Notice u/s 143(2) – Real Income Tax Assessment

When is notice u/s 143(2) issued?

The Income Tax Department issues a notice under section 143(2) to the taxpayer when their Income Tax Return has been selected for a detailed assessment or scrutiny assessment under Section 143(3) of the Income Tax Act, 1961. A scrutiny or detailed assessment as per the prescribed section means that the taxation department conducts a scrutiny or verification process to confirm that the claims and deductions made by the taxpayer in the returns are true and correct. Such assessments are also called as Real Income Tax Assessment as they are conducted to verify the genuineness of the taxpayers paid amount of taxes on the incurred income. The main purpose behind the scrutiny assessment is to ensure and check the following-

·         That the taxpayers have filed their correct income in the Income Tax Return.

·         That accurate and appropriate taxes levied on the income incurred by the taxpayer have been paid accordingly.

·         That the income has not been understated by the taxpayer in the returns.

·         That in any manner the taxes have not been under-paid.

·         The losses have not been computed excessively.

 

 

Time limit for issuing the Notice under Section 143(2) for Scrutiny Assessment:

 

The Assessing Officer of the Income Tax Department issues a notice for Scrutiny Assessment under Section 143(2) within six months from the date of end of the concerned financial year or assessment year for which the taxpayer has furnished the returns. Notices after the end of six months cannot be served to the taxpayer.

 

Process of Scrutiny Assessment:

 

The process of scrutiny assessment commences in the following steps-

·         Step 1: The Assessing Officer issues a notice under Section 143(2) for Scrutiny Assessment within 6 months from the date of end of the assessment year or financial year for which the returns were filed and furnished by the taxpayer or assesses.

·         Step 2: The taxpayer or their representatives have to appear before the Assessing Officer and place all the relevant arguments and required evidences.

·         Step 3: Once the evidences and arguments have been heard by the Assessing Officer, he passes an order of assessment determining the total payable taxes and refund amount to the assesses.

 

Consequences of not complying with Scrutiny Assessment Notice:

 

If a taxpayer receives a scrutiny notice from the Income Tax Department under section 143(3), they must reply to the same and never ignore it in any case or scenario. In case of any default, the taxpayer is liable for the following-

·         The AO can make Best Judgment Assessment under Section 144 of the Act.

·         Under Section 271(1)(b), a penalty amounting to Rs.10,000 will be levied on the taxpayer or even a prosecution can be set up against them.

·         After the 1^st April, 2017 for all the commenced assessment years, the penalty is being levied as per Section 272A (1).

 

Related Articles: How to file Reply to Income Tax Notice

 

Final order of Scrutiny Assessment under Section 143(3):

 

After the whole arguments and evidences presented by assesses are considered by the AO in the Scrutiny Assessment, taking them in account the AO makes an assessment report about the total income, payable sum, losses and due taxes of the taxpayer. He passes a Final order stating the suggestions and recommendations as per section 143(3) of the Income Tax Act, 1961, to be complied by assesses.