How to Avoid Scrutiny Notices by Correct ITR Filing

Avoiding scrutiny notices from the Income Tax Department starts with filing your Income Tax Return (ITR) accurately, completely, and on time. Even small mistakes — like mismatched income data, wrong form selection, or missing verification — can trigger automated scrutiny under the Income Tax Act, 1961. The department uses advanced data-matching systems to flag inconsistencies between your ITR, Form 26AS, AIS, and TIS. To stay compliant and stress-free, taxpayers must ensure accuracy at every step, from reporting income sources to reconciling financial details.

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Table of Contents

• Understanding Scrutiny Notices Under the Income Tax Act

• Common Mistakes That Trigger Income Tax Scrutiny

• How to File ITR Correctly to Avoid Scrutiny Notices

• Importance of Matching ITR Data with Form 26AS, AIS, and TIS

• Choosing the Correct ITR Form for Accurate Filing

• Disclosing High-Value Transactions and Linked Bank Accounts

• Timely Filing and E-Verification: The Easiest Way to Stay Safe

• Keeping Documentation Ready for Income and Deductions

• What to Do If You Receive a Scrutiny Notice

• CBDT Guidelines and Deadlines for FY 2024–25

• How TaxBuddy Helps You File ITR Accurately and Avoid Scrutiny

• Conclusion

• FAQs

  
  

Understanding Scrutiny Notices Under the Income Tax Act

A scrutiny notice is an official communication sent by the Income Tax Department to verify the accuracy of details provided in an Income Tax Return (ITR). It is issued under Section 143(2) of the Income Tax Act when the assessing officer suspects discrepancies, under-reporting of income, or mismatches with third-party data such as Form 26AS, AIS, or TIS. The notice aims to ensure the correctness of declared income, claimed deductions, and taxes paid. Receiving a scrutiny notice doesn’t automatically imply wrongdoing; it often arises from data mismatches or incomplete information in the filed return.

Common Mistakes That Trigger Income Tax Scrutiny

Scrutiny notices are often triggered by common mistakes that can be easily avoided. These include failing to disclose income from multiple sources, mismatches between ITR and AIS data, incorrect reporting of interest or capital gains, claiming ineligible deductions, and not reconciling TDS details. Under-reporting foreign income, missing high-value transactions like property purchases or mutual fund redemptions, or delays in e-verification can also prompt notices. Proper review and reconciliation before submission significantly reduce such risks.

How to File ITR Correctly to Avoid Scrutiny Notices

Filing your ITR correctly begins with selecting the appropriate ITR form based on your income type—salary, business, capital gains, or other sources. Ensure all income streams are disclosed, including interest, dividends, and rent. Report deductions only when supported by valid proofs, and verify pre-filled details like TDS and advance tax before final submission. Cross-check data from Form 16, AIS, and 26AS for consistency. Using a reliable tax-filing platform like TaxBuddy ensures AI-based verification, reducing human errors and flagging discrepancies before filing.

Importance of Matching ITR Data with Form 26AS, AIS, and TIS

Form 26AS, AIS (Annual Information Statement), and TIS (Taxpayer Information Summary) collectively reflect your income, tax credits, and financial transactions. Any mismatch between these and your ITR data can trigger scrutiny. Ensure that income from salary, interest, dividends, and TDS entries match exactly. AIS also tracks large expenses such as credit card payments or property purchases, so they must align with your declared income. TaxBuddy automatically reconciles these statements to maintain accuracy and compliance.

Choosing the Correct ITR Form for Accurate Filing

Choosing the right ITR form is critical. For instance, salaried individuals should use ITR-1 (Sahaj) if their income is below ₹50 lakh and from one source. Those with capital gains, multiple properties, or foreign income should opt for ITR-2 or ITR-3. Filing with an incorrect form can lead to processing delays or even invalidation of your return. TaxBuddy assists in identifying the right form based on income sources and financial data, ensuring the return is filed correctly.

Disclosing High-Value Transactions and Linked Bank Accounts

The Income Tax Department monitors high-value transactions such as mutual fund investments, property purchases, and large bank deposits through PAN-linked reporting. Failure to disclose these can result in a scrutiny notice. All linked bank accounts, including savings and current accounts, should be reported in your ITR. Be transparent about capital gains, business income, and investments to prevent red flags during assessment.

Timely Filing and E-Verification: The Easiest Way to Stay Safe

Timely filing and completing e-verification are among the simplest yet most effective ways to avoid scrutiny. If you file after the due date or fail to e-verify within the prescribed window, your ITR is treated as invalid. This can attract penalties or trigger automatic system-generated notices. TaxBuddy’s guided filing process reminds users of deadlines, ensuring timely submission and instant e-verification through Aadhaar OTP or bank login.

Keeping Documentation Ready for Income and Deductions

Every claim made in your ITR—be it salary, rent, business expenses, or deductions under sections like 80C and 80D—should be backed by documentation. Keep salary slips, bank statements, rent receipts, investment proofs, and interest certificates ready for verification. The department may request these during scrutiny proceedings. TaxBuddy provides digital storage and categorization for such documents, making retrieval easy if required later.

What to Do If You Receive a Scrutiny Notice

If you receive a scrutiny notice, do not panic. Review the notice carefully to identify the specific reason—such as income mismatch, deduction verification, or under-reporting. Respond within the timeline mentioned, usually 30 days, through the Income Tax e-filing portal. Provide supporting documents, explanations, and updated computations if needed. Avoid ignoring the notice, as non-compliance may lead to penalty or reassessment. TaxBuddy’s expert team can help draft accurate replies and ensure timely compliance.

CBDT Guidelines and Deadlines for FY 2024–25

The Central Board of Direct Taxes (CBDT) has implemented new data-matching algorithms and stricter reporting norms for FY 2024–25. Automated scrutiny selection is now based on mismatched entries in AIS, delayed filings, and high-value undisclosed transactions. The deadlines for responding to scrutiny notices typically range between 15 to 30 days from receipt, depending on the nature of the case. Taxpayers are advised to keep contact details updated on the portal to receive timely alerts and avoid missed communications.

How TaxBuddy Helps You File ITR Accurately and Avoid Scrutiny

TaxBuddy simplifies income tax filing by combining the precision of AI-driven systems with the reliability of expert human review. The platform is designed to help taxpayers file their Income Tax Returns (ITR) accurately and avoid unnecessary scrutiny from the Income Tax Department. Its automated engine cross-verifies all major financial data sources—such as the Annual Information Statement (AIS), Taxpayer Information Summary (TIS), and Form 26AS—against the income declared in your return. This process ensures that every transaction, from interest income to capital gains, matches perfectly, reducing the likelihood of receiving a notice due to data discrepancies.

The system intelligently flags inconsistencies and missing information before submission. For example, if a dividend, salary component, or mutual fund redemption is reflected in AIS but not reported in your ITR, TaxBuddy alerts you instantly, allowing corrections before filing. This proactive approach minimizes the most common causes of scrutiny, such as mismatched data, underreporting of income, or incorrect claim of deductions.

Beyond AI-based automation, every return undergoes a review by TaxBuddy’s team of qualified tax professionals. These experts ensure that all deductions and exemptions are claimed correctly under relevant sections like 80C, 80D, and 24(b), maximizing savings while maintaining compliance. They also verify the correctness of details like bank accounts, refund claims, and TDS credits before submission.

TaxBuddy’s role doesn’t end after filing. The platform offers comprehensive post-filing support to handle any communication from the Income Tax Department. If a notice is issued for verification or clarification, users receive expert guidance on how to respond along with the necessary documentation. This support includes preparing replies, reviewing notices, and representing users for simple compliance-related matters, helping avoid confusion or stress after submission.

Whether a taxpayer chooses the self-filing plan or the expert-assisted option, TaxBuddy ensures that every ITR is accurate, compliant, and optimized for quick processing. The combination of AI-based validation, expert oversight, and personalized assistance provides users with complete confidence and peace of mind during the tax filing process.

Conclusion

Scrutiny notices can be easily avoided through accurate reporting, document management, and timely filing. Regularly review your AIS, reconcile income data, and use professional platforms like TaxBuddy for filing. With its AI-driven system and expert support, TaxBuddy ensures your ITR is accurate, compliant, and optimized for quick processing—minimizing the risk of future scrutiny.

For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

Q1. What is a scrutiny notice under the Income Tax Act?

A scrutiny notice is a formal communication from the Income Tax Department issued under Section 143(2) of the Income Tax Act. It is sent when the department wants to verify the correctness of the income, deductions, or claims made in a filed return. The notice does not always imply wrongdoing; it can also result from routine checks, data mismatches, or random selection for detailed verification.

Q2. What are the main reasons for receiving a scrutiny notice?

Scrutiny notices are commonly triggered by discrepancies between reported income and data available in AIS, TIS, or Form 26AS. Other reasons include unreported bank interest, undeclared foreign assets, excessive deductions, high-value transactions, or mismatch in TDS claims. Sometimes, the system randomly selects returns for scrutiny under CBDT’s risk-based monitoring framework.

Q3. How can I avoid scrutiny notices?

To avoid scrutiny, taxpayers must ensure consistency across all financial records and ITR data. Always verify that your income details match the figures in AIS, TIS, and Form 26AS before filing. Report all income sources, including savings account interest and dividends, and maintain proofs for every deduction claimed. Filing your return through professional platforms like TaxBuddy helps prevent mismatches and ensures error-free submission.

Q4. What is the difference between a defective return and a scrutiny notice?

A defective return, issued under Section 139(9), occurs when there are errors or missing details in your ITR—such as incorrect PAN, mismatch in income heads, or missing attachments. A scrutiny notice, however, is issued under Section 143(2) to verify the accuracy of information after the return has been accepted. The former can be corrected by revising the return, while the latter requires formal compliance and document submission.

Q5. What is the time limit for receiving a scrutiny notice?

The Income Tax Department can issue a scrutiny notice within three months from the end of the financial year in which the ITR was filed. For instance, if you filed your return for FY 2024-25 on July 31, 2025, the notice can be issued up to June 30, 2026. Any notice received after this period is generally invalid unless it falls under reassessment provisions like Section 147.

Q6. What documents are required to respond to a scrutiny notice?

You must submit all relevant financial documents supporting the data in your return. These include Form 16, bank statements, investment proofs, rent receipts, property sale/purchase documents, loan statements, and proof of deductions under sections like 80C, 80D, or 24(b). If queried about income sources, you may also need invoices, salary slips, or business account statements.

Q7. Can scrutiny notices be resolved online?

Yes, scrutiny proceedings are now mostly faceless and conducted online through the Income Tax e-proceedings portal. Taxpayers can log in, view notices, upload supporting documents, and respond directly without visiting the assessing officer. This process ensures transparency, convenience, and faster resolution.

Q8. What happens if I ignore a scrutiny notice?

Ignoring a scrutiny notice can lead to serious consequences such as penalties, reassessment, or a best judgment assessment under Section 144, where the assessing officer determines your taxable income without your input. Continued non-compliance may also result in prosecution or disallowance of deductions. Timely and accurate responses are therefore essential.

Q9. How does CBDT select returns for scrutiny?

The Central Board of Direct Taxes (CBDT) uses advanced data analytics and AI-driven risk parameters to identify cases for scrutiny. Factors include sudden spikes in income, undeclared transactions reported by banks, large deductions, property purchases, and discrepancies in AIS or TDS data. Random selection also occurs under the risk management system to ensure overall compliance.

Q10. Can I revise my return after receiving a scrutiny notice?

Once a scrutiny notice under Section 143(2) is issued, taxpayers cannot revise their return under Section 139(5). However, you can provide additional explanations, supporting documents, or clarifications during the scrutiny process to justify your claims or rectify minor errors.

Q11. How long does the scrutiny process take?

The duration depends on the complexity of the case and the completeness of your responses. Generally, scrutiny assessments are completed within 12 months from the end of the financial year in which the notice was issued. Prompt submission of all required documents and timely replies can help in early closure.

Q12. How can TaxBuddy assist in handling scrutiny notices?

TaxBuddy provides end-to-end support for responding to scrutiny notices. Its experts help draft replies, prepare supporting documentation, and upload them accurately on the e-filing portal. The platform ensures compliance with deadlines and helps resolve cases efficiently, reducing stress and minimizing the risk of penalties or reassessment.