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Scrutiny Assessment u/s 143(2) of Income Tax Act
Reply to Income Tax Notice under section 143(2) of Incone Tax Act with Ebizfiling at INR 4130/- only.
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Scrutiny Assessment u/s 143(2) of Income Tax Act
All you need to know
What is 143(2) of income tax act?
A Notice under Section 143(2) of the Income Tax Act, 1961, in India is sent by the Income Tax Department to a taxpayer after they have submitted their income tax return. This notice lets the taxpayer know that their return will be checked, and it is part of the review process.
When is Notice u/s 143(2) is issued?
A notice under Section 143(2) of the Income Tax Act, 1961, is issued by the Income Tax Department in India after an income tax return (ITR) has been filed. This notice is typically sent for the purpose of scrutiny assessment. Here’s when and how it is generally issued:
- Filing of Return: After a taxpayer files their income tax return, the Income Tax Department processes it.
- Selection for Scrutiny: If the return is selected for scrutiny based on certain criteria (like discrepancies, high income, etc.), the department issues a notice under Section 143(2).
- Timeframe: The notice must be issued within six months from the end of the assessment year in which the return is filed. For example, if the ITR is filed for the assessment year 2022-23, the notice must be issued by September 30, 2023.
- Response Required: The notice requires the taxpayer to respond to the queries raised by the department, usually involving documentation and evidence supporting the claims made in the return.
- Assessment Process: Following the response, the assessment process continues, which may involve further notices or discussions.
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What happens if you don’t comply with the notice under Section 143(2)?
Here’s a simplified explanation of the consequences of not complying with a notice issued under Section 143(2):
- Assessment Order: If you don’t respond, the tax department may make decisions about your taxes without your input, which could lead to you owing more money.
- Best Judgment Assessment: The tax officer might estimate your income based on limited information, possibly resulting in a higher tax bill.
- Penalties: Not responding to the notice can lead to penalties, which could be up to ₹10,000 for each time you don’t comply.
- Interest on Tax Due: If you end up owing more taxes, you may also have to pay extra interest for not paying on time.
- Prosecution: In serious cases, such as deliberately ignoring notices, the tax department could take legal action, leading to fines or even jail time.
- Loss of Tax Benefits: If you can’t prove deductions or credits you claimed, you may lose those benefits and end up paying more taxes.
- Future Scrutiny: Ignoring notices can make the tax department watch your future tax returns more closely.
- Legal Action: The tax department can take legal steps to collect what you owe, like seizing your property or bank accounts.
What is the time limit for issuing a notice under Section 143(2)?
The notice must be issued within six months from the end of the assessment year in which the income tax return (ITR) was filed.
Deadline to issue the final assessment order under Section 143(2)
The assessment order must be completed within 12 months from the end of the assessment year in which the notice under Section 143(2) was issued.
what are the Types of Notices u/s 143(2)?
There are three main types of notices issued under Section 143(2) of the Income Tax Act, each serving a different purpose during the scrutiny assessment process:
- Limited Scrutiny Notice: Issued when only specific areas of the taxpayer’s return need to be examined, such as high-value transactions, unexplained deductions, or mismatches between income and expenses.
- Complete Scrutiny Notice: Issued when the entire return is subject to detailed examination. This happens if the tax department believes there are significant discrepancies in the filed return that require a thorough review.
- Manual Scrutiny Notice: Issued for cases that meet certain high-risk criteria as laid out by the tax department. These cases are manually selected for scrutiny based on risk factors like large cash transactions, international dealings, or high-income levels.
