Section 143(2) scrutiny notice, what to do in the first 48 hours.

CPC Bengaluru uses algorithmic selection parameters to flag returns for scrutiny. Common triggers:

• Large deductions / exemptions relative to total income — Section 80C maxed, HRA at ceiling, 80G claims, Section 54 property reinvestment.
• Mismatch between ITR and Form 26AS / AIS — interest income not reported, TDS claimed higher than reported, capital-gains transactions not matching.
• High-value transactions — cash deposits, property purchases, foreign remittances, mutual fund transactions above thresholds reported via SFT (Specified Financial Transactions).
• Business income with low profit margin — turnover reported but net profit is suspiciously low.
• Foreign assets / income — Schedule FA entries, foreign remittances, foreign bank accounts.
• Random statistical selection — CBDT publishes annual scrutiny selection parameters; some returns are picked at random.

Two types of scrutiny:

• Limited scrutiny — AO examines specific issues flagged in the notice (e.g., only HRA, or only capital gains). Faster, narrower.
• Complete scrutiny — AO examines the entire return. Longer, broader document calls.

Section 143(2) notice must be served within 3 months from the end of the FY in which the return was furnished.

Assessment under Section 143(3) completed within 12 months from the end of the FY in which the return was furnished (longer for complex / cross-border cases).

Response window after 143(2) notice: specified in the notice, typically 15-30 days for initial response. Additional document calls follow. The Department has discretion to extend the overall assessment timeline.

Faceless Assessment Scheme: since 2020, most individual scrutiny is conducted via the Faceless Assessment Scheme (National Faceless Assessment Centre, Delhi). All communication via e-filing portal; no physical appearance in most cases. The AO is not disclosed to the taxpayer.

1. Do NOT ignore. Non-response is treated as acceptance of the Department's view; best-judgment assessment under Section 144 follows, typically unfavorable.
2. Read the notice carefully. Identify (a) notice type: limited or complete scrutiny, (b) specific issues flagged, (c) response deadline, (d) e-filing portal reference number.
3. Pull together initial documents: original ITR filing acknowledgement, Form 16, Form 26AS, Form AIS, bank statements for the AY, all deductions-supporting proofs.
4. Engage a CA before responding. The first response sets the tone of the proceeding. Over-sharing creates new areas of inquiry; under-sharing invites adverse inference.
5. Draft a measured first response addressing only the specific flagged issues (for limited scrutiny) with the exact documents requested. Do not volunteer additional information.
6. File the response via e-filing portal within the deadline (or request extension if genuinely needed; granted judiciously).
7. Prepare for follow-up queries. First response rarely closes the matter — AO typically asks 1-3 rounds of further queries.

Accept the return as filed — happens in a meaningful minority of scrutiny cases where documentation is clean.

Minor additions — small disallowances of specific expenses, interest additions, small refunds reduced. Common and settled via acceptance.

Material additions — AO disallows large deductions, adds unreported income, imputes business profit margins. Resulting demand can be material. Response: appeal via CIT(A) within 30 days.

Section 68/69/69A additions — AO classifies unexplained cash, investment, or expenditure as income. These are harder to defend; strong documentation + logical commercial narrative essential.

Penalty under Section 270A — if AO concludes under-reporting (50% penalty) or misreporting (200% penalty). Appealable.

If the Section 143(3) order adds material income or imposes penalty, you have:

1. Rectification under Section 154 if there is a mistake apparent from record. 4-year window.
2. Appeal to CIT(A) under Section 246A within 30 days of the order. First appellate level.
3. Appeal to ITAT (Tribunal) under Section 253 if CIT(A) order unfavorable, within 60 days.
4. Appeal to High Court under Section 260A on substantial questions of law. Narrow scope.

Each stage requires different legal support. BQP handles up to CIT(A); for ITAT and above, we co-ordinate with tax counsel. Last updated: 2026-10-10.