A Section 143(2) notice formally opens scrutiny assessment, allowing the Assessing Officer to examine your return in depth. It must be issued within 6 months from the end of the financial year in which the return was filed; any notice issued after this deadline is void and invalid.
Section 143(2) Scrutiny Notice: Time Limit and How to Reply
A Section 143(2) notice is the formal opening move in a scrutiny assessment – the point at which the Assessing Officer (AO) steps beyond the CPC’s automated check and takes a close look at your return. The notice is valid only if issued within 6 months from the end of the financial year in which the return was filed. A notice issued even one day beyond this deadline is void, and any resulting assessment order is invalid. Most scrutiny assessments are now conducted under the Faceless Assessment Scheme through the e-proceedings portal at incometax.gov.in. This guide covers why returns are selected, the two scrutiny types, the full timeline, and how the assessment proceeds from the first notice to the final order.
Key Takeaways: Section 143(2) at a Glance
- Jurisdictional deadline: 6 months from end of the FY in which the return is furnished. For AY 2025-26 (return filed in FY 2025-26): 30 September 2026. A late notice is void – challenge it immediately.
- Two scrutiny types: Limited scrutiny (CASS – one or two specific issues) and Complete scrutiny (full examination of the entire return).
- Faceless Assessment: All proceedings are through the National Faceless Assessment Centre (NaFAC) under Section 144B – no physical visit from or to the AO for most taxpayers.
- Assessment completion: Section 143(3) order must be passed within 12 months of end of AY. For AY 2025-26: by 31 March 2027.
- Consequence of 143(2): Followed by Section 142(1) document demands and a Show Cause Notice (SCN) before the final order.
- Non-compliance risk: Ignoring a 143(2) notice leads to best-judgment assessment under Section 144 – the AO estimates income without your inputs.
- Appeal route: Assessment order under Section 143(3) is appealable to CIT(A) under Section 246A within 30 days of the demand notice.
Contents
- What Is a Section 143(2) Scrutiny Notice and Who Can Issue It?
- Why Does the Income Tax Department Select Returns for Scrutiny Under Section 143(2)?
- What Is the Time Limit for Issuing a Section 143(2) Scrutiny Notice?
- What Is the Difference Between Limited Scrutiny and Complete Scrutiny Under Section 143(2)?
- What Happens During a Faceless Scrutiny Assessment Under Section 144B?
- How Do You Respond to a Section 143(2) Scrutiny Notice on the E-Filing Portal?
- What Are the Most Common Questions About Section 143(2) Scrutiny Notices?
What Is a Section 143(2) Scrutiny Notice and Who Can Issue It?
Section 143(2) of the Income Tax Act 1961 empowers the AO to serve a notice on an assessee requiring them to produce evidence or documents supporting the income, deductions, and claims made in the return. This notice formally opens scrutiny assessment proceedings – it is the jurisdictional trigger that gives the AO the authority to examine the return in depth and ultimately pass an assessment order under Section 143(3).
Under the Faceless Assessment Scheme (Section 144B, effective from 13 August 2020), most Section 143(2) notices are now issued by the National Faceless Assessment Centre (NaFAC) rather than the local jurisdictional AO. The NaFAC allocates each case to an Assessment Unit (AU) in any city in India, meaning the officer examining your return may be in a different city from where you filed. All communication happens electronically through the e-proceedings section of the income tax e-filing portal.
| Feature | Section 143(1) Intimation | Section 143(2) Scrutiny Notice |
|---|---|---|
| Issuing authority | CPC, Bengaluru (automated, no human) | NaFAC / jurisdictional AO (human assessment) |
| Time limit to issue | 9 months from end of FY of return filing | 6 months from end of FY of return filing |
| What it examines | Only 6 arithmetic/AIS adjustments under 143(1)(a) | Full return – any income, deduction, or claim |
| Followed by | Refund, demand, or no-change intimation; no further action unless Section 154 or appeal needed | Section 142(1) document notices, Show Cause Notice, and finally Section 143(3) order |
| Final output | 143(1) intimation (not an assessment order) | 143(3) assessment order (a full assessment order) |
| Remedy against adverse outcome | Section 154 rectification or Section 246A appeal | Section 246A appeal to CIT(A) within 30 days of demand notice |
Why Does the Income Tax Department Select Returns for Scrutiny Under Section 143(2)?
CBDT (Central Board of Direct Taxes) issues annual scrutiny guidelines that specify the categories of returns to be selected for scrutiny. Selection happens through two channels: CASS (Computer Aided Scrutiny Selection) and manual selection by AOs.
CASS: Computer Aided Scrutiny Selection
CASS is an algorithmic risk-scoring system that analyses each filed return against multiple parameters and assigns a risk score. Returns above a certain risk threshold are selected for limited scrutiny on the specific flagged parameter, while the highest-risk returns are selected for complete scrutiny. The CASS system cross-references the return with:
- Annual Information Statement (AIS) and Form 26AS data – mismatches between declared income and reported transactions
- Statement of Financial Transactions (SFT) data from banks, registrars, mutual funds, and stock exchanges
- GST returns – comparison of turnover declared in ITR vs. GST turnover in GSTR-3B
- Prior year assessment history – whether additions were made in earlier assessments
- High-value transactions – property purchases above Rs 30 lakh, cash deposits above Rs 10 lakh, share transactions above certain thresholds
- Sector-specific parameters – CBDT identifies high-risk industry segments and applies additional scrutiny filters for those sectors each year
Mandatory Scrutiny Categories
CBDT’s annual scrutiny guidelines also specify categories that must be selected for scrutiny regardless of CASS scores. These mandatory categories typically include:
High-Risk Mandatory Categories
- Cases where search and seizure under Section 132 was conducted
- Cases with survey under Section 133A with impounded books
- Returns filed after receiving a Section 148 notice
- Cases where the AO has specific intelligence or information about concealment
- Cases referred by the Director General of Income Tax (Investigation)
Risk-Based CASS Categories
- Large deductions claimed (80C, 80G, 80-IA/IB/IC) inconsistent with income level
- Claimed capital loss on securities with high turnover
- Refund claims above a threshold amount
- Turnover mismatch between ITR and GST returns
- Income-to-expenditure ratios outside sector norms
- Transactions with entities on the CBDT high-risk list
Manual Selection by AO
Beyond CASS, the jurisdictional AO can select returns for scrutiny manually when they have specific information suggesting that the return is incorrect. This is done through a separate approval process and is less common than CASS selection. Under the Faceless Assessment Scheme, manual selection by the local AO has been significantly curtailed.
Why Knowing Your CASS Selection Category Matters for Your Response
The distinction between limited scrutiny and complete scrutiny directly determines the scope of your engagement. If your return is selected for limited scrutiny on a specific CASS parameter – for example, “mismatch between GST turnover and ITR turnover” – the AO is legally restricted to examining only that mismatch. You only need to explain and document the specific discrepancy; you do not need to justify your entire return. Knowing the CASS category also tells you what evidence to prepare: for a turnover mismatch, prepare GST returns, books of accounts, and a reconciliation statement; for a capital gains discrepancy, prepare broker statements and capital gain computation. The limited scrutiny notice will state the specific issue on its face. If it does not clearly state the issue, raise a query on the e-proceedings portal asking the AO to specify the limited scrutiny parameter before responding.
What Is the Time Limit for Issuing a Section 143(2) Scrutiny Notice?
The time limit is embedded in the statute: Section 143(2) states that “no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return was furnished.” This is a jurisdictional condition – not a procedural guideline – and its violation makes the notice and resulting assessment void.
| Assessment Year | Return Normally Filed In (FY) | End of Filing FY | 143(2) Deadline HARD LIMIT | 143(3) Order Deadline (Section 153) |
|---|---|---|---|---|
| AY 2025-26 | FY 2025-26 (Jul-Oct 2025) | 31 Mar 2026 | 30 Sep 2026 | 31 Mar 2027 |
| AY 2026-27 | FY 2026-27 (Jul-Oct 2026) | 31 Mar 2027 | 30 Sep 2027 | 31 Mar 2028 |
| AY 2024-25 (return filed late, in FY 2025-26 after condonation) | FY 2025-26 (say Dec 2025) | 31 Mar 2026 | 30 Sep 2026 | 31 Mar 2027 |
How to Verify Whether a 143(2) Notice Is Time-Barred
The date of the notice is stated on the notice document itself and in the e-proceedings portal entry. Calculate whether this date falls within 6 months of 31 March of the year in which you filed the return. If the notice is dated 1 October 2026 for a return filed in FY 2025-26, it is issued the day after the 30 September 2026 deadline and is time-barred. Raise the jurisdictional objection in your very first response on the e-proceedings portal. Do not wait for the assessment order to be passed before challenging the notice – courts have held in several cases that a challenge to jurisdiction must be raised at the earliest opportunity or it may be treated as waived.
Effect of an Extended Return Filing Date
When CBDT extends the ITR filing due date (as it frequently does for audit cases or in years with system issues), the 143(2) timeline also shifts. If the due date is extended to 30 November 2025 for non-audit taxpayers for AY 2025-26, and the return is filed on 25 November 2025 (still in FY 2025-26), the 6-month clock still runs from 31 March 2026, giving a 143(2) deadline of 30 September 2026. The extension of the filing date does not extend the 143(2) period.
What Is the Difference Between Limited Scrutiny and Complete Scrutiny Under Section 143(2)?
| Feature | Limited Scrutiny | Complete Scrutiny |
|---|---|---|
| Selection basis | CASS identifies one or two specific high-risk parameters in the return | CASS identifies the entire return as high-risk, or mandatory categories (search cases, intelligence-based), or AO has specific information |
| Scope of examination | Only the specific issue(s) stated in the notice; AO cannot go beyond without PCIT/CIT approval | The entire return – all income heads, all deductions, all transactions |
| Documents demanded | Only documents relevant to the flagged issue | Full books of accounts, all schedules, all transaction documentation |
| Duration | Typically shorter – one or two rounds of 142(1) queries for the specific issue | Typically longer – multiple rounds of queries; may include special audit under 142(2A) |
| Conversion to complete scrutiny | Requires written approval from PCIT/CIT; AO cannot convert unilaterally | Not applicable – already at full scope |
| Assessee strategy | Respond only to the stated issue; politely but firmly refuse to provide unrelated documents | Prepare comprehensive documentation covering all income heads and deductions |
How to Read a Limited Scrutiny Notice
A limited scrutiny notice under CASS will typically mention a phrase like “The return has been selected for limited scrutiny on the issue of [specific issue].” Common limited scrutiny issues include: turnover as per ITR is lower than turnover as per GST returns; cash deposits during demonetisation period not explained; capital gains on sale of immovable property exceeds threshold; refund claim is disproportionately large relative to income; mismatch between rent income declared and TDS deducted by tenant. If you receive a limited scrutiny notice and the stated issue is narrow, confine your response exclusively to that issue and document it thoroughly. Any queries from the AO that go beyond the stated scope should be met with a written objection citing the limited scrutiny designation.
What Happens During a Faceless Scrutiny Assessment Under Section 144B?
The Faceless Assessment Scheme under Section 144B restructured the entire scrutiny process to eliminate the taxpayer-AO interface. Here is the sequence of events from the 143(2) notice to the final assessment order:
How Do You Respond to a Section 143(2) Scrutiny Notice on the E-Filing Portal?
Ignoring a Section 143(2) Notice Leads to Best-Judgment Assessment Under Section 144
If an assessee fails to respond to a Section 143(2) notice or fails to comply with subsequent Section 142(1) notices, the AO is empowered to pass a best-judgment assessment under Section 144. In a best-judgment assessment, the AO determines the assessee’s total income and tax liability on their own estimate, without being bound by what the return states. The AO uses available information – Form 26AS, AIS, SFT data, industry profit ratios, and comparable cases – to arrive at an assessed income that is typically far higher than the declared income. A best-judgment assessment under Section 144 carries the same appeal rights as a Section 143(3) order, but the burden of proof in the appeal is reversed: the assessee must prove that the AO’s estimate is excessive, rather than the Department needing to prove that income was under-declared. For business owners, also ensure that records demanded under Section 142(1) include the documentation needed to support deductions such as Section 40(b) partner remuneration and Section 43B(h) MSME payment compliance, both of which are frequently examined during complete scrutiny.
What Are the Most Common Questions About Section 143(2) Scrutiny Notices?
Can the AO issue a Section 143(2) notice after the 6-month deadline has passed?
No – the 6-month deadline is a jurisdictional bar, not a procedural guideline. The proviso to Section 143(2) categorically states that “no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return was furnished.” A notice issued even one day after this deadline is void ab initio, and any Section 143(3) assessment order passed on the basis of such a void notice is also void and liable to be quashed. The Supreme Court and multiple High Courts have consistently upheld this position. If you receive a 143(2) notice that you believe is time-barred, raise the jurisdictional objection in your very first response on the portal – not just in an appeal after the assessment order. See our series on income tax notices, including the Section 143(1) intimation guide, for the broader assessment timeline context.
What is the difference between a Section 143(2) scrutiny notice and a Section 148 reassessment notice?
Section 143(2) opens a fresh assessment for a return that is currently in the regular assessment window. No pre-existing finding of escaped income is needed – the AO selects the return based on CASS risk scores or mandatory categories and issues the notice within 6 months of the end of the FY of filing. Section 148 is used to reopen an already-assessed year or a year for which the regular assessment window has closed. It requires the AO to have “information which suggests that income has escaped assessment,” to record reasons, and to obtain prior approval from a specified higher authority (Specified Authority under Section 151). Section 148 has its own time limits: 3 years from end of AY for escaped income below Rs 50 lakh; 5 years for Rs 50 lakh and above with specific evidence; and 10 years for foreign assets or foreign income. A Section 143(2) scrutiny is a routine tool; a Section 148 notice signals a specific, evidence-based suspicion of under-reporting.
Can the AO expand the scope from limited scrutiny to complete scrutiny?
Not without prior written approval from the PCIT or CIT. When a return is selected for limited scrutiny through CASS on a specific issue, the AO is legally confined to examining only that issue. CBDT Instruction No. 5/2016 and subsequent annual circulars on scrutiny guidelines explicitly provide that conversion of a limited scrutiny case into a complete scrutiny case requires prior written approval from the PCIT/CIT specifying the reasons. If the AO starts asking questions or making additions beyond the stated limited scrutiny issue without obtaining this approval, raise the procedural objection in writing on the e-proceedings portal. Any addition made beyond the limited scrutiny scope without the required prior approval is vulnerable to deletion at the appellate level. Keep a record of the original limited scrutiny notice and refer to it in all your responses so the confined scope is always on record.
What is the Show Cause Notice before the final assessment order and how should you respond?
Under Section 144B of the Faceless Assessment Scheme, before passing an assessment order that is adverse to the assessee, the NaFAC must issue a Show Cause Notice (SCN) giving the assessee at least 15 days to respond. The SCN will identify each proposed addition and the basis for it. Responding effectively to the SCN is the single most important act in the entire scrutiny proceeding. Your SCN response should: (a) address each proposed addition separately; (b) submit all supporting documents not already on the portal record; (c) cite the relevant section of law and explain why the proposed addition does not satisfy the legal requirements for that section; (d) cite binding High Court or Supreme Court judgments in your jurisdiction supporting your position; and (e) explicitly request that any document or case law submitted be considered before the order is passed. A thorough SCN response reduces or eliminates additions before the order is issued, which is always better than winning an appeal after a bad order is passed. See our guide on the Section 139(9) defective return timeline for how the CPC proceedings that precede scrutiny fit into the overall assessment framework.
Does completing a scrutiny assessment under Section 143(3) prevent future reassessment under Section 148?
It significantly raises the threshold but does not provide complete protection. Once a Section 143(3) order is passed, the AO cannot reopen the same year under Section 147/148 merely because they have a “change of opinion” about the same facts that were before them during the scrutiny. The Supreme Court in Calcutta Discount Co. held that if all material facts were disclosed and the AO passed an order under Section 143(3), a later reassessment based on re-evaluation of the same material amounts to a change of opinion and is impermissible. However, if genuinely new information emerges after the assessment – such as evidence from a search operation (Section 132), information from a foreign tax authority under DTAA, or SFT data that was not available at the time of the original assessment – the AO can use that new information as the basis for a Section 147/148 notice. Full and frank disclosure of all material facts during the 143(2) scrutiny proceeding is therefore the strongest protection against future reassessment, as it establishes the “change of opinion” defence on the fullest possible record. For MSME certificate holders, ensure Udyam Registration details and related MSME documentation are disclosed during scrutiny if relevant to income or deductions being examined.
CA Madhusmita Padal is a Practicing Chartered Accountant with firms based in Odisha and Chennai. She specializes in taxation, company law, and auditing. She is passionate about simplifying complex concepts and making knowledge accessible to all.