Notice under Section 143(2) of the Income Tax Act is the second chance to assessee after Income Tax Department find major or minor discrepancies in the tax return. The discrepancy can be in the form of under-reporting the income or over-reporting of the losses. On receipt of a notice, an individual must timely respond to the tax department along with the supporting proof to defend themselves.
Reasons for issuance of notice u/s 143(2)
Income Tax Department issues notice u/s 143(2) when Income Tax Return is selected for scrutiny assessment or detailed assessment u/s 143(3).
Scrutiny assessment or detailed assessment u/s 143(3) means scrutiny carried out to confirm the correctness and genuineness of various claims, deductions, etc made in Income Tax Return. The basic purpose of this scrutiny assessment is to ensure that assessee has filed the return with the correct income and paid the tax accordingly.
Time limit for issuance of notice u/s 143(2)
AO can issue notice u/s 143(2) for scrutiny assessment only up to a period of six months from the end of the financial year in which the assessee filed his return.
For example, Ms. X filed her return on 25.07.2020 for the financial year 2019-20. In such a case, the notice u/s 143(2) AO can issue notice to Ms. X only up to 30.09.2021 being the end of six months period from the FY 2020-21 in which the said return was filed.
Types of notices u/s 143(2) of Income Tax Act
There can be 3 types of following notices under Section 143(2):
Limited Scrutiny: This is a Computer-Assisted Scrutiny Selection (CASS) where cases are selected based on set parameters. The scrutiny will be limited to the particular area of return mentioned in the notice. An example of this scrutiny can be a mismatch in tax credits, inaccurate information, etc.
Complete Scrutiny: A complete scrutiny is carried out on the return filed along with all supporting documents. Cases are flagged based on CASS. Scope of scrutiny is not limited in these types of notices. However, the assessing officer cannot verify documents beyond the particular assessment year.
Manual Scrutiny: Cases are selected for complete scrutiny based on the criteria defined by the Central Board of Direct Taxes; the criteria may vary every year.
How does this works?
AO can issue notice u/s 143(2) within 6 months from the end of FY in which the assessee filed his return, to carry out scrutiny of income tax return u/s 143(3).
The assessee or his tax representative will have to appear before the AO to place arguments and pieces of evidence as required by the assessing officer. Alternatively, the assessee can submit an online response to notice u/s 143(2) by uploading evidence and your arguments.
After looking over to all the evidence, AO will pass an assessment order determining total tax payable or refund to the assessee after taking into account produced evidence.
Time limit for issuance of the final assessment order u/s 143(3)
Time Limits are as below as per section 153
|* For Assessment year 2017-18 or before||21 months from the end of the assessment year|
|* For Assessment year 2018-19||18 months from the end of the assessment year|
|* For Assessment year 2019-20 and onwards||12 months from the end of the assessment year|
Consequences of not complying with the notice issued u/s 143(2)
If the assessee receives a notice from the Income Tax Department, and there is any default, he/she may be liable for the following:
- Penalty u/s 271(1)(b) amounting to Rs. 10,000 and even prosecution if found guilty. However, for the A.Y commencing on or after the 1st day of April 2017 the penalty shall be levied in Sec 272A(1).
- AO can do the best judgment assessment u/s 144 for the assessee.
No it is possible to receive notice u/s 143(2) if I have not filed return. You might receive a notice u/s 142(1) asking for filing the return.
Generally, you will receive this notice via email in a PDF format on your email ID. You will also receive this notice at your postal address.
If AO issues notice u/s 143(2) for production of evidence and after taking into account such pieces of evidence and hearing the arguments, the AO will make an assessment of total income or loss and also determine any sum payable by assessee or due to assessee by passing the order u/s 143(3).