Scrutiny notice under section 143(2) and faceless assessment
A notice under section 143(2) is the one that matters. It means the department is not satisfied with your return and intends to examine it. Unlike a processing intimation, this leads to an assessment order with a demand, and the entire proceeding now runs faceless — no officer to meet, no file to follow up in person, only deadlines on a portal.
What a section 143(2) notice is
Section 143(2) of the Income-tax Act, 1961 is now section 270(8) of the Income-tax Act, 2025. It empowers the Assessing Officer to serve a notice requiring you either "to attend the office of the Assessing Officer; or to produce, or cause to be produced before the Assessing Officer any evidence" on which you rely in support of your return, where the Officer considers it necessary to ensure that you have not understated income, computed excessive loss or underpaid tax.
The proceeding that follows ends in an assessment order under section 270(10) — the old section 143(3) — determining your total income and the sum payable or refundable. That order carries a notice of demand under section 289 (the old section 156) and, where income has been added, penalty proceedings under section 439 (the old section 270A).
There are, in practice, three flavours. A limited scrutiny confines the examination to specified issues selected by the computer-assisted system — the notice will say so. A complete scrutiny opens the whole return. Compulsory scrutiny arises under annual CBDT criteria — survey cases, search cases, certain exemption claims. Read the notice to know which one you are in, because in a limited scrutiny the Officer cannot stray beyond the listed issues without approval to convert it.
How worried should you be?
Genuinely worried, in a working sense — not panicked, but organised.
A section 143(1) intimation showing a refund is not a problem. A section 270(8) notice is a different thing: it is the start of a proceeding that produces an appealable order with tax, interest and penalty attached. Only a small fraction of returns are selected, and selection is driven by specific data, not chance. Something in your return did not reconcile with something the department holds.
The good news is that scrutiny is now entirely document-driven. There is no personal equation to manage and no discretion to plead for. If your documentation supports your return, you will generally survive. If it does not, no amount of correspondence will substitute for it. The outcome is decided by what you can evidence within the deadlines.
The statutory position and the time limits
The department's window to select you is short and it is the first thing to check.
Section 270(9) provides that "no notice under sub-section (8) shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished". So a return for tax year 2025-26 filed in July 2026 — that is, in the financial year 2026-27 — can be selected only up to 30 June 2027. A notice served after that is invalid and the point should be taken at the first opportunity, not saved for appeal.
| Provision under the 1961 Act | Corresponding provision, Income-tax Act, 2025 |
|---|---|
| 143(2) — scrutiny notice | 270(8) |
| Proviso to 143(2) — three-month service limit | 270(9) |
| 143(3) — assessment order | 270(10) |
| 143(1) — processing and intimation | 270(1) |
| 142(1) — inquiry before assessment | 268(1) |
| 142(2A) — special audit | 268(5) |
| 144 — best-judgement assessment | 271 |
| 144B — faceless assessment | 273 |
| 153 — time limit for completion | 286 |
| 154 — rectification | 287 |
| 156 — notice of demand | 289 |
| 139 — return of income | 263 |
| 234A / 234B / 234C / 234F | 423 / 424 / 425 / 428 |
| 270A — under-reporting and misreporting penalty | 439 |
| Deadline | Period |
|---|---|
| Service of the scrutiny notice | Three months from the end of the financial year in which the return was furnished — section 270(9) |
| Your response to each notice or questionnaire | As stated in the notice, commonly 15 days |
| Response to a show-cause notice before a variation | As stated, typically 7 to 15 days |
| Completion of the assessment under section 270(10) | One year from the end of the financial year succeeding the relevant tax year — section 286 |
| Payment of demand under section 289 | 30 days |
| Appeal to the Commissioner (Appeals) | 30 days from service of the order |
How faceless assessment works
Section 144B of the 1961 Act is now section 273 of the 2025 Act. Under it, the assessment is conducted by the National Faceless Assessment Centre, which allocates your case to an assessment unit through automated allocation. Four kinds of unit are involved: assessment units, which conduct the assessment; verification units, which carry out inquiry and cross-verification; technical units, which supply specialist input; and review units, which examine any proposed variation before it becomes an order.
The Centre serves the notices — the section explicitly contemplates it "serving a notice to the assessee under section 268(1) or 270(8)". All communications pass through the Centre, and communications between the Centre and you "shall be exchanged exclusively by electronic mode". Cases may be transferred to a jurisdictional officer at any stage where that is considered necessary.
The practical shape of it: a scrutiny notice, then one or more questionnaires under section 268(1), then — if the unit proposes to add to your income — a show-cause notice setting out the proposed variation and inviting your objections, then the order. You are entitled to an opportunity of being heard, and a personal hearing is conducted by video conferencing on request, subject to approval. Request it in writing when you file your objections to the show cause; asking after the order is passed achieves nothing.
The trade-off is real. You cannot walk into an office and explain. Everything you want considered must be uploaded, legible, indexed and inside the deadline.
What gets a return selected
| Trigger | What the department sees |
|---|---|
| Income in AIS not reported | Interest, dividend, rent, professional receipts appearing in the Annual Information Statement but absent from the return |
| Form 26AS receipts exceeding declared turnover | Contractor or professional receipts on which TDS was deducted, higher than the turnover shown |
| TDS credit mismatch | Credit claimed beyond what deductors have reported, or claimed without offering the income |
| Capital gains not reported | Depository, RTA and registrar reporting of share, mutual fund and property transactions |
| Large or unusual deductions | 80C at the full ₹1,50,000 with no supporting investment reporting, 80G donations the donee never reported, 80D beyond plausible premiums |
| HRA claims | Rent paid without landlord PAN where annual rent exceeds ₹1,00,000; rent claimed in a city where the taxpayer's employer records a different location. Note that from 1 April 2026 the 50 per cent metro concession extends to eight cities, with Bengaluru, Pune, Hyderabad and Ahmedabad added |
| Deductions claimed under the default regime | Chapter VI-A claims where the taxpayer did not validly opt out |
| F&O treated as speculative | Exchange-traded derivatives are non-speculative business income; misclassification distorts turnover, set-off and the audit threshold |
| Cash deposits and high-value transactions | SFT reporting of cash deposits, credit card settlements, foreign remittances |
| GST versus income tax turnover gap | Outward supplies materially exceeding declared turnover |
| Foreign assets and foreign income | Schedule FA left blank by a resident and ordinarily resident, against information received under exchange-of-information arrangements |
| Refund out of proportion to the income profile | Large refunds with thin supporting data |
| Business ratios out of line | Gross profit or net profit ratios far from the sector norm, sharp year-on-year swings, heavy cash expenditure |
How to respond on the e-filing portal
Log in at incometax.gov.in and go to Pending Actions > e-Proceedings, then Self. Faceless assessment notices appear as proceedings issued by an income-tax authority. Click View Notice to open the proceeding and Notice/Letter pdf to download the notice and its annexures.
Click Submit Response to reply. You enter remarks against each query and upload supporting documents; individual attachments are capped at 5 MB, so scan at moderate resolution, split large files and name them to match the query number — "Q4_Rent_Agreement_FY2025-26.pdf" is read; "IMG_20260714.pdf" is not. Tick the declaration and submit. The portal issues a Transaction ID; retain it against every submission.
Before drafting, reconcile the department's data with yours at e-File > Income Tax Returns > View AIS, or via the Annual Information Statement (AIS) menu on the dashboard followed by Proceed. Where an entry is genuinely wrong, open it, use the Optional button in the Feedback column, select the appropriate feedback option, submit and keep the acknowledgement receipt — then cite that receipt in your reply rather than merely asserting the entry is incorrect.
If you need more time, file an adjournment request within the same proceeding before the response date, with a reason and a proposed date. If a show-cause notice proposing a variation arrives, respond point by point and, in the same submission, request a personal hearing through video conferencing if you want one.
When the order is passed, download it and the notice of demand from the proceeding, and from e-File > Income Tax Returns > View Filed Returns for the year. If you accept the demand, respond at Dashboard > Pending Actions > Response to Outstanding Demand and choose Demand is Correct — but only if you are certain, because that election closes off disagreement. If you contest it, choose Disagree with the demand (Either in full or in Part) and file your appeal within 30 days.
What happens if you ignore it
Non-compliance with a section 270(8) notice is an express trigger for best-judgement assessment. Section 271 of the 2025 Act applies where a person, "having made a return, fails to comply with all the terms of a notice issued under section 270(8)". The Assessing Officer then assesses "to the best of his judgment" on the material gathered, after an opportunity of being heard.
In a faceless environment that means the assessment unit works from AIS, Form 26AS, bank data, GST returns and SFT reports, and adds what it cannot reconcile. Expenditure you have not proved is not allowed. Deductions you have not documented are not allowed. Capital gains are computed with a nil cost of acquisition if you have not produced the purchase evidence.
On top of the tax comes interest under section 424 at 1 per cent a month, and penalty under section 439 — 50 per cent of the tax on under-reported income, rising to 200 per cent where the department alleges misreporting. Each unanswered notice is separately penalisable under the successor to section 272A(1)(d) of the 1961 Act, ₹10,000 per default. Where a return was never filed at all for the year, prosecution under section 479 becomes available, with rigorous imprisonment from three months to two years, and from six months to seven years where the tax sought to be evaded is large.
And an unpaid demand is recoverable. Refunds of later years are adjusted against it, and bank attachment is a live possibility for businesses with visible accounts.
Rectification, revised return or updated return
Once scrutiny has begun, your ability to rewrite the return narrows sharply.
| Instrument | Availability during or after scrutiny | Time limit |
|---|---|---|
| Revised return — section 263(5) | Only until the assessment is completed, and only within the statutory window | Twelve months from the end of the tax year — 31 March 2027 for tax year 2025-26; fee under section 428(b) if filed after nine months |
| Belated return — section 263(4) | Not relevant if a return already exists | Nine months from the end of the tax year — 31 December 2026 for tax year 2025-26 |
| Updated return — section 263(6) | Practically closed once an assessment is made; barred after search or survey, where prosecution has begun, and where it would reduce liability or create a refund | 48 months from the end of the financial year succeeding the tax year; additional tax of 25%, 50%, 60% or 70% by time slab |
| Rectification — section 287 | Available against the assessment order, but only for a mistake apparent from the record | Four years from the end of the financial year in which the order was passed; the department must dispose of the application within six months from the end of the month of receipt, under section 287(9) |
| Appeal to the Commissioner (Appeals) | The proper remedy for a disagreement on merits | 30 days from service of the order |
The judgement call is this: if you know the return understated income and the revision window is still open, revising before the assessment concludes is almost always cheaper than defending it and paying penalty at 50 per cent. Once the order is passed, that door is shut and only appeal remains. Do not use rectification to argue merits — a disallowance you disagree with is not a mistake apparent from the record, and filing a rectification instead of an appeal usually just burns the 30-day appeal period.
Interest and fee exposure
| Charge | Old section | New section | Amount |
|---|---|---|---|
| Late filing | 234A | 423 | 1% per month or part on unpaid tax from the due date |
| Advance tax shortfall | 234B | 424 | 1% per month where advance tax is below 90% of assessed tax — the main charge on a scrutiny addition |
| Deferment of instalments | 234C | 425 | 1% per month against the 15%, 45%, 75% and 100% milestones |
| Fee for late return | 234F | 428 | ₹5,000; ₹1,000 where total income does not exceed ₹5,00,000 |
| Under-reporting penalty | 270A | 439 | 50% of tax on under-reported income; 200% where misreporting is alleged |
An addition of ₹10,00,000 at a 30 per cent rate is ₹3,00,000 of tax, roughly ₹54,000 of section 424 interest over eighteen months, and ₹1,50,000 of penalty — about ₹5,04,000 for an item that may have been a documentation failure rather than an evasion.
Practical mistakes we see
Missing the first deadline because the notice went to an email address nobody monitors. Uploading a single 60 MB bundle instead of indexed files tied to each query, so the unit cannot find the answer and treats the query as unanswered. Answering nine of twelve queries and assuming the rest will be dropped. Producing bank statements without a reconciliation, which invites the unit to treat every credit as income. In HRA cases, producing rent receipts but no bank transfers, no rent agreement and no landlord PAN where annual rent exceeds ₹1,00,000 — receipts alone rarely survive. In capital gains cases, being unable to produce the original purchase document, so the cost of acquisition is disallowed. Requesting a video hearing after the order is passed. And, in a limited scrutiny, volunteering information on issues outside the listed scope, which hands the unit grounds to widen it.
When to handle it yourself and when to get help
There is a narrow band in which handling it yourself makes sense: a limited scrutiny on a single, clean issue — one property sale where you hold the purchase deed, the sale deed and the bank trail, or one 80C claim you can evidence in full. Upload the documents, meet the dates, and it usually closes.
Get help in every other case, and get it at the first notice rather than at the show-cause stage. Specifically: complete scrutiny; any year with business income, cash transactions or a GST turnover gap; capital gains where cost or indexation is in issue; foreign assets or foreign income; any case where a proposed variation exceeds roughly ₹5,00,000; any case where you have already missed a deadline; and any case involving a direction for special audit under section 268(5). The reason is not complexity for its own sake. Faceless assessment is decided on the written record, and the record is fixed early. What you fail to place before the assessment unit is very hard to introduce later, and the appellate process is slow, costly and constrained by what was said at this stage.
Common questions
How long does the department have to issue a section 143(2) scrutiny notice?
Three months from the end of the financial year in which the return was furnished, under section 270(9) of the Income-tax Act, 2025. For a return for tax year 2025-26 filed in July 2026 — financial year 2026-27 — the last date for service is 30 June 2027. A notice served beyond that period is not valid, and the objection should be raised in your first response.
What is the difference between a 143(1) intimation and a 143(2) notice?
A 143(1) intimation, now section 270(1), is the output of automated processing; if it shows a refund or no change, there is nothing to do. A 143(2) notice, now section 270(8), means a human assessment unit will examine your return and may add to your income, producing an appealable order with tax, interest and penalty. They are not comparable in seriousness.
Do I have to attend an office for a faceless assessment?
No. Under section 273 of the 2025 Act all communications pass through the National Faceless Assessment Centre and are exchanged exclusively by electronic mode. You are entitled to an opportunity of being heard, and a personal hearing is conducted by video conferencing on request and subject to approval. Ask for it in writing when you respond to the show-cause notice, not after the order.
Can I file a revised return after receiving a scrutiny notice?
Only if the statutory window is still open and the assessment has not been completed — section 263(5) allows a revised return within twelve months from the end of the tax year or before completion of assessment, whichever is earlier. Where you know income was omitted, revising early is usually far cheaper than defending it, because a voluntary correction avoids the 50 per cent under-reporting penalty under section 439.
What happens if I do not respond to the scrutiny notice?
Section 271 of the 2025 Act permits a best-judgement assessment where a person who has filed a return fails to comply with a notice under section 270(8). Your income is then estimated from AIS, Form 26AS, bank and GST data with no allowance for unproved expenditure or deductions, and the resulting demand carries interest under section 424 and penalty under section 439. Each unanswered notice is separately penalisable at ₹10,000.
How long can a scrutiny assessment take?
The order under section 270(10) must be passed within one year from the end of the financial year succeeding the relevant tax year, under section 286. In practice the proceeding runs in bursts — a questionnaire, a gap of weeks, a further questionnaire, then a show-cause notice near the end. The deadlines fall on you throughout, so keep the portal monitored rather than waiting to be chased.
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More in this series
- Form GST ASMT-10 scrutiny notice and how to reply in ASMT-11
- Form GST DRC-01A pre-notice intimation and how to reply in Part B
- Form GST DRC-01 show cause notice under section 73 and section 74
- Form GST REG-31 intimation and how to stop suspension of your GSTIN
- Intimation under section 143(1): what it means and how to respond