How to Deal with a Scrutiny Assessment Notice? | H&R Block
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How to Deal with Scrutiny Assessment Notice?

Income Tax Scrutiny

Ever received a random scrutiny notice from the Income Tax Department. Notice under section 143(2) commonly known as Scrutiny Assessment Notice can be sent to any taxpayer if the tax department has doubts about the income of individual. Any notice from IT-department can invoke panic among taxpayers but really there is no reason to worry if you go by the book. Assessment u/s 143(3) is a detailed process so you can expect to take some time to complete. During the scrutiny assessment, the concerned Assessing Officer will try to find out whether the reported income, deductions and claims, etc. made by you in your tax return are genuine and correct.

Why me?

Every year IT-department sends scrutiny notices to several taxpayers where they consider it necessary to ensure that taxes paid by the taxpayer are not less than the actual tax liability or they have not understated the income or overstated the losses. However, merely receiving a notice for scrutiny does not attach a criminal tag with your name. Purpose of Scrutiny Assessment under this section is many a time to create a deterrence in the minds of wrongdoers by showing that someone is watching them.

Time limit

Income Tax Department does not pick up any Income Tax Return e-filed in the distant past for scrutiny. It can pick an ITR within 6 months after the end of Financial Year in which ITR was filed. For example if return was submitted on 30th June 2015, notice under section 143(2) can be issued by 30th September 2016, which is 6 months from the end of 31st March 2016 (end of FY 2015-16 in which return is submitted).

Although, it is not allowed to send such notice after the time limit has elapsed, you may still end up receiving a delayed notice from the tax department. It may come as a surprise for you but if you do not bring such incident to light or simply start responding to the requirements, the delayed notice will become a valid one. Even though it is uncommon, it is important to inform tax officers if you received a delayed notice to avoid scrutiny.

Type of Notices issued u/s.143(2)

Scrutiny notice under this section can be classified in three types as under

  1. Limited Scrutiny
  2. Complete Scrutiny
  3. Manual Scrutiny

What to do?

Through the notice, the IT-department will ask you to present yourself in front of an officer on a specific day. In case of limited scrutiny you may not have to submit all the bulky records, but in case of manual selection or complete scrutiny you will be asked to bring an exhaustive list of documents related to your income and expenses such as credit card statements, bank account details, documents about gifts sent/received and several other things. If you do not have a good understanding of Income Tax rules and laws, you can avail the services of a tax professional (CA) who can represent you on your behalf and make the whole process seamless for you. In case you do not have access to some of the documents asked, you must convey the information regarding the same properly to the tax department.

What if I don’t comply?

If the IT department has chosen your return for scrutiny, then offering your full co-operation is a wise thing to do. Failing to do so allows your jurisdictional Assessing Officer to complete your scrutiny assessment on ‘Best Judgement’ basis which means that the department can confirm the assessment and finalize your income and tax liability thereon as they deem fit, on the basis of information available to them. Even after this, you can be given an opportunity to be heard but in most cases it becomes redundant for not choosing to respond in the first place.  Penalty of Rs 10,000 may also be applicable [as per section 271(b)] for failing to comply with the notice. As a result, you will have to face the consequences of the assessment like paying extra tax and penalty. Since this will put you in bad light with the tax department, you may even become a target of much more excruciating form of assessment called a ‘Survey’.


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Niteesh Singh
Niteesh Singh
Niteesh works as a Tax Researcher at H&R Block India. He makes taxes easy to understand for people. He creates content for the website, marketing activities and social media. He carries experience in creating a wide variety of content like blogs, press releases, research papers, etc.

1 Comment

  1. karan says:


    Can someone explain the whole process of replying u/s 143(2) notice. I want to know that if one complies and goes/attend every hearing and give them all the records required. What next is done by AO? In what time they clear you.

    and if they find that one has understated his income, what they do next? and what remedies will be available to me to challenge any such allegation?


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