Q. What Does a 143(2) Notice Mean? What Comes Next?

Receiving a notice under Section 143(2) means your income tax return has been selected for scrutiny. Simply put, the tax department wants to examine your return in greater detail. The scrutiny process involves multiple stages:

1. 143(2) Notice: The department selects your return for scrutiny. This may be due to errors, discrepancies, or high-value transactions.
2. 142(1) Notice: The officer sends a questionnaire of specific information and documents they require, to be submitted online.
3. Show Cause Notice: Based on the response and data available, the officer communicates the discrepancy. A detailed response must be submitted with references to the Income Tax Act & relevant case laws.
4. Assessment Order: Based on the response, the officer passes either a closure order (if satisfied) or a penalty order (if not), with computed tax liability. If you disagree, you’re entitled to file an appeal.

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Q. What is a Faceless Assessment? Is my Case Faceless?

Faceless Assessments are part of the department’s digital initiative to reduce human interface and improve transparency – all interactions are online. This eliminates the scope of bribery or informal resolution as a response to scrutinies. The only way to close a scrutiny is compliance – either by paying the demand or by providing legal justification for dismissal.

Note: Most scrutiny assessments today are faceless by default. You can confirm by checking your notice – if issued by the National Faceless Assessment Centre. If a local officer or jurisdiction is mentioned, it is likely a traditional case.

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Q. Why Did I Get Picked for Scrutiny?

Most notices stem not from fraud – but incomplete understanding: incomes omitted by mistake, deductions based on assumptions, or improper disclosures.
The government uses Computer Aided Scrutiny Selection (CASS) to identify:

• High deductions / exemptions claimed, which may be unusual or bogus
• Incomes presented in return that have a discrepancy with the Dept.’s information (AIS, TIS, 26AS)
• High-Value Transactions like cash deposits, property purchases/sales

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Q. Got a Notice? Here’s What to Do Next?

• Timely Response: Never ignore a notice – it leads to the worst-case scenario, assessment without your intervention. If additional time is needed, request for an adjournment (i.e., extension of time limit).
• Review your Filed Return: First, identify the trigger for selection. This helps in formulating responses.
• Prepare Ahead: Coordinate with your professionals and compile the required documents and responses.

Where you’re unable to identify the trigger or are unsure about submissions – it’s best to involve a CA. Don’t delay. Stay informed & gather information to avoid penalties.

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We’ve helped business-owners navigate scrutiny cases for over three decades, ensuring clarity, compliance and resolution. Feel free to call – we’re happy to guide you.