Updated for AY 2026-27  |  Written by a practicing Chartered Accountant 

The first time a scrutiny notice lands in a client’s inbox, the reaction is almost always the same. They call me, voice slightly shaking, asking whether they’re “in trouble.” Most of the time, they’re not. But that fear is exactly why I’m writing this — because an income tax scrutiny notice is one of those things that sounds far worse than it usually is, and the panic it creates leads people to make mistakes they didn’t need to make.

In over eight years of handling assessments and notices, I’ve seen salaried employees, small traders, and seasoned businessmen all freeze at the sight of the words “Notice under Section 143(2) of the Income-tax Act, 1961.” So let me walk you through what this notice actually is, why you got it, and what you should — and absolutely should not — do next.

What is an income tax scrutiny notice?

When you file your return, the system processes it almost automatically. Most returns are accepted as filed, you get your intimation under Section 143(1), and that’s the end of it.

But a small percentage of returns get picked up for a closer look. This is called scrutiny assessment, and the official communication that starts it is the notice under Section 143(2). In plain terms, the department is telling you: we want to examine your return in detail, and we may ask you to justify the figures you’ve claimed.

That’s it. It is not a penalty. It is not a prosecution. It is not an accusation of fraud. It is the beginning of a verification process — and how you handle that process decides whether it ends quietly or turns into something messier.

The important thing to understand is that 143(2) is the gateway. Without a valid 143(2) notice issued within the prescribed time, the Assessing Officer cannot proceed to a scrutiny assessment under Section 143(3) at all. Courts have struck down entire assessments on this single point. I’ll come back to why that matters.

Section 143(2) of the Income Tax Act, explained simply

Let me break down the section without the legalese.

Section 143(2) empowers the Assessing Officer (AO), where they consider it necessary to ensure that you have not understated income, computed excessive loss, or underpaid tax, to serve a notice requiring you to either attend their office or produce evidence in support of your return.

Two things are doing the heavy lifting here:

“Where the AO considers it necessary.” The officer needs a reason to scrutinise. These days, most cases are selected by the system itself — through what’s called CASS (Computer Assisted Scrutiny Selection) — based on risk parameters and data mismatches. A smaller set are picked manually under CBDT’s annual guidelines.

“To produce evidence.” The burden, at this stage, is on you to support what you’ve claimed. A deduction you took, an exemption you relied on, a source of funds you didn’t fully explain — the AO wants the paperwork.

So when someone asks me “what is 143?”, the honest answer is that the 143 family is the entire processing-and-assessment backbone of the Act:

• 143(1) — the automated intimation after your return is processed (this is not scrutiny; it’s just a computation summary).
• 143(2) — the scrutiny notice that opens a detailed examination.
• 143(3) — the final assessment order the AO passes after that examination.

People constantly confuse 143(1) with 143(2). A 143(1) intimation showing a small refund or demand is routine and arrives for almost everyone. A 143(2) notice is the one that actually requires you to defend your return.

Why did you receive a scrutiny notice?

There’s no single answer, but in my practice the recurring triggers are remarkably consistent:

Mismatch with AIS/TIS and Form 26AS. This is the number one reason today. The department now sees your salary, interest, dividends, securities transactions, property dealings, and more — all pre-populated. If your return doesn’t reconcile with what third parties reported, the system flags it.

High-value transactions out of line with declared income. A ₹40 lakh property purchase on a declared income of ₹6 lakh will draw attention. Large cash deposits, heavy credit card spends, and significant mutual fund or share transactions are all reported to the department.

Large or unusual deductions and exemptions. Sudden spikes in 80C, 80G donations, HRA claims that don’t match your rent profile, or business expenses disproportionate to turnover.

Claiming refunds repeatedly or a return inconsistent with your profile. A presumptive-scheme businessman suddenly showing a loss, or a salaried person with a large “income from other sources” they can’t easily explain.

Random and manual selection. Some cases genuinely are picked up under the manual scrutiny criteria, or as a sample. Receiving a notice does not mean you’ve done something wrong.

If you’ve received one, don’t immediately assume guilt — but do immediately start gathering your documentation. The reconciliation work you do in the first week is worth more than any argument you make later.

The time limit for a 143(2) notice — and why it can win your case

This is the part most taxpayers don’t know, and it’s the single most powerful point in your favour.

A notice under Section 143(2) cannot be served on you whenever the department feels like it. It must be served within three months from the end of the financial year in which your return was filed.

So if you filed your return for AY 2025-26 in July 2025 (i.e., in FY 2025-26), the department has until 30 June 2026 to validly serve the 143(2) notice. Serve it on 1 July 2026, and the notice — and any assessment built on it — is legally defective.

I cannot overstate how many assessments fall apart on this single technicality. The Supreme Court in ACIT v. Hotel Blue Moon settled long ago that issuance of a valid 143(2) notice within time is not a procedural formality but a mandatory condition for a valid scrutiny assessment. If it’s served late, or not served at all, the assessment can be quashed regardless of the merits.

So before you even read the body of the notice, check three things:

1. The date it was issued (look at the notice, not the date you opened the email).
2. The date and mode of service on you.
3. Whether that service falls within the three-month window.

If it doesn’t, you may have a complete defence. This is exactly the kind of point that separates a practitioner who files replies from one who actually litigates — and it’s worth far more to your client than any number of well-worded paragraphs.

What happens after the 143(2) notice: the road to 143(3)

Once the 143(2) is validly served, the matter moves into the faceless assessment system under Section 144B. You won’t meet an officer face to face. Everything happens through the e-proceedings portal: notices come electronically, you upload responses and documents, and the assessment is finalised by a unit you never deal with in person.

Typically, the sequence runs like this:

• The 143(2) notice opens the assessment.
• One or more notices under Section 142(1) follow, asking for specific information, documents, and explanations.
• You respond, attach evidence, and make your submissions through the portal.
• The AO may issue a show-cause notice if they propose to make an addition, giving you a final chance to respond before the order.
• The assessment concludes with an order under Section 143(3) — either accepting your return or making additions to your income, with tax and possibly interest and penalty proceedings to follow.

The quality of your replies at the 142(1) stage is what decides the outcome. A vague, late, or incomplete response invites additions. A clear, document-backed, legally reasoned reply often closes the matter without any addition at all.

How to respond to a scrutiny notice: a practitioner’s checklist

Here’s the process I follow, and the one I’d recommend to anyone — whether you handle it yourself or with a professional.

Don’t ignore it. This sounds obvious, but non-response is the most damaging thing you can do. If you fail to respond, the AO can complete a best judgment assessment under Section 144 — meaning they estimate your income themselves, and rarely in your favour. You also expose yourself to penalty under Section 272A(1)(d) for non-compliance.

Read the notice carefully and note every deadline. Identify whether it’s a limited scrutiny (confined to specific issues) or complete scrutiny. Limited scrutiny means the AO can only examine the flagged issues — they can’t go fishing through your entire return unless the case is converted, and that conversion has its own conditions.

Reconcile before you reply. Pull your AIS, TIS, Form 26AS, bank statements, and your filed return side by side. Find the mismatches yourself before the AO points them out. Half the battle is knowing exactly where your numbers differ and having the explanation ready.

Respond on the portal, on time, with documents. Every claim you’ve made should be backed by proof — deduction receipts, loan confirmations, sale deeds, bank entries, whatever supports the figure. Keep your submission organised and reference each document clearly.

Frame your reply legally, not emotionally. “I am a small businessman, please have mercy” is not a reply. “The deduction under Section 80C is supported by the attached LIC premium receipts and ELSS statements totalling ₹1,50,000” is a reply. The AO responds to evidence and law, not to sentiment.

If you’re out of your depth, get help early. The cost of a professional handling the reply correctly is almost always less than the addition, penalty, and interest that follow a botched one. Bring someone in at the notice stage, not after the order.

Difference between Section 142(1) and Section 143(2)

This trips people up constantly, so let me make it clean.

A 142(1) notice is an inquiry notice. The AO uses it to ask for specific details, documents, or even to direct you to file a return if you haven’t. It can be issued independently and at various points.

A 143(2) notice is the scrutiny notice — it formally opens the detailed examination of a return you’ve already filed, and it carries the strict three-month time limit discussed above.

In a typical scrutiny, you’ll see both: the 143(2) opens the assessment, and the 142(1) notices that follow are how the AO actually gathers the information.

Can salaried employees get a scrutiny notice?

Yes — and it’s more common than people assume. The myth that scrutiny is only for businessmen is exactly that, a myth. Salaried taxpayers get picked up most often for HRA claims that don’t square with their PAN-linked rent payments, large deductions inconsistent with their salary, refund claims, or income from other sources (capital gains, crypto, foreign income) that doesn’t reconcile with AIS. If you’re salaried and you’ve received one, the same rules apply: check the time limit, reconcile, and respond with documents.

A final word from the other side of the desk

Most scrutiny notices are not the disaster they feel like in the moment. The taxpayers who come out of it cleanly are the ones who treat it as a documentation exercise, respond on time, and either know the law themselves or work with someone who does. The ones who suffer are the ones who panic, ignore it, or send a weak reply and hope it goes away.

The technical points — the three-month limitation, limited versus complete scrutiny, the faceless procedure, the case law on defective notices — are not things you can pick up from a single article. They’re the difference between a reply that protects your client and one that doesn’t.

A note for tax professionals

If you’re a CA, advocate, or accountant who can file returns confidently but still hesitates when a notice arrives, you’re not alone — it’s the single biggest gap I see in the profession. That’s exactly why I built the Income Tax Litigation Mastery course — a practical, drafting-first programme covering scrutiny, reassessment, penalties, and appeals under both the 1961 Act and the new Income Tax Act, 2025. It’s built around how litigation actually works: reading the notice, finding the real issue, drafting a strong reply, and carrying the matter through appeal. If handling notices like this is something you want to do yourself instead of outsourcing, take a look here.

Frequently Asked Questions

Is a 143(2) notice serious?

It’s significant but not alarming. It opens a detailed examination of your return. If your return is well-documented and you respond properly, most cases close without any addition. Ignoring it is what makes it serious.

What is the time limit for issuing a notice under Section 143(2)?

Three months from the end of the financial year in which the return is filed. A notice served after this period is generally invalid, and any assessment based on it can be challenged.

What is the difference between 143(1) and 143(2)?

143(1) is an automated intimation after your return is processed — routine and not scrutiny. 143(2) is the notice that formally begins a detailed scrutiny of your return.

What happens if I don’t respond to a 143(2) notice?

The AO can proceed to a best judgment assessment under Section 144, estimating your income themselves, and may levy a penalty under Section 272A(1)(d) for non-compliance. Always respond.

Can the assessment be cancelled if the 143(2) notice was issued late?

Yes. A valid and timely 143(2) notice is a mandatory condition for a scrutiny assessment. Courts have quashed assessments where the notice was served beyond the time limit. This is one of the strongest defences available.

Do salaried employees get scrutiny notices?

Yes, regularly — most often over HRA claims, large deductions, refund claims, or other-source income that doesn’t match AIS data.