How to Respond to Notice Under Section 143(2)?

• Section 143(2) notice is issued by the Income Tax Department to carry out a scrutiny assessment on your tax returns.
• There are three types of notices under Section 143(2) of Income Tax Act that you can receive.
• If you receive a notice, you have to respond to it by submitting the relevant documents.
• Not responding to the notice under Section 143(2) of Income Tax Act might result in a penalty, prosecution, or best judgment assessment.

If you have received a notice under Section 143(2) of Income Tax Act and are worried about it, don’t. Notices issued by the IT department need not always be scary. They are usually a reminder of any tax error being made by you and a request to rectify the same within the given time. All you need to do is understand the nature of the issued notice and respond to it in a correct and timely manner.  So, if a notice under Section 143(2) of Income Tax Act, 1961has been issued to you, don’t worry; instead, try and understand what it is andhow to respond to notice u s 143(2).

When a notice under section 143(2) of Income Tax Act is issued, it is important to respond within the stipulated section 143(2) of Income Tax Act time limit . Failure to do so can result in serious repercussions from the Income Tax Department. Here are the key consequences of not responding:

Penalty Imposition

You may be liable to pay a penalty of ₹10,000 under section 271 (1)(b) for failing to comply with the notice.

Prosecution Proceedings

In cases of deliberate tax evasion, the Income Tax Department may initiate prosecution, leading to further legal troubles.,br/>

Best Judgment Assessment

The Assessing Officer can pass a best judgment assessment under section 144 , where the tax payable is determined based on available information, potentially resulting in a higher tax liability than appropriate.

Regulatory Non-Compliance

Ignoring the notice reflects non-compliance with income tax section 143(2) regulations, affecting your tax record and future filings.Responding to the notice properly and within the section 143(2) of Income Tax Act time limit helps you avoid these consequences and ensures your tax affairs are in order

Section 143(2) of Income Tax Act is a legal notice issued to you by the income tax department when they find minor or major discrepancies in your annual tax returns. The notice is issued by the department to make sure that you have not underpaid your taxes for any given year and also ensure that the income or losses you reported are correct and are not over- or under-reported.
The income tax department issues such a notice when they observe a mismatch in your tax return file and select it for scrutiny assessment or detailed assessment u/s 143(3). The main objective is to scrutinise your account and confirm that the claims or deductions made by you are genuine and that you have paid your liable tax amount in full.

Some of the salient features of the section are as follows:

• A notice under Section 143(2) of Income Tax Act can be issued any day between the last date of the financial year and 3 months from then.
• The notice is issued in PDF format and sent via e-mail.
• The notice under Section 143(2) of Income Tax Act cannot be issued if you haven’t filed your IT returns for the year. The AO will first have to issue a notice u/s 143(1) asking you to file your tax returns.
• Only the Assessing officer or the AO is authorised to issue a Section 143 (2) Notice and is expected to conduct a detailed enquiry of the same.

Also Read: Penalty for Filing Income Tax Return Late

Three types of notices are issued under section 143(2) of Income Tax Act. They are as follows:

Limited scrutiny

This is computer-assisted scrutiny selection (CASS), whereby cases are selected based on pre-set parameters such as inaccurate returns or mismatched information. Limited scrutiny is restricted to a limited area for scrutiny.

Complete scrutiny

Under this method, complete scrutiny is carried out on all cases flagged based on CASS and their filed returns and supporting documents are thoroughly verified/scrutinised by the AO. However, the AO does not have the authority to scrutinise any document which does not belong to the given financial year.

Manual scrutiny

Under manual scrutiny, cases are selected based on pre-defined parameters by the Central Board of Direct Taxes (CBDT). The parameters are not fixed and are subject to change year-on-year.

Notice u/s 143 (2) of Income Tax Act is issued when government officials sense a mismatch in your tax returns. So, when you receive a Section 143(2) notice, it becomes your duty as a responsible citizen to respond to it swiftly and rectify the errors. Here’s how to respond to notice u s 143(2)-

• Physically present before the AO all the evidence and place your arguments in their truest form, or,
• Upload all the evidence and arguments and submit an online response to the Section 143 2 Notice.
• You need to provide all the supporting documents like income proof-related documents, claims, deductions, reliefs, and allowances for cross-verification by the AO.
• After considering all the evidence and your arguments, the AO passes an assessment order determining the total tax to be paid by you or the balance refund amount to be given by you.

In case you fail to respond/reply to the notice under section 143 (2), you might have to face the following consequences:

• Penalty amounting to ₹10,000 under section 271(1)(b)
• Prosecution
• Best judgment assessment can be done under section 144.

Also Read : Income Tax Return - ITR Filing, Types, Process and Forms

Responding to a section 143(2) of Income Tax Act notice in a timely and accurate manner is essential to avoid penalties and legal troubles. It offers you an opportunity to clarify discrepancies in your tax return, provide necessary supporting documents, and correct any unintentional errors. Ignoring the notice can result in higher tax liabilities, penalties, or prosecution. At Aditya Birla Capital, we understand the complexity of tax assessments and the importance of responding to Income Tax Department notice properly. Our expert team can help you navigate the 143 (2) of Income Tax Act process smoothly, ensuring compliance and peace of mind.