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Section 143(2) Scrutiny Notice: Meaning, Documents and Reply Guide

Of all the income tax notices a person can receive, the scrutiny notice under Section 143(2) is the one that tends to cause the most worry. And in some ways, that's understandable. The word "scrutiny" sounds serious. The implication that your return has been selected for detailed examination feels personal.

But here's the reality: Being selected for scrutiny does not mean you did something wrong. Every year, thousands of returns are picked by automated systems based on statistical parameters, data mismatches, or specific CBDT guidelines. Many of those assessments conclude with no change to the taxpayer's liability at all. What the notice means is that the department wants to verify specific things in your return before finalising it. That's it.

What matters now is how you respond. A well-prepared, documented response resolves most scrutiny cases cleanly. Silence or incomplete responses are what turn a manageable situation into a painful one.

What Is a Section 143(2) Scrutiny Notice?

Section 143(2) of the Income Tax Act, 1961, is the provision under which the Income Tax Department formally notifies a taxpayer that their return has been selected for scrutiny assessment. The AO or the National Faceless Assessment Centre (NaFAC) intends to examine your return in greater detail to verify that:

The income you declared is complete and accurate
The deductions and exemptions you claimed are valid and supported by documentation
Your tax liability has been correctly computed
There is no income that has escaped assessment

A 143(2) notice is always issued after you have filed your return. It cannot be issued if you haven't filed. And unlike the 142(1) inquiry notice, which is a preliminary step, the 143(2) notice formally initiates a scrutiny assessment under Section 143(3).

Before you respond to anything, check one detail: every valid 143(2) notice must carry a Document Identification Number (DIN). You can verify this on the income tax portal. A notice without a DIN is not legally valid, and you are not obligated to act on it.

Three Types of Scrutiny Under Section 143(2)

Not all scrutiny notices are the same. There are three types, and which one you've received affects the scope of what the AO can examine.

Limited Scrutiny: This is the most common type. Your return was flagged by the CASS system (Computer Assisted Scrutiny Selection) for one or a few specific issues. The AO can only examine the points mentioned in the notice and cannot expand the scope of scrutiny without approval from higher authorities. If the notice says it's about a mismatch in capital gains, that's all that's being examined.

Complete Scrutiny: A comprehensive examination of your entire return. All income, deductions, exemptions, and supporting documents are potentially in scope. This is reserved for higher-risk cases: survey cases under Section 133A, returns where prior-year additions exceeded a significant threshold, cases involving foreign assets, or cases flagged manually by a senior officer.

Manual Scrutiny: Selected based on specific risk parameters issued by CBDT, typically involving particular industries, complex transactions, or cases where intelligence has been gathered by the department through third-party sources.

Common Reasons for Receiving a Section 143(2) Notice in AY 2025-26

The Central Board of Direct Taxes releases guidelines each year for compulsory scrutiny selection. For AY 2025-26, some of the key compulsory triggers included:

Survey cases under Section 133A: If your business premises were surveyed after 1 April 2023, your return is automatically selected for complete scrutiny.

Significant AIS or 26AS mismatch: A major discrepancy between income reported by third parties (banks, employers, brokers, property registrars) and income declared in your ITR triggers CASS selection.

High-value cash deposits not explained by declared income: Large cash deposits relative to your declared income, especially in the post-demonetisation context, remain a red flag.

Property transactions at variance with stamp duty valuation: Selling a property at a price lower than the stamp duty value, or not declaring capital gains from a property sale, triggers scrutiny.

Unreported gains from mutual funds, equities, or cryptocurrency: The department has access to transaction data from SEBI-registered brokers and exchanges. Unreported capital gains are a primary CASS trigger for AY 2024-25 and 2025-26.

Disproportionately high deductions: Deductions that appear unusually large relative to your income level raise flags. For instance, claiming ₹1.5 lakh under 80C while your declared income is ₹2 lakh.

GST and ITR turnover mismatch: For businesses, a significant difference between turnover declared in GSTR filings and income declared in the ITR is a near-automatic trigger.

Foreign remittances or foreign assets: Any foreign asset held but not disclosed in Schedule FA, or foreign income not reported, leads to compulsory scrutiny.

The 3-Month Time Limit: When a 143(2) Notice Becomes Invalid

This is one of the most important facts about this notice, and one that many taxpayers don't know until it's too late to use it.

A Section 143(2) notice is legally valid only if it is issued within three months from the end of the financial year in which you filed your return.

If you filed your ITR for AY 2025-26 (FY 2024-25) on 31 July 2025, the financial year in which you filed it ends on 31 March 2026. The department had until 30 June 2026 to issue the scrutiny notice. A notice issued on 1 July 2026 or later is time-barred and can be challenged.

Check the date on the notice. If you have any doubts about whether it was issued within the statutory window, consult a CA before responding. A time-barred scrutiny notice can be contested and is not something you simply accept.

What Is Faceless Assessment and How Does It Work?

Since 2020, the majority of scrutiny assessments have been conducted under the Faceless Assessment Scheme through the National Faceless Assessment Centre (NaFAC). This changed the process significantly.

Under faceless assessment, there is no specific AO assigned to your case from your local jurisdiction. Instead, your case is handled by an assessment unit that is geographically separate from you. All communication happens through the income tax portal. You do not visit any tax office. Your CA does not meet any AO in person.

Everything goes through e-Proceedings: the notice, your response, follow-up queries, and the final assessment order. This was introduced to reduce discretionary decision-making and physical interaction, and while it has its critics, it does mean the process is more standardised than it used to be.

Personal hearings are available under the faceless scheme, but only through video conference and only when specifically requested. They are not common in routine scrutiny cases.

How to Respond to a Section 143(2) Notice

Step 1: Log in to incometax.gov.in and go to Pending Actions → e-Proceedings → For Your Action → View Notices.

Step 2: Open the notice. Read the scope carefully. Identify whether it's limited or complete scrutiny. Note the specific issues raised.

Step 3: Prepare your documents. For each point raised, gather the relevant supporting material. A typical scrutiny response file includes: ITR computation and acknowledgement, Form 16 and Form 26AS, AIS for the relevant year, bank statements for all accounts, investment proofs, and any transaction-specific documentation (capital gains statements, property purchase or sale deeds, GSTR reconciliation).

Step 4: Submit your response through the e-Proceedings section, uploading documents against each query. Physical submissions are not accepted under faceless assessment.

Step 5: Download and save the submission acknowledgement.

After your initial response, the AO may send a questionnaire with follow-up queries. This is normal. You respond to each query the same way. The AO then completes the assessment and passes an order under Section 143(3). The entire process from notice to final order must be completed within 12 months from the end of the assessment year.

When Should You Hire a CA for a Section 143(2) Notice?

For limited scrutiny with a single straightforward issue, like a minor AIS mismatch you can explain with bank records, many taxpayers handle the response themselves without professional help.

But there are situations where getting a CA involved is the right call, and it's better to make that decision early.

Hire a CA if the scrutiny is of the complete type, if your return includes business income, foreign assets, large capital gains, or complex deductions, if the notice relates to a year where there were major transactions, or if the AO has already proposed additions to your income in a questionnaire. A professional response at the scrutiny stage costs far less than an appeal later.

Real Questions People Ask When They Get This Notice

"I'm a salaried employee. I've never run a business. Why did I get a scrutiny notice?" Salaried taxpayers do get scrutiny notices, particularly when AIS data shows income or transactions not reflected in their return. Common triggers include FD interest not declared, capital gains from stocks or mutual funds not reported, or a high-value property transaction. Check your AIS carefully and compare it line by line against your ITR.

"My refund has been stuck since I got this notice. Is that normal?" Yes. Refunds are typically held during the pendency of a scrutiny assessment. Once the assessment order is passed under Section 143(3), the refund is processed if the final assessment confirms it. If the scrutiny gets extended, the refund waits.

"The AO sent me a questionnaire with 15 questions after I submitted my documents. Did I do something wrong?" Not necessarily. Follow-up questionnaires are a routine part of the scrutiny process. The AO is clarifying specific points. Go through each question carefully, answer only what is asked, and support every answer with documentation. Accuracy and specificity matter more than volume here.

"I received this notice for a year when my income was very low. Does the department think I'm hiding income?" The selection may be completely automatic, triggered by a mismatch between your declared income and a transaction flagged in AIS. Low declared income combined with a high-value transaction (property, cash deposit, equity sale) is a common CASS trigger. Your response simply needs to explain and document the discrepancy.

"Should I be worried that this scrutiny will affect future years too?" A scrutiny for one year does not automatically affect other years. However, if the AO finds significant additions in the current year, it may flag your returns for closer attention in subsequent years. This is another reason to respond thoroughly and resolve the current scrutiny cleanly.

"My CA is asking for a large fee to handle the scrutiny. Is professional help really necessary?" For simple, limited scrutiny with one clear issue, you can often handle it yourself. For complete scrutiny, business income, foreign assets, or any case where the AO has proposed additions, professional help typically pays for itself many times over. The cost of a bad response at this stage, which can include penalties and appeals, is significantly higher than a professional fee.

Got a 143(2) notice and not sure whether it's limited or complete scrutiny, or which documents apply to your case? Upload the notice to our AI tool and get a clear breakdown of what is being assessed, what to prepare, and what to watch out for.

Drafted by NoticeSahayak Editorial Team — based on CGST Act, CBIC circulars, and case law in our legal corpus.