Scrutiny Assessment Notice — Section 143(2)

What is This Notice?

A Section 143(2) notice is issued by the Assessing Officer (AO) when your Income Tax Return has been selected for scrutiny assessment — a detailed, line-by-line examination of your return to verify that income has been correctly reported, deductions legitimately claimed, and taxes accurately computed. It is a formal intimation that the AO intends to carry out a scrutiny assessment under Section 143(3) of the Income Tax Act, 1961.

The scrutiny assessment process involves the AO examining specific aspects of your return and calling for supporting documents, explanations, or clarifications related to those areas. You will have the opportunity to present your case, submit evidence, and respond to any adverse findings before the assessment is finalised.

How Are Returns Selected for Scrutiny?

Returns are selected for scrutiny through two main routes:

• CASS (Computer Aided Scrutiny Selection): The majority of scrutiny cases are selected through the CASS system, which is an automated, risk-based algorithm run by the Income Tax Department. CASS analyses returns against various parameters such as significant year-on-year variations in income, high-value deductions, mismatches between Form 26AS / AIS data and the return, unusual ratios, high refund claims, or returns falling within specific risk profiles identified by the Department. Selection by CASS does not indicate any wrongdoing — it is a data-driven process.
• Manual Selection: In a smaller number of cases, the AO may select a return manually based on specific intelligence, information received from a third party, survey findings, search and seizure operations, or information shared by other government agencies. Manual selection cases may indicate a specific concern the Department has about your return and may warrant more careful handling — professional advice is strongly recommended in such cases.

Deadline to Respond

CBDT Guidelines on Scrutiny Timelines

The Central Board of Direct Taxes (CBDT) has laid down important procedural guidelines that govern the scrutiny assessment process:

• The notice under Section 143(2) must be served within the prescribed limitation period — under the IT Act 2025, this is within 3 months from the end of the financial year in which the return was furnished. A notice served beyond this period is invalid and cannot be acted upon.
• Under the Faceless Assessment Scheme, the assessment is conducted electronically without any physical interface between the taxpayer and the AO. All communications are through the e-filing portal.
• The taxpayer has the right to seek an adjournment or extension for submitting responses, which must be requested in writing before the deadline. The AO has discretion to grant or refuse extensions.
• The taxpayer has the right to be heard and to present their case through written submissions, documents, and where permitted, a personal hearing (now virtual under the faceless scheme).
• A draft assessment order with proposed additions or disallowances must be shared with the taxpayer before the final order, giving the taxpayer an opportunity to object under Section 144B.

What to Submit in Response

Section 143(2) notices typically cover one or more of the following broad areas, depending on the nature of your return and the basis of selection:

• Large or unusual deductions under Chapter VI-A (80C, 80D, 80G, 80TTA, etc.)
• Business income or profession income — gross receipts, expenses, net profit ratios
• Capital gains — computation, cost of acquisition, indexation, exemptions claimed
• Foreign assets or foreign income disclosure
• High-value cash transactions or deposits not matching income levels
• Mismatch between TDS credit claimed and Form 26AS / AIS data
• Large refund claims
• Loans, gifts, or cash credits received during the year
• Income from house property — rent received, interest on home loan
• Agricultural income claimed

For each query raised by the AO, you should submit:

1. A written explanation or reply addressing the specific point raised, clearly cross-referenced to the relevant item in the notice or questionnaire
2. Supporting documentary evidence such as bank statements, invoices, agreements, certificates, receipts, Form 16, Form 26AS, AIS, or any other relevant documents that substantiate your position
3. Computation or working sheets where the query involves a calculation, such as capital gains computation, depreciation schedule, or deduction working, presented clearly and reconciled with the figures in your return

Reply Template — Section 143(2) Scrutiny Notice

This template is designed for the faceless assessment regime. Responses are submitted through the Income Tax e-filing portal under “Pending Actions → e-Proceedings.” The covering letter below should accompany all document submissions. Customise each section with your specific details.

To,
The National Faceless Assessment Centre (NFAC) /
The Assessing Officer,
[As addressed on the notice],
Income Tax Department

Date: [DD/MM/YYYY]

Subject: Reply to Notice under Section 143(2) of the Income Tax Act, 1961
         (Section 270(8) of the Income Tax Act, 2025)
         PAN: [Your PAN] | Assessment Year: [AY XXXX-XX]
         Notice Reference / DIN: [As shown on the notice]
         Date of Notice: [DD/MM/YYYY]

Sir / Madam,

I / We, [Full Name / Name of Firm / Company], PAN [XXXXXXXXXX], hereby
acknowledge receipt of the notice dated [DD/MM/YYYY] issued under Section
143(2) of the Income Tax Act, 1961, selecting my / our return for Assessment
Year [AY XXXX-XX] for scrutiny.

2.  BACKGROUND
    The Income Tax Return for AY [XXXX-XX] was filed on [date of filing]
    vide acknowledgement number [ITR-V acknowledgement number], declaring
    a total income of Rs. [amount] and tax paid of Rs. [amount]. The return
    was filed under the [regular / revised] provisions of the Act.

3.  REPLY TO QUERIES
    The notice / questionnaire dated [DD/MM/YYYY] has raised the following
    queries, which are addressed point-by-point below:

    Query 1: [Reproduce the exact query as stated in the notice]

    Reply 1: [Your detailed, factual reply addressing this specific query.
    Be precise and factual. Do not volunteer information beyond what is
    asked. State figures with source references.]

    Supporting Documents: Enclosed as Annexure 1.

    Query 2: [Reproduce the exact query]

    Reply 2: [Your reply]

    Supporting Documents: Enclosed as Annexure 2.

    [Continue for all queries raised in the notice]

4.  DOCUMENTS ENCLOSED
    The following documents are enclosed herewith in support of the above
    replies:

    Annexure 1: [Description, e.g., Bank statements for FY XXXX-XX
                  (Account No. XXXXXXXX, [Bank Name])]
    Annexure 2: [Description, e.g., Form 16 issued by employer /
                  TDS certificate]
    Annexure 3: [Description, e.g., Purchase and sale agreement for
                  property / capital asset]
    Annexure 4: [Description, e.g., Computation of capital gains with
                  indexation working]
    Annexure 5: [Description, e.g., Receipts / certificates for
                  deductions claimed under Chapter VI-A]
    [Add further annexures as required]

5.  RECONCILIATION WITH ITR / FORM 26AS / AIS
    [If applicable] The figures declared in the ITR reconcile with the
    Form 26AS and AIS data as follows:

    Income as per ITR:                Rs. [amount]
    Income as per AIS / Form 26AS:    Rs. [amount]
    Difference, if any:               Rs. [amount]
    Reason for difference (if any):   [Explanation]

6.  ADDITIONAL SUBMISSIONS
    [Include any additional facts, legal provisions, judicial decisions,
    or CBDT circulars that support your position, if relevant to the
    queries raised.]

7.  I / We submit that the return filed for AY [XXXX-XX] is correct and
    complete in all material respects. All income has been duly declared
    and taxes have been correctly computed and paid. I / we trust that
    the above reply and the enclosed documents will be found in order and
    that the assessment may be completed accordingly.

    Should any further information or clarification be required, I / we
    will be happy to furnish the same.

Yours faithfully,

[Full Name]
[Designation: Proprietor / Partner / Director / Individual]
[Name of Firm / Company, if applicable]
PAN: [XXXXXXXXXX]
Address: [Full address with PIN code]
Contact: [Mobile number] | [Email address]
Date: [DD/MM/YYYY]
Place: [City]

---
Enclosures:
Annexure 1 through Annexure [X] as listed above.
Total pages enclosed: [Number]
        

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