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Responding to Notice under section 143(2) of Income Tax Act

Last Update Date : April 30, 2019
Estimated Read Time: 4 min

We all deserve second chances in life, as it allows us the opportunity to redeem ourselves, when some wrong has been done. A notice issued under section 143(2) of Income Tax Act is your second chance from the Tax Department, who upon receiving your tax return has found minor or major discrepancies in either under reporting of income or over reporting of losses. Recipients of this notice may find themselves having to appear for a hearing to defend themselves with supporting proof. Failure to take this notice seriously will result in hefty penalties and in severe instances imprisonment.

What is notice under section 143(2)?

If you get notice under section 143(2), it means your return has been selected for scrutiny by your Assessing Officer.

notice under section 143 2 of income tax act

Here are some important facts you should know about scrutiny notice:

  • This notice can be served up to the expiry of six months from the end of the Financial Year in which the return is furnished.
  • If you have not furnished your return of income, the Assessing Officer (AO) cannot straight away issue a notice u/s 143(2).  Your AO will first need to issue a notice u/s 142(1), asking you to file your tax return and if you fail to respond to this notice, then the AO will issue a “Best Judgement Assessment” u/s 144 based on the information available to him/her.
  • The notice u/s 143(2) might ask you to produce documents in support of deductions, exemptions, allowances, reliefs, other claims of loss you have made and provide proof of all sources of income.
  • Section 143(2) enables the Assessing Officer to make a regular assessment after a detailed inquiry.

[ Read: Notice under section 143(1) ]

How can H&R Block help you?

Receiving a scrutiny notice is never a pleasant experience and failure to respond to it correctly can result in further proceedings or penalties.  To ensure any notices you receive are handled with care and attention to detail, consult your personal tax experts at H&R Block India to get instant tax notice assistance.

Types of Notices u/s 143(2)

When you receive a notice under this section, it will be one of the following three: (links with examples for each notice)

  • Limited Scrutiny (CASS – Computer Assisted Scrutiny Selection) – Cases where the Income Tax Department(ITD), as per the preset parameters has flagged your return for limited scrutiny due to mismatches or inaccurate reporting. In this case the scope of the scrutiny will be restricted to the particular area of your return mentioned in the notice (Ex. Claim of foreign tax credit, sale of property).
  • Complete Scrutiny (CASS – Computer Assisted Scrutiny Selection) – These are cases where there will be a complete scrutiny of the return filed and all related documents. The scope is not restricted here but the AO usually cannot go beyond the particular assessment year.
  • Manual Scrutiny – Specific cases are selected for detailed scrutiny, based on predefined criteria issued every year by the CBDT.

To download the copy of the criteria click here.

Revised Procedure For Issuing Notice under section 143(2) of Income Tax Act

Last year, the procedure for issuing notices u/s 143(2) was changed to electronic mode.  Whatever documents/proof are requested by your AO, you must submit them online at the e-filing portal.  All scrutiny proceedings will be conducted online from now on, except in the following situations:

  • Examination of book of accounts
  • Third party investigations need to be carried out
  • Examination of witnesses
  • Personal hearing request by the taxpayer to explain his/her case

Click here for circular.

Validity of Notice

As per section 292BB, the scrutiny assessment notice served will be valid if no objections are raised for:

  • Notice not served
  • Improper issuance of notice
  • Invalid Service

However, the objection must be raised before the start of the proceedings, then it will be held valid. Additionally, once the proceedings are complete no objections can be raised.

Consequences of Failure to Respond

Consequences of not responding to notices u/s 143(2) can be very grave. In addition to a penalty of Rs. 10,000 u/s 272A for each failure to respond, the officer can complete the best judgement assessment u/s 144 based on the information with him. This may also result in increasing your taxable income which in turn can result in huge taxes and penalties payable by you. If you choose to subsequently dispute this tax demand you will be required to pay at least 20% of the taxes due before you can file an appeal with any higher authorities. And in rare circumstances it may lead to prosecution and if found guilty then imprisonment too.

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CA Shreya Oturkar
Shreya is a tax advisor at H&R Block (India) with intensive experience in SME taxation and audit. She holds an advanced post graduate qualification in accounting and is highly skilled in financial analysis and reporting. Apart from her professional achievements, Shreya is a talented artist with a flair for free-hand sketching!

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