A scrutiny notice is alarming to receive and, in the great majority of cases, entirely manageable. Scrutiny is not an accusation. It is the department asking you to substantiate what you have already declared.
Understanding how returns are selected, what the notice actually requires, and how to respond turns it from a crisis into a process. Here is what to expect.
How returns get selected
Selection is largely automated. Returns are flagged through a computer-assisted scrutiny selection system that looks for risk indicators rather than picking names at random. The signals that commonly draw attention:
- A mismatch between your return and third-party data. Your AIS and Form 26AS already record income reported by employers, banks, brokers, and registrars. A return that does not reconcile with them is the single most common trigger.
- High-value transactions inconsistent with declared income - large deposits, property purchases, or spending that your reported income does not readily support.
- Deduction or exemption claims that are unusual relative to your income profile, or unsupported by the reporting the department already receives.
- A sharp, unexplained departure from your own prior-year pattern.
- Specific issues the department is examining, where returns with a particular feature are taken up as a class.
The notice, and what it means
Scrutiny assessment begins with a notice under Section 143(2). It tells you that your return has been selected for examination, and it is issued within a statutory time limit from the end of the financial year in which you filed.
Not every communication from the department is a scrutiny notice, and the distinction matters:
- A Section 143(1) intimation is not scrutiny. It is an automated processing summary that arithmetic-checks your return and tells you whether the department agrees with your computation. Most filers receive one, and it usually requires no action.
- A Section 139(9) notice flags a defective return - typically something incomplete or inconsistent - and asks you to correct it.
- A Section 143(2) notice is the one that opens a scrutiny assessment, followed by requisitions under Section 142(1) asking for specific information and documents.
Assessments are now conducted through the faceless assessment system, which means the process runs electronically through the portal rather than through a visit to a local office. Read the notice carefully: it will specify what is being examined and the date by which you must respond.
What you will need to produce
The requisition will be specific to the issue under examination, but the underlying principle is constant - you are being asked to evidence what you declared. Typically that means:
- Bank statements for the relevant period.
- Proof supporting every deduction and exemption you claimed - premium receipts, investment statements, rent agreements and rent receipts, donation certificates.
- Documentation for any business income and expenses claimed, including books of account where you are required to maintain them.
- Property documents, purchase and sale deeds, and capital gains computations where relevant.
- Loan documents and evidence of the source of any large credits.
- An explanation reconciling any difference between your return and your AIS or Form 26AS.
How to respond
Read the notice properly and note the deadline. Identify which section it is issued under and exactly what is being asked. Deadlines are real, and an extension must be requested, not assumed.
Do not ignore it. Non-response is the one genuinely bad option. Where a taxpayer does not respond, the assessment can proceed to a best-judgement assessment under Section 144, made on the department's view of the facts rather than yours.
Get professional help early, particularly if the notice concerns business income, capital gains, or a substantial sum. The cost of representation is almost always smaller than the exposure.
Assemble your documents and answer the question asked. Respond precisely to the issue raised, with supporting evidence attached, rather than sending an undifferentiated bundle of paperwork.
Submit on the portal, and keep the acknowledgement. Retain a complete record of everything you filed and when.
Possible outcomes
A scrutiny assessment concludes with an order under Section 143(3). Broadly, it can go three ways:
- Your return is accepted as filed, and the matter ends. This is a common outcome where the taxpayer has substantiated their position.
- An addition is made to your income, increasing your tax. You pay the additional tax with the interest that has accrued on it.
- A penalty is levied in addition to the tax, where the department concludes that income was under-reported or misreported. Penalty is a distinct consequence from tax and interest, and it is imposed under specific provisions rather than at large.
If you disagree with the assessment order, you are not without recourse - an appeal lies to the Commissioner (Appeals), and onward from there. Do not simply accept an addition you believe to be wrong.
Frequently Asked Questions
Does receiving an intimation mean I am being scrutinised?
No. A Section 143(1) intimation is an automated processing summary that most filers receive, and it usually needs no action. Scrutiny begins with a notice under Section 143(2).
Why was my return selected?
Most commonly because something in it does not reconcile with the data the department already holds - your AIS and Form 26AS - or because a transaction or claim sits oddly against your declared income. Selection is risk-driven, not random.
What happens if I ignore the notice?
The assessment can proceed without your input as a best-judgement assessment under Section 144, decided on the department's view of the facts. This is the worst available outcome and it is entirely avoidable.
Will I have to visit the tax office?
Assessments are conducted through the faceless system, so the process runs electronically through the portal rather than in person.
Can I challenge the outcome if I disagree?
Yes. An appeal lies to the Commissioner (Appeals) against an assessment order, with further appellate routes beyond that. Take advice promptly, as appeals are time-bound.
Received a notice? Talk to Regikart
How you respond to the first notice shapes everything that follows. Regikart's Chartered Accountants read the notice, identify precisely what is being examined, assemble the evidence, and represent your position through the faceless assessment process.
The best defence, though, is a return that reconciles in the first place - which is what our income tax filing service is built around. With offices in Kolkata, Delhi, Gurugram, and Pune and clients across India, we handle scrutiny from first notice to final order. Get in touch as soon as a notice arrives, not as the deadline approaches.
About the author
Suresh Iyer
Direct Tax Advisor at Regikart. Want to discuss this in the context of your business?
