Section 143 Of The Income Tax Act, 1961

Section 143 of the Income Tax Act, 1961:

A Practical CA Guide to Intimations, Scrutiny Notices, and Assessment Orders

Introduction

Overview of Section 143

Section 143(1): Intimation Processing of the Return

Statutory Explanation

The Central Processing Centre (CPC) looks at every tax return that people file under Section 139 or when they get a notice. They check the return to make sure everything is correct. They fix mistakes like math errors. They also look at claims that're wrong and fix those too. If someone claims a loss but does not file their return on time the Central Processing Centre (CPC) will not allow that loss. They also do not let people use expenses to reduce income that is not taxed. The Central Processing Centre (CPC) adds income to the return that shows up on Form 26AS AIS or TIS. Is not included in the tax return.

The Central Processing Centre (CPC) sends a note to the person who filed the tax return within one year after the financial year ends. This note is, about the tax return that the Central Processing Centre (CPC) processed under Section 143(1).

Typical Process and Timeline

Upon filing, the return is submitted to CPC for automated processing. Within a few weeks to several months, CPC issues an intimation under Section 143(1) through registered email. The intimation will tell you one of three things:

* Your return is okay as it is.

* You owe tax.

* You will get a refund.

You have 30 days to respond if you disagree with any changes suggested.

After that a final intimation will be sent.

The intimation is, about your tax return.

The tax return is what you filed.

You need to check the intimation.

It tells you what you need to do.

Key Points CAs Must Check

• Match TDS credits in Form 26AS and AIS against credits claimed in the return.
• Verify that all income reported in AIS/TIS including interest, dividends, and capital gains is reflected in the return.
• Confirm that deductions claimed under Chapter VIA are within eligible limits and supported by applicable investment proofs.
• Ensure that MAT/AMT credit claims, advance tax paid, and self assessment tax challans are correctly entered in the return.
• Check that losses from prior years, if set off, are accompanied by the corresponding schedules.

Common Mistakes Related to Section 143(1)

1. Failure to reconcile AIS entries with the return before filing, resulting in CPC additions for unreported income.
2. When you claim TDS credit for amounts that are not shown in Form 26AS because the deductor did not file or the PAN was mismatched it can cause problems.
   You need to make sure that TDS credit is handled correctly especially when TDS credit is not reflecting in Form 26AS due to deductor nonfiling or mismatched PAN.
3.  Another mistake people make is entering tax payment details like the challan number, BSR code and date.
   This can lead to your credit being rejected so you have to be careful when you enter these details and make sure that the tax payment details are correct.
4. Some people claim deductions under sections like 80C, 80D or 80G without checking if they are eligible for these deductions when they prepare their return.
   You have to verify your eligibility for deductions under sections such as 80C, 80D or 80G before you claim them.
5.  You also need to disclose any income that's exempt from tax, like agricultural income or tax-free dividends in your return schedules.
   Omitting this information can cause problems so you have to make sure you include all the information, including exempt income like agricultural income or tax-free dividends.
6. If you do not file a condonation application when you respond late to a proposed adjustment notice your demand will be confirmed automatically.

Practical Corrective Actions

• You should check the AIS, TIS and Form 26AS with the draft return at least two weeks before you have to file it. This is an idea because it helps you find any mistakes.
• If you do not see the TDS credit in Form 26AS you need to ask the person who deducted the tax to file the TDS return or fix the mistake. At the time you should file an application under Section 154 to correct the intimation after the credit shows up in the system.
• Make sure you keep copies of all the documents that prove your investments, payment receipts and other supporting papers. This is important in case the CPC does not allow a deduction when they process your return.
• When you get a notice about a proposed adjustment you must respond within 30 days with the documents. You can submit your response through the e-proceedings portal. You should include a detailed explanation of your situation.
• If the tax department raises a demand you should file a request for rectification under Section 154 as soon as possible. You need to point out the mistakes of fact or law that you can see in the records of the tax department and do it quickly to avoid any more problems, with the Income Tax Return of the AIS, TIS and Form 26AS.

Section 143(2): Scrutiny Notice Initiation of Detailed Assessment

Statutory Explanation

The Assessing Officer has the power to send a notice to the person being assessed under Section 143(2) if the Assessing Officer thinks it is necessary. The Assessing Officer needs to do this to make sure the person being assessed has not said they have income than they really do or that they have not paid as much tax as they should or that they are asking for too much money back. This notice is very important because it starts the process of looking closely at the persons tax return. The Assessing Officer must give this notice to the person being assessed before a certain amount of time has passed. The notice under Section 143(2) is like a step, to looking very closely at the persons tax return.

Typical Process and Timeline

The income tax people are now sending out notices under Section 143(2) in a way. They are using the assessment mechanism under the eAssessment Scheme. When you get a notice it goes to your account on the income tax portal. You get it electronically.

The income tax people have to send out these notices within three months after the financial year ends. This is the deadline for sending out the notice under Section 143(2).

When you get a notice under Section 143(2) you have to do something. You have to send back a compliance response. You also have to send supporting documents. You do all this through the eproceedings module. You have to do it on time.

The eproceedings module is where you send your compliance response and supporting documents, for the notice under Section 143(2).

Practical Corrective Actions

• On receipt of the notice, immediately compute the response deadline and diarise all compliance dates.
• Prepare a point by point written reply addressing each issue raised; avoid broad denials and support each position with documentary evidence.
• Submit all documents in a structured, indexed manner through the eproceedings portal; retain acknowledgements.
• Where the notice is time barred, file a written objection at the first opportunity on the portal and retain it for any future appellate proceedings.
• Seek an adjournment through the portal if additional time is required to collate complex evidence; document the reason for the request.

Key Points Chartered Accountants Must Check

• Check the date when the notice was served to make sure it is within the time allowed by law. If the notice is served late it is not valid and the assessment cannot go ahead.
• Look at the reasons why the notice was sent to understand what exactly will be checked.
• Find out which transactions, income or deductions might be questioned and start collecting the documents.
• Make sure that all submissions are done through the eproceedings portal and keep a record of each submission.
• Check if the case was chosen for scrutiny by the Computer Assisted Scrutiny Selection system or if it is a case because the rules are different in each case.

 

Common Mistakes Related to Section 143(2)

• Chartered Accountants ignore the notice. Do not respond on time which can lead to an ex party order, under Section 144.
• Chartered Accountants give a reply that's not clear or does not answer the questions raised in the notice.
• Chartered Accountants do not give the documents with their response, which can result in extra taxes being added.
• Chartered Accountants do not challenge a notice that was served late which means they give up a valid reason to object.
• Chartered Accountants give information than they need to which can lead to more questions being asked about things that were not part of the original check.
• Chartered Accountants miss the deadline to respond without asking for time which can lead to bad results.

 

Sample Reply Template Section 143(2) Scrutiny Notice

To,

The Income Tax Officer / Deputy Commissioner of Income Tax,

[Designation and Address of AO / Faceless Assessment Unit]

 

Subject: Response to Notice under Section 143(2)  Assessment Year [AY]  PAN: [XXXXXXXXXX]

 

Sir/Madam,

 

With reference to the notice issued under Section 143(2) of the Income Tax Act, 1961, bearing reference number [Notice Reference No.] dated [Date], received on [Date of Receipt], the undersigned respectfully submits the following response:

 

1. The assessed, [Name], having PAN [XXXXXXXXXX], filed the return of income for Assessment Year [AY] on [Date of Filing], declaring a total income of Rs. [Amount] and tax payable of Rs. [Amount].

 

2. With respect to the issues/queries raised in the notice, the following clarifications and documents are submitted:

   (a) [Issue 1 as per notice]: [Explanation]  Supporting Document: [Describe]

   (b) [Issue 2 as per notice]: [Explanation]  Supporting Document: [Describe]

 

3. All relevant documents, books of account, and supporting evidence pertaining to the above are enclosed and uploaded on the eproceedings portal.

 

We request that the assessment be completed in accordance with the submissions made above. The assessed reserves all rights available in law.

 

Yours faithfully,

[Signature]

[Name of CA / Authorised Representative]

Membership No.: [XXXXXX]

Date: [Date]

Place: [City]

 

Section 143(3): Scrutiny Assessment  The Final Order

Statutory Explanation

Section 143(3) is a provision. It lets the Assessing Officer make an assessment order. This happens after a scrutiny assessment.

The Assessing Officer checks the return and evidence. They also look at any information. This helps them find the income of the person being assessed.

If the Assessing Officer is not happy with the persons explanation they may assess income at an amount.

This can lead to a demand for money.

The person may also have to pay interest under sections 234A, 234B or 234C.

There is also a chance of penalty proceedings.

This can happen under Section 270A.

It is, for underreporting or misreporting income.

The Assessing Officer and income are key here.

The Assessing Officer checks income.

The income may be more than expected.

The income needs to be reported.

Typical Process and Timeline

The officer in charge also known as the Assessing Officer or the AO for short will finish the tax assessment after the Section 143(2) notice and the taxpayers responses or the assessees responses are taken into account.

The AO does everything through the eproceedings portal when the tax system is faceless.

The tax assessment has to be finished within twelve months from the end of the tax year when the income was first looked at or the assessment year, in which the income was first assessable.

When the AO is done the AO will give the taxpayer or the assessed a draft of the assessment order. This is what happens under the faceless scheme.

This draft assessment order gives the taxpayer or the assessed a chance to say something or file objections before the final order is made or passed, by the AO.

Key Points CAs Must Check

• Make sure all questionnaires and notices during scrutiny get responses on time with documents.

• Check all additions in the draft order and see if they are legally and factually okay.

• check that interest calculations under Sections 234A, 234B and 234C are correct.

• See if any penalty notice under Section 274 with Section 270A is fair or can be argued.

• Ensure the assessment order deals with issues, in the Section 143(2) notice.

Common Mistakes Related to Section 143(3)

7. Failure to file objections to the draft assessment order within the prescribed 30day window, foregoing a critical opportunity to correct additions.
8. Neglecting to provide specific legal grounds while objecting, relying instead on generic submissions without case law support.
9. Not computing and depositing 20% of the tax demand before filing an appeal, leading to recovery proceedings.
10. Omitting to raise a jurisdictional objection to addition of income not covered by the original notice.
11. Failing to preserve all submission acknowledgements and correspondence for use in appellate proceedings.
12. Overlooking penalty proceedings that are triggered simultaneously with the assessment order, causing missed deadlines in response.

Practical Corrective Actions

• File detailed objections to the draft order through the eproceedings portal within 30 days, supported by case law, CBDT circulars, and primary documents.
• Where additions are sustained in the final order, file an appeal before the Commissioner of Income Tax (Appeals) within 30 days of receipt of the demand notice, along with Form 35.
• Deposit 20% of the disputed demand to stay recovery proceedings pending appeal; file a stay application if the demand is substantial.
• Document every submission made during the scrutiny process as a contemporaneous record for the appellate stage.
• Initiate penalty response proceedings separately by engaging with the penalty notice under Section 274, as penalty and assessment proceedings run independently.

CA Checklist  Preparing for a Section 143(3) Scrutiny Assessment

• Obtain and review the complete copy of the Section 143(2) notice; note all issues raised and record receipt date.
• Compile the original return, computation of income, and all schedules as filed.
• Gather books of account, ledgers, bank statements, and vouchers for the relevant assessment year.
• Prepare a reconciliation of gross turnover/receipts per books with turnover reported in GSTR3B/GSTR1 (for GSTregistered entities).
• Reconcile TDS deducted as per Form 26AS with credits claimed in the return; obtain revised TDS certificates if required.
• Collate Form 16/16A, Form 16B, investment proofs, and loan statements corresponding to every deduction and exemption claimed.
• Prepare written explanations for each query or addition proposed; cite applicable sections, CBDT circulars, and judicial precedents.
• Verify interest computations under Sections 234A, 234B, and 234C and flag discrepancies in advance.
• Confirm that all previous responses and document submissions are acknowledged and retained in the file.
• Review the draft assessment order within 30 days; file factual and legal objections to each unsustainable addition.
• In the event of an adverse final order, compute the 20% deposit requirement and arrange funds before filing the appeal.
• Brief the client on the timeline for appeal, the scope of CIT(A) jurisdiction, and the estimated cost benefit of litigation.

Frequently Asked Questions

1. What triggers a Section 143(2) notice?

The Income Tax Department selects returns for scrutiny through CASS based on risk parameters such as significant variance between declared income and third-party data in AIS, high value transactions not corroborated by income, large deduction claims, or discrepancies between TDS credits and income reported. Returns may also be selected for specific scrutiny on the direction of supervisory authorities in cases involving high value transactions, search operations, or information received from external agencies.

2. How long does the department have to issue a Section 143(2) notice?

A notice under Section 143(2) must be issued within three months from the end of the financial year in which the return was filed. If the return is filed for Assessment Year 202425 (financial year 202425), the notice must be issued by 30 June 2025. A notice issued after this deadline is invalid and renders the entire scrutiny assessment without jurisdiction.

3. What is the time limit for completing a scrutiny assessment under Section 143(3)?

A scrutiny assessment under Section 143(3) must ordinarily be completed within twelve months from the end of the assessment year in which the income was first assessable. The Finance Act has progressively reduced these limitation periods; taxpayers and CAs must verify the applicable timeline for the specific assessment year in question.

4. Can I appeal against an assessment order passed under Section 143(3)?

Yes. An assessed aggrieved by an order passed under Section 143(3) may file an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] under Section 246A within 30 days of receipt of the demand notice. If not satisfied with the CIT(A) order, the assessed may further appeal before the Income Tax Appellate Tribunal (ITAT). Depositing 20% of the disputed demand before filing the appeal is a prerequisite for a stay of demand recovery.

5. What is the difference between Section 143(1) and Section 143(3)?

Section 143(1) processing is automated, conducted by CPC, and limited to specified adjustments such as arithmetical errors and income appearing in AIS but not in the return. Section 143(3), by contrast, involves a human Assessing Officer conducting a full factual and legal examination of the return, books, and evidence. Additions under Section 143(3) are based on substantive findings and carry penalty and prosecution exposure, making professional representation indispensable.

6. Does receiving an intimation under Section 143(1) mean my case is closed?

Not necessarily. An intimation under Section 143(1) does not preclude subsequent issuance of a notice under Section 143(2) for scrutiny assessment. The 143(1) intimation merely represents automated processing; it does not constitute a scrutiny assessment. As long as the limitation period under Section 143(2) is open, the return remains eligible for selection for scrutiny.

Conclusion

Section 143, in its three subsections, encapsulates the entire post filing compliance cycle for income tax returns in India. Proactive compliance accurate return preparation, timely reconciliation of AIS and TDS data, and structured responses to departmental notices remains the most effective risk mitigation strategy available to taxpayers. Where an intimation, scrutiny notice, or assessment order is received, engaging a qualified Chartered Accountant at the earliest opportunity is not merely advisable; it is imperative. The cost of inadequate representation during scrutiny invariably exceeds the cost of professional guidance at the outset.