice arrives.
What a section 143(2) notice means
Returns are selected for scrutiny either through computer-assisted selection (CASS), based on risk parameters and data mismatches, or under compulsory selection criteria notified by the CBDT. The notice will state whether the scrutiny is limited — confined to specific issues such as a large cash deposit or a capital gain — or complete, covering the entire return.
A 143(2) notice must be served within three months from the end of the financial year in which the return was filed. A notice served after this period is invalid, and the resulting assessment can be challenged.
How faceless assessment works
Most scrutiny assessments are now conducted under the faceless assessment scheme in section 144B. You will not meet an officer. Notices are issued by the National Faceless Assessment Centre and appear in the e-Proceedings tab of the income tax e-filing portal, with an email and SMS alert. Replies and documents are uploaded online. You can request a personal hearing through video conference, particularly when an adverse addition is proposed.
The 143(2) notice is usually followed by one or more notices under section 142(1) asking for specific information and documents.
Step-by-step: preparing your reply
- Check the notice. Confirm the assessment year, the section, the Document Identification Number (DIN) and the date of service. A notice without a valid DIN is treated as invalid under CBDT instructions.
- Note the deadline. Replies are usually due within 7 to 15 days. If you need more time, request an adjournment on the portal before the due date, giving reasons.
- Identify the issues. For limited scrutiny, the reasons for selection are stated in the notice. Your reply should stay within those issues.
- Reconcile with the department's data. Compare your return with the Annual Information Statement (AIS), TIS and Form 26AS. Most scrutiny questions arise from transactions reported by banks, registrars and other parties.
- Collect evidence. Bank statements, purchase and sale deeds, contract notes, loan confirmations, invoices, books of account — whatever explains each transaction.
- Draft a point-wise reply. Answer each question separately, refer to the supporting documents by annexure number, and explain the legal position where relevant, with case law.
- Respond to the show cause notice. Before making any addition, the faceless assessment unit must issue a show cause notice with a draft order. This is your last opportunity to present your case before the order, so treat it with the same care as the first reply.
Common mistakes to avoid
- Ignoring the notice. Non-compliance can lead to a best judgment assessment under section 144 and a penalty of ₹10,000 for each failure under section 272A(1)(d).
- Uploading documents without explanation. A bundle of bank statements does not explain a cash deposit; a clear note linking the documents to the question does.
- Going beyond the scope of limited scrutiny. Volunteering unrelated information can widen the inquiry.
- Accepting additions without considering penalty. Additions can lead to penalty proceedings for under-reporting (50% of the tax) or misreporting (200%). Every concession should be made with the penalty consequences in mind.
Time limit for completing the assessment
For assessment year 2022-23 onwards, a scrutiny assessment must generally be completed within 12 months from the end of the assessment year. An order passed after the time limit is barred by limitation.
If the order goes against you
You can appeal to the Commissioner of Income Tax (Appeals) within 30 days, and apply for a stay of the demand. Read our guide to what an assessment order means and how an appeal works.
ASKN & Co. LLP drafts replies and represents taxpayers in scrutiny and faceless assessments — see our income tax notice reply service.
Frequently asked questions
What is the time limit for issuing a notice under section 143(2)?
The notice must be served within three months from the end of the financial year in which the return was filed. A notice served later is invalid.
What is the difference between limited and complete scrutiny?
Limited scrutiny examines only the specific issues stated in the notice. Complete scrutiny covers the entire return.
What happens if I don't reply to a section 143(2) notice?
The Assessing Officer can make a best judgment assessment under section 144, and a penalty of ₹10,000 can be levied for each failure under section 272A(1)(d).
How long does a scrutiny assessment take?
For assessment year 2022-23 onwards, the assessment must generally be completed within 12 months from the end of the assessment year.
Section references are to the Income-tax Act, 1961, which continues to govern assessments for tax years up to 2025-26 (assessment year 2026-27).
This article is general information based on the law as at the date shown and is not professional advice. Please consult us before acting on it.