First thing to do is not to panic, so let’s go and understand notice of Income tax under 143(2)
So, what is notice under 143(2)?
The Income Tax Department issues a notice u/s 143(2) when an 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 a scrutiny carried out to confirm the correctness and genuineness of various claims, deductions, etc made in Income Tax Returns. The basic purpose of this scrutiny assessment is to ensure that the assessee has filed the return with the correct income and paid the tax accordingly.
Time limit for issuance of notice u/s 143(2) of Income Tax Act
National Faceless Assessment Centre (NFAC)/AO can issue notice u/s 143(2) of Income Tax Act for scrutiny assessment only up to a period of 3 months from the end of the financial year in which the assessee filed his return.
For example, Ms. A filed her return on 26.09.2022 for the FY 2021-22. In such a case, NFAC/AO can issue notice u/s 143(2) to Ms. A only up to 30.06.2023, being the date on which the three months period ends from the FY 2022-23, in which the said return was filed.
Types of notices u/s 143(2) of Income Tax Act
There can be 3 types of notices under Section 143(2), which are as follows:
1. Limited Scrutiny: This is a Computer-Assisted Scrutiny Selection (CASS) where cases are selected based on certain 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.
2. Complete Scrutiny: A complete scrutiny is carried out on the return filed along with all supporting documents. Cases are flagged based on CASS. The scope of scrutiny is not limited in these types of notices. However, the assessing officer cannot verify documents beyond the particular assessment year.
3. Manual Scrutiny: Cases are selected for complete scrutiny based on the criteria defined by the Central Board of Direct Taxes; the criteria may vary year after year.
How does this work?
NFAC/AO can issue notice u/s 143(2) of the Income Tax Act to carry out scrutiny of income tax return u/s 143(3). The assessee or his tax representative(s) will have to submit online response to notice issued u/s 143(2) by uploading evidence and arguments in your favour, as an when asked by NFAC/AO.
After examining all the evidence, NFAC/AO will pass an assessment order determining the total tax payable or refundable to the assessee after taking into account all the evidence produced.
Time limit for issuance of the final assessment order u/s 143(3) or Closure of assessment proceedings
For Assessment year 2021-22 and onwards: a period of 9 months from the end of the assessment year.
For example, if Ms. ABC filed her return on 26.09.2022 for the financial year 2021-22. In such a case, the NFAC/AO can issue notice u/s 143(2) to Mr. ABC on 30.06.2023 then the NFAC/AO will have to pass an order by 31-12-2023.
Note: There were different timelines for Prior assessment years.
Consequences of not complying with the notice issued u/s 143(2)
If the assessee receives a notice from the I.T. Department and there is any default, he/she may be liable for the following:
1. 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 as per Sec 272A (1).
2. NFAC/AO can do best judgment assessment u/s 144 for the assessee.
What after 143(2) orders?
If order is passed against assessee, the assessee can go for appeal to CIT(A), ITAT, High Court or Supreme Court (As the case may be).
Note: There is no option to physically meet the assessing officer, this is possible only in search and seizure case, although an option is given for video conferencing with the NFAC/AO.
We hope the above blog was helpful in enhancing your knowledge on the matter. In case of any queries feel free to get in touch with our team of experts.
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CA Umang Jain
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umang@caumang.com
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