Income Tax
Income Tax Scrutiny Notice (Section 143(2)) for AY 2025-26: Causes, Who Gets One, How to Respond & How We Help
Reviewed by CA Kunal Mehta, FCA — Co-Founder & Chartered Accountant, Startup Advisory, Saket, New Delhi. Last reviewed: June 2026.
In short
A Section 143(2) notice means the Income Tax Department has picked your return for a scrutiny assessment — a detailed verification, not an accusation. For AY 2025-26 (FY 2024-25), the department must serve this notice by 30 June 2026, which is exactly why so many notices are going out in May–June 2026. Selection is by CASS (system risk-flagging) or under the CBDT's compulsory-scrutiny guidelines. The whole process is now faceless under Section 144B — you reply online through e-Proceedings with documents that back up your return. Respond on time, respond well, and most scrutinies close with little or no addition. Ignore it and you risk a best-judgment assessment under Section 144, interest and penalty.
If a scrutiny notice has just landed in your inbox or by SMS, the first useful thing to know is this: receiving it does not mean you have done anything wrong. It means the department wants to verify specific things in your return. The second useful thing: there is a clock on it, and understanding that clock changes how you should react. This guide walks through why these notices are issued now, who tends to get them, exactly how to prepare and respond, how to keep a level head while you do — and where a CA-led firm fits in.
First, the law that applies — and the deadline that matters
A scrutiny assessment begins with a notice under Section 143(2) of the Income-tax Act, 1961. It can only be served within three months from the end of the financial year in which you furnished the return. A return for AY 2025-26 (income of FY 2024-25) filed during FY 2025-26 therefore has a hard outer limit: 30 June 2026. A notice served after that date is time-barred, and the scrutiny built on it is invalid. This single rule explains the May–June surge: the department is clearing its risk assessment and issuing notices before the window shuts.
You may reasonably ask: the Income Tax Act, 2025 came into force on 1 April 2026 — doesn't that change the section numbers? Not for this. The new Act's repeal-and-savings clause (Section 536) expressly preserves the 1961 Act for assessments, notices and proceedings relating to earlier years, including those initiated on or after 1 April 2026. So a scrutiny for AY 2025-26 is issued, conducted and decided entirely under the 1961 Act — Sections 143(2), 143(3), 142(1), 144 and 144B. Anyone quoting new-Act numbers at you for an AY 2025-26 scrutiny is mixing up the years.
| Stage | Section | What it is |
|---|---|---|
| Preliminary processing (auto) | 143(1) | Arithmetic check & intimation — not scrutiny |
| Call for information / missing return | 142(1) | Officer asks for documents or to file a return |
| Scrutiny notice | 143(2) | Your return is selected for detailed verification |
| Faceless conduct of the assessment | 144B | Done online, no personal appearance |
| Scrutiny assessment order | 143(3) | The final order — no addition, or an addition with demand |
| Best-judgment assessment | 144 | Where you do not respond — officer assesses on best judgment |
Always check the DIN. Every genuine notice carries a computer-generated Document Identification Number (DIN). A communication without a valid DIN is, barring narrow exceptions, treated as never issued. Verify the DIN on the income-tax portal before you act on anything.
1. What causes a scrutiny notice
Returns reach scrutiny by two routes. Knowing which one applies to you tells you what the officer is likely looking at.
a) CASS — Computer Assisted Scrutiny Selection
Most cases are flagged by the system on risk parameters, not by a human picking your file. The common triggers we see:
- Mismatch with Form 26AS, AIS or TIS — income or TDS in the department's data that doesn't tie to your return.
- Third-party data mismatch — information reported by banks, employers, mutual funds, registrars or other filers that doesn't match what you declared.
- High-value transactions disproportionate to declared income — large cash deposits, property purchase or sale (with TDS under Section 194-IA), heavy share or mutual-fund activity, foreign remittances under the LRS.
- Large deductions or exemptions — outsized claims under Chapter VI-A (80C, 80D, 80G, 80GGC and the like), HRA, or capital-gains exemptions.
- Substantial refund claims — large refunds are often verified before they are released.
- Foreign income or foreign assets — Schedule FA / FSI entries, or the absence of them where the department has information.
- A 143(1) discrepancy that was never satisfactorily explained.
b) Compulsory scrutiny — the CBDT's annual guidelines
Separately, the CBDT issues guidelines each year listing categories that are mandatorily selected for complete scrutiny, regardless of risk score. For this cycle these broadly include cases involving a survey under Section 133A; search or requisition cases under Sections 132 / 132A; certain exemption claims by trusts and institutions (ITR-7 filers) where the underlying registration is in question; cases with recurring additions on the same issue above specified monetary limits; and cases flagged by enforcement or regulatory agencies on specific information. If you fall in a listed category, selection is automatic.
The exact monetary limits and category wording are set by the CBDT's guideline for the year and can change; we confirm the current text against the official guideline for your specific facts before advising.
2. Who tends to receive one
There is no single "type" of taxpayer who is scrutinised, but some profiles see notices more often:
- Salaried taxpayers with deduction or HRA claims that the system reads as high, or a 26AS/AIS mismatch.
- Business owners and professionals — cash-heavy operations, presumptive filings that don't square with bank inflows, or sharp year-on-year swings.
- Anyone with a high-value transaction in the year — a property deal, a large investment, sale of shares or crypto, a foreign remittance.
- Large-refund filers, especially where the refund is driven by claimed deductions or TDS.
- Founders and companies with funding inflows, related-party dealings, or loans and advances that invite questions.
- Trusts and institutions claiming exemptions — a standing compulsory-scrutiny category.
If you have already received a notice, your profile is now beside the point — what matters is reading it correctly and responding well.
3. How to prepare — a practical checklist
Preparation is where scrutinies are won or lost. Work through this in order.
- Read the notice end to end. Confirm your PAN, the assessment year and the acknowledgment number match your return, verify the DIN, and identify whether it is limited (specific issues) or complete scrutiny. Note the response deadline.
- Pin down exactly what is being asked. List each issue or document the notice raises. For a limited scrutiny, you only need to defend those points; for a complete scrutiny, prepare across the whole return.
- Reconcile your return to the department's data. Put your ITR side by side with Form 26AS, the AIS and the TIS, and explain every difference — the gaps are usually where the questions come from.
- Assemble your evidence against each issue, for example:
- Salary & TDS: Form 16, Form 26AS, salary slips.
- Deductions: investment proofs, premium receipts, donation receipts with the donee's details, rent receipts and the landlord's PAN for HRA.
- Capital gains: contract notes, sale deeds, purchase cost and improvement proof, exemption-investment documents.
- Business/profession: books, bank statements, invoices, GST returns, the tax-audit report where applicable.
- Cash deposits / high-value items: source-of-funds trail.
- Loans & capital: confirmations establishing identity, creditworthiness and genuineness.
- Draft a clear, point-wise written reply that answers each question and cross-references the exhibit that proves it — rather than dumping a folder of files.
- Watch the calendar. If you genuinely need more time, seek an adjournment on the portal before the deadline; do not let it lapse.
How the response actually happens — faceless
Scrutiny is faceless under Section 144B: there is no Assessing Officer to visit and, in most cases, no personal hearing unless one is specifically allowed through video conferencing. You log in to the income-tax e-filing portal, open the notice under e-Proceedings, and upload your reply and scanned PDFs there. Everything is on record and time-stamped, so a complete, well-organised submission matters more than ever.
4. How to keep calm while you deal with it
The stress of a scrutiny notice is usually out of proportion to the actual risk. A few things that genuinely help:
- Reframe it. A notice is a request to verify, not a verdict. A large share of scrutinies end with no addition at all once documents are produced.
- You are not summoned anywhere. Faceless assessment means no office visits, no queues, no informal pressure — just a documented online exchange.
- It is finite. There is a defined scope (especially in limited scrutiny), a defined process, and a defined timeline. It will end.
- Preparation dissolves anxiety. Most of the fear is fear of the unknown; once your reconciliation and document set are ready, the notice stops being intimidating.
- You don't have to do it alone. Bringing in a professional early removes the guesswork and the worry about saying the wrong thing.
- And if you disagree with the order, the process isn't the end of the road — there is a clear appeal route to the Commissioner (Appeals) and then the ITAT.
What happens if you don't respond
Silence is the one genuinely costly choice. If you don't reply:
- The officer can pass a best-judgment assessment under Section 144 — typically adding to your income and raising a demand.
- Interest can follow under Sections 234A, 234B and 234C.
- A penalty for under-reporting or mis-reporting of income under Section 270A can be levied — 50% of the tax on under-reported income, rising to 200% where it is treated as mis-reported.
- In serious cases, prosecution provisions can be invoked.
Set against that, a timely, well-documented response is almost always the cheaper path.
5. How Startup Advisory helps
Startup Advisory is a CA-led firm in Saket, New Delhi that represents individuals, professionals, founders and companies across Delhi NCR through income-tax scrutiny — end to end and entirely on the faceless portal:
- Notice review & strategy — we read the notice, verify the DIN, confirm whether it is limited or complete, and map exactly what is being asked.
- Reconciliation & document compilation — we tie your return to 26AS/AIS/TIS, build the source-of-funds and evidence trail, and close the gaps.
- Drafting & representation — a point-wise reply and complete submission filed under e-Proceedings, with a named Chartered Accountant as your authorised representative through to the Section 143(3) order.
- Appeals — if the order isn't acceptable, we carry it to the Commissioner (Appeals) and, where warranted, the ITAT.
- Staying compliant going forward — clean bookkeeping, correct ITR filing and ongoing Virtual CFO support so the next return doesn't get flagged.
If a 143(2) notice has arrived, the deadline to respond is already running. Call 9311972982 or book a free consultation and we'll take it from here.
This article is general information, not professional advice. Section numbers, monetary limits and CBDT guidelines are set by the Income Tax Department / Government of India and can change — confirm the current position for your specific notice and facts with a Chartered Accountant before acting.
