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Income Tax Notice u/s 143(2) for Scrutiny Assessment u/s 143(3)

Taxation in India

Income Tax Notice u/s 143(2) for Scrutiny Assessment u/s 143(3)

The Income Tax notice u/s 143(2) is issued with the aim of ensuring that the taxpayers have not understated any income or shown excessive loss or have not paid lower tax. To carry out an assessment under section 143(3), the Assessing Officer shall serve notice in accordance with provisions of section 143(2). The Assessment u/s- 143(3) is a scrutiny assessment, and a detailed assessment is carried out at this stage. Moreover, notice u/s 143(2) can only be issued if the taxpayer has filed an income tax return.

When is notice u/s 143(2) issued?

Notice u/s 143(2) is issued to you by the Income Tax Department when your Income Tax Return is selected for scrutiny assessment or detailed assessment u/s 143(3).

In simple words, Scrutiny assessment or detailed assessment u/s 143(3) means scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by you in your Income Tax Return. The basic purpose of this scrutiny assessment is to ensure that you have filed the return with the correct income and paid the tax accordingly.

The objective of this scrutiny is to check that:

  • You have not understated your income
  • You have not computed excessive loss
  • You have not underpaid the tax in any manner

So, we can conclude to carry out scrutiny u/s 143(3) of the Income Tax Act, notice u/s 143(2) is issued by the Income Tax Department.

What is the time limit for issuance of notice u/s 143(2)?

A notice u/s 143(2) for scrutiny assessment can only be issued up to a period of three months from the end of the financial year in which you furnished the return. (before 1 st April 2021, the limit was six months from the end of the financial year)

For example, Ms Sharma filed her return on 25.07.2022 for the financial year 2021-2022. In such a case, the notice u/s 143(2) can be issued to Ms. Sharma only up to 30.06.2023(being the end of three months period from FY 2022-2023 in which the said return was filed).

So how does notice u/s- 143(2) work?

Step 1 A notice u/s 143(2) is issued to you by the AO within 3 months from the end of FY in which a return was filed to carry out scrutiny of your income tax return u/s 143(3).

Step 2 You or your tax representative will appear before the AO to place your arguments and evidence as required by the assessing officer.
Alternatively, you can submit an online response to notice u/s 143(2) by uploading your evidence and arguments.

Step 3 After hearing all the evidence, as produced by the assessee as per notice u/s 143(2), AO will pass an assessment order determining the total tax payable or refund to the assessee after taking into account produced evidence.

What is the final order u/s 143(3)?

If notice u/s 143(2) was issued upon you by the AO for the production of evidence on the specified day and after taking into account such evidence and hearing the same, the AO will assess your total income or loss and also determine any sum payable by you or due to you bypassing the order u/s 143(3).

Is there any time limit for issuance of the final assessment order u/s 143(3)?

Time Limits are as below as per section 153
* For Assessment year 2017-18 or before21 months from the end of the assessment year
* For Assessment year 2018-1918 months from the end of the assessment year
* For the Assessment year 2020-21 and 2021-2212 months from the end of the assessment year

For example, Mr ABC filed his return on 25.07.2019 for the financial year 2018-19. In such a case, the notice u/s 143(2) issued to Mr. ABC on 30.09.2020 begins at the end of six months of 2019-20 in which the said return was filed. Now, order u/s 143 (3) can be issued up to 31.03.2021, the end of 12 months from the end of the A.Y. 2019-20.

How will I receive this notice u/s 143(2)?

Generally, you will receive this notice via email in a PDF format on your email id registered with the Income Tax Department. However, it will also be sent to your postal address.

If I haven’t filed my return, will I get a notice u/s 143(2)?

No, since you furnished no return, a notice u/s 143(2) cannot be issued to you, and no scrutiny of your records can be done. In such a case, section 144 shall apply to you for the best judgment assessment of your records. Also, an assessment can be done as per the provisions of section 147 in this case.

What are the consequences of not complying with the notice issued u/s 143(2)?

If you receive a notice from the Income Tax Department, you should always reply to it and never ignore it. But in case of any such default, you may be liable for the following:

  • Penalty u/s 271(1)(b) amounting to Rs. 10,000 and even prosecution. However, for the A.Y commencing on or after the 1st day of April 2017 the penalty shall be levied in Sec 272A(1).
  • The best judgment assessment u/s 144 can be made.

Is the notice u/s 143(2) a consequence of notice u/s 142(1)?

A notice is issued to you u/s 142(1) for the production of books of accounts, income statement, and statement of assets and liabilities for preliminary investigation. If the AO is not satisfied with the information you reproduce, a notice u/s 143(2) may be issued to you for scrutiny of accounts.
Also, practically it is seen that whenever a taxpayer receives notice u/s 143(2), he also receives notice u/s 142(1) for submission of the necessary information/papers.

 

 

Frequently Asked Questions

▶What is the procedure adopted for making the assessment under section 143(3) i.e., scrutiny assessment?

Tax officer would perform tests and processes to confirm the correctness and genuineness of various claims, deductions, etc. made by the taxpayer in the income tax return, and to initiate a scrutiny assessment, the Income Tax officer must first issue an income tax notice u/s 143(2). The time limit to issue notice is three months from the end of the relevant F.Y. in which the return is filed.

▶What is limited scrutiny?

Limited Scrutiny cases shall remain confined only to the specific reasons/issues for which the case has been picked up for scrutiny.

▶What is the assessment order u/s 143 (3)?

This is a comprehensive assessment known as a scrutiny assessment. A careful examination of the return of income will be performed at this step to validate the veracity and credibility of numerous claims, deductions, and so on made by the taxpayer in the return of income.

▶What is the meaning of intimation u/s 143 (1)?

Assessment under section 143(1) is a preliminary review of an income tax return. At this point, no comprehensive assessment of the income return is performed. A summary assessment under Section 143(1) can be completed without calling the assessee.

▶What is the time limit for the notice of scrutiny assessment 143(2)?

The time limit is only up to a period of 3 months from the end of the financial year in which the assessee filed his return.

▶What happens if I don’t respond to the notice within 30 days?

If you do not answer within 30 days, your income tax return will be processed after making the relevant adjustments for which the notice has been sent. The assessing officer may close the assessment with the information he has with the best judgment under Section 144.

Disclaimer: This tax consultancy article is for educational purposes only. It does not constitute personalized tax advice. For specific tax situations, consult a qualified tax professional or contact Qualified Munim Team at qualifiedmunim@gmail.com or +91-74199-00446. Visit www.qualifiedmunim.com. We are not liable for any actions taken based on this information.

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