How to Address a Notice Under Section 143(2) Effectively?
Updated: Oct 22
Getting a notice from the income tax department can trigger anxiety and confusion. Deciphering whether you need to address the notice and how to go about it can be a challenging task.
Table of Content
What is Notice u/s 143(2) of the Income Tax Act?
A notice under Section 143(2) is issued by the Income Tax Department when your Income Tax Return is selected for scrutiny assessment, specifically detailed assessment under Section 143(3). This scrutiny aims to verify the correctness and genuineness of claims, deductions, and other details in your return, ensuring there is no understated income, excessive loss, or underpayment of tax. The notice is typically issued within three months from the end of the financial year in which you filed the return.
Key Information About Section 143(2) Notices:
You will typically receive this notice in the form of a PDF sent to your registered email address, along with a postal copy. Income tax notices under the Faceless Assessment Scheme are uploaded straight onto the income tax site, which you can access by signing into your account. A notification via email and SMS regarding the issuance of said alerts will also be sent to your registered email address and registered mobile number.
If you haven't filed your tax returns for the financial year, the assessing officer cannot issue a Section 143(2) notice. They must first send a notice under Section 142(1) instructing you to file your returns.
Upon receiving a Section 143(2) notice, you must provide supporting documentation for the deductions, exemptions, allowances, reliefs, and other claims made in your tax returns.
Proof of all your sources of income is essential.
The assessing officer conducts a thorough examination.
Time Limit to Issue a Notice Under Section 143(2)
After an income tax return has been filed, but no later than three months after the end of the financial year in which the return was filed, the notice under Section 143(2) may be sent. Let's take an example where X filed his tax returns for the fiscal year 2022–2023 on July 31, 2023. Only until June 30, 2024, may the assessing officer issue a notification pursuant to Section 143(2). This is due to the fact that he is only able to send out the notice for a maximum of three months following the conclusion of the fiscal year 2023–24, which is the fiscal year for which X submitted the returns.
Time Limit for Final Assessment Order u/s 143(3)
The time limit for issuing the final assessment order under Section 143(3) varies depending on the assessment year. For assessments up to the financial year 2017-18, it's 21 months from the end of the assessment year. For the financial year 2018-19, it's 18 months, and for assessments from 2019-20 onwards, it's 12 months from the end of the assessment year.
Process of Responding to a Section 143(2) Notice
1. You have filed your income tax return.
2. The assessing officer issues a Section 143(2) notice.
3. You or your tax representative present arguments and submit required documents to the assessing officer.
4. After reviewing all submissions, a final order under Section 143(3) is issued, determining the tax payable or refund due.
Types of Section 143(2) Notices
Limited Scrutiny:
Cases selected through Computer-Assisted Scrutiny Selection (CASS) based on specific parameters. These cases involve inaccuracies or discrepancies in returns, and scrutiny is confined to particular areas, like foreign tax credit claims or property sales.
Complete Scrutiny:
A thorough examination of the filed return and all supporting documents, flagged based on CASS. Although this type has a broader scope, the assessing officer's document review is limited to the specific assessment year.
Manual Scrutiny:
Cases selected for comprehensive scrutiny according to criteria set by the Central Board of Direct Taxes, with variations each year.
Consequences of Ignoring the Notice
Ignoring a Section 143(2) notice is not advisable. Failure to respond can lead to:
A penalty of Rs. 10,000 under Section 272A for each non-compliance.
The assessing officer closing the assessment based on the information available, utilising the best judgment under Section 144.
A potential adjustment of your taxable income, resulting in higher taxes and penalties.
If you dispute the increased tax demand, you must pay at least 20% of the tax owed before filing an appeal with higher authorities.
Prosecution, and if found guilty, possible imprisonment.
Understanding the Final Order Under Section 143(3):
When a notice is issued under Section 143(2) of the Income Tax Act, it signifies a preliminary stage where the assessing officer requests the taxpayer to produce evidence related to their tax returns. Following this stage, the assessing officer evaluates the evidence presented and holds a hearing. Subsequently, the final order is issued under Section 143(3). This order serves to assess the taxpayer's total income or loss and determines any amount that is payable by the taxpayer or due to them based on the evidence and proceedings.
Conclusion
In essence, the final order under Section 143(3) is the concluding step in the scrutiny assessment process. It quantifies the taxpayer's tax liability or refund after a comprehensive evaluation of the provided evidence and a fair hearing.
FAQs
Q1. What triggers the issuance of a Section 143(2) notice?
A Section 143(2) notice is issued when discrepancies or inaccuracies are identified in your income tax returns. These can include underreported income or exaggerated losses.
Q2. How do I respond to a Section 143(2) notice?
Upon receiving the notice, gather and submit all relevant documents and proof supporting your income, deductions, exemptions, allowances, and other claims made in your returns. Ensure timely compliance.
Q3. Can I ignore a Section 143(2) notice?
Ignoring the notice is not advisable. Failure to respond can result in penalties, potential tax adjustments, and even legal consequences, including prosecution.
Q4. What is the timeframe for issuing a Section 143(2) notice?
The notice can be issued after you've filed your income
Q5. Will I receive a notice under Section 143(2) if I haven't filed my tax return?
No, if you haven't filed your tax return, a notice under Section 143(2) cannot be issued to you. In such situations, your case may be assessed under Section 144, which allows for the best judgment assessment by the tax authorities. Alternatively, an assessment can be carried out under the provisions of Section 147 in such cases
Q6. How will I receive this notice u/s 143(2)?
The notice under Section 143(2) is typically delivered through email in PDF format to the email address registered with the Income Tax Department. Additionally, a physical copy of the notice may be dispatched to your postal address. This dual delivery method ensures that you are informed of the notice through both electronic and traditional mail channels.
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