Few words in an income tax communication create as much concern as “scrutiny assessment.”
If you have received a notice under Section 143(2), it is natural to wonder whether the Income Tax Department believes your ITR is incorrect.
The answer is not necessarily.
A scrutiny notice means that the return has been selected for examination under the statutory assessment process. It gives the department an opportunity to examine particular information, claims or aspects of the return.
For the taxpayer, the most important thing is to respond accurately, completely and within the prescribed timeline.
What Is a Section 143(2) Notice?
Section 143(2) of the Income-tax Act, 1961 provides for a notice where the Assessing Officer considers it necessary to ensure that the taxpayer has not understated income, claimed excessive loss, underpaid tax or otherwise requires examination under the scrutiny process.
A 143(2) notice is therefore different from a routine 143(1) processing intimation.
The Income Tax Department has confirmed that scrutiny proceedings for AY 2026–27 and earlier continue under the Income-tax Act, 1961 even after the new Income-tax Act, 2025 came into force.
Does Receiving a Scrutiny Notice Mean You Have Done Something Wrong?
No.
Selection for scrutiny does not automatically establish tax evasion, concealment or an incorrect return.
The purpose of scrutiny is examination.
The department may want clarification regarding a particular transaction, deduction, income source, capital gain, business expense or other item.
A taxpayer with a completely correct return can still receive a scrutiny notice.
The correct response is therefore not panic, but documentation.
Why Can an ITR Be Selected for Scrutiny?
Returns can be selected for scrutiny based on prescribed risk parameters, information available with the department and other legally permitted criteria.
Certain transactions or inconsistencies may attract verification.
For example, significant differences between reported income and information available through reporting systems may require examination.
Large deductions, unusual business transactions, high-value financial activity, international transactions or other risk indicators may also result in scrutiny depending on the applicable selection framework.
The exact reason should be understood from the notice and subsequent communications.
What Should You Do After Receiving 143(2)?
First, verify the notice on the official e-Filing portal.
Then read the notice carefully.
Check the assessment year, DIN, date, section and response requirements.
Next, identify what information has been requested.
Do not submit documents randomly.
The response should be organized around the questions raised by the department.
Prepare Your Records Before Responding
A scrutiny response should ideally be supported by the relevant records.
For salaried taxpayers, this may include Form 16, salary statements, bank statements, investment documents and deduction proofs.
For business owners and professionals, books of account, invoices, bank statements, GST records, expense records, TDS certificates and financial statements may be relevant.
For capital gains, transaction statements, purchase documents, sale documents and broker statements may become important.
The exact documents depend on the issue under examination.
What Happens During Scrutiny?
The Assessing Officer examines the return and the information submitted by the taxpayer.
Additional notices or questionnaires may be issued asking for explanations or documents.
The taxpayer is expected to provide the requested information through the prescribed electronic process where applicable.
The Income Tax Department's e-Proceedings system allows taxpayers to view and respond to notices and upload supporting documents.
Can a Scrutiny Assessment Be Faceless?
Yes.
Income tax assessment proceedings may be conducted through the faceless assessment framework where the case falls within the applicable provisions and notifications.
The faceless system is designed to reduce direct physical interaction and allocate cases electronically.
The Income Tax Department's current framework also provides for faceless assessment procedures under the new Act.
What If You Cannot Provide a Requested Document?
Do not simply ignore the request.
If a document is unavailable, explain why and provide alternative evidence where appropriate.
For example, if an old bank statement cannot be immediately obtained, explain the situation and provide other supporting records while requesting reasonable additional time if available.
The response should remain factual.
What Happens If You Do Not Respond?
Ignoring scrutiny communications can be risky.
The Assessing Officer may proceed based on the information available.
This can potentially result in an adverse assessment and tax demand.
If there is a genuine difficulty in responding within the specified period, the taxpayer should explore the available mechanism for requesting additional time or adjournment.
How Should a Scrutiny Reply Be Written?
A good scrutiny response should be structured.
Begin by identifying the notice and assessment year.
Then respond point by point to every question.
Where a question relates to a figure in the ITR, clearly state the figure and provide the supporting reconciliation.
If documents are attached, refer to them clearly.
Avoid lengthy explanations unrelated to the issue.
A concise and evidence-backed response is usually easier to examine than a long response filled with unnecessary information.
What If the Department Proposes an Addition?
During scrutiny, the Assessing Officer may identify an issue that could result in an adjustment or addition to taxable income.
The taxpayer should examine the proposed adjustment carefully and submit the relevant explanation and evidence.
Do not wait until the final order to start understanding the issue.
If the proposed adjustment involves a significant amount or complicated legal interpretation, professional tax advice can be particularly valuable.
What Happens After the Scrutiny?
After considering the taxpayer's submissions, the assessment may be completed according to the applicable statutory provisions.
The result may not necessarily involve additional tax.
Depending on the facts, the assessment may accept the return, modify certain items or determine another taxable amount.
If an adverse assessment order is passed, further remedies, including appeal, may be available.
Section 143(2) and the Income-tax Act, 2025
The new Income-tax Act, 2025 has reorganized and renumbered assessment provisions.
For tax years governed by the new Act, the scrutiny provisions correspond to the new statutory framework.
However, the transition rule is critical.
The Income Tax Department has expressly stated that scrutiny proceedings relating to AY 2026–27 and earlier continue under the Income-tax Act, 1961.
Therefore, taxpayers should always identify the year to which the notice relates before assuming that a new section number applies.
Frequently Asked Questions
1. Is a 143(2) notice the same as a tax demand?
No. It is a scrutiny notice and does not by itself mean that additional tax has been finally determined.
2. Why was my return selected for scrutiny?
Selection may occur under prescribed risk-based or other statutory criteria. The notice and subsequent communication should be examined for the specific issue involved.
3. Do I need to respond if my ITR is correct?
Yes. A correct return does not remove the obligation to respond to a valid scrutiny notice.
4. Can scrutiny be completed online?
Many proceedings are conducted electronically through the e-Proceedings/faceless framework where applicable.
5. Can I upload supporting documents?
Yes, subject to the portal's prescribed attachment limits and the requirements of the proceeding. Current e-Proceedings guidance allows attachments subject to size and quantity limits.
6. Can I ask for more time?
Depending on the proceeding, taxpayers may be able to request an adjournment or extension. The request should be made before the deadline where possible.
7. What happens if I don't respond?
The assessment may proceed based on available information, potentially resulting in an adverse order.
8. Can a scrutiny assessment be appealed?
An assessment order passed under the applicable provisions can generally be challenged through the prescribed appellate mechanism, subject to the conditions and limitation period.
Get Professional Support for Your Scrutiny Notice
A Section 143(2) notice deserves careful attention because the information submitted during scrutiny becomes part of the assessment record.
If you have received a scrutiny notice and need help reviewing the notice, preparing reconciliations, organizing supporting documents or responding to the department, professional assistance can help you handle the proceedings systematically.
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Disclaimer: This article is for general informational purposes and does not constitute professional tax or legal advice. Scrutiny procedures and applicable provisions depend on the relevant assessment year/tax year and the facts of the case.