How to Respond to Notice Under Section 143(2)?

If you receive a notice under section 143(2), it means that the income tax department has selected your returns for detailed scrutiny. Either the assessing officer has not received any documents, or he or she is not satisfactory with provided documents. Notice itself does not mean that you have evaded taxes, but the department seeks additional clarifications and explanations through notice. It is to ensure that there is no underreporting of income, errors and discrepancies or fake deductions. Learn more to understand the grounds of issue of notice under section 143(2) and how to respond to the same.

What Does a Notice Sent u/s 143(2) Mean?

When the income tax department finds discrepancies, minor or major, in your income tax returns, an intimation is received under section 142(1) before notice under Section 143(2). If the response is not sent to inquiry, or the response is not satisfactory, notice under section 143(2) is sent by the assessing officer. The discrepancies can be under-reporting income, over-reporting losses, or claiming excessive deductions. Receiving notice does not mean that the you are guilty, but to make sure that you have not underpaid tax in any way. 

Why is Notice under section 143(2) issued?

As already explained, notice under section 143(2) is issued when the assessing officer suspects discrepancy. The following are some of the illustrative situations wherein a notice under section 143(2) can be issued:

• Major mismatch between Form 26AS (or) AIS and the ITR filed
• Turnover as per GST records not matching with turnover as per tax audit report
• Amount of deduction claimed is disproportionate to the level of income earned.
• High value transactions as per Form 26AS not disclosed in return of income.
• Property sale transactions as per records of the registrar not disclosed in the return of income.

It is to be noted that in the recent times, the income tax department has access to numerous digital transactions carried out or related to the taxpayer. Through advanced data analytic techniques and artificial intelligence, suspicious returns are flagged and selected for detailed scrutiny. 

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 within a period of three months from the end of the financial year in which the return was filed. 
• For example, say, Mr. Jaideep filed his returns on 31 July 20254 for the financial year 2024-25 . The assessing officer can issue a notice under Section 143(2) only within 30 June 2026 . This is because he can only issue the notice within a period of three months from the end of the financial year , the financial year in which Mr. Jaideep filed the returns.

What should I do after Receiving Notice u/s 143(2)?

• 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.

Step-by-Step Response Process

1. Login to your income tax portal.
2. Go to Worklist> E proceedings.
3. Choose the notice to respond, and click on ‘View Notice’
4. Click on ‘Submit Response’.
5. You can either select ‘Agree’ or ‘Disagree’.
6. If you agree to the notice, you can upload the JSON file of ITR generated by offline utility and submit.
7. If you disagree, choose the reason for disagree and submit.  

You will receive a successful submit dialogue box with the transaction number.

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