The Income Tax Department of India recently announced that it has selected 1.6 lakh income tax returns for scrutiny assessment under Section 143(2) of the Income Tax Act. This figure is nearly three times higher than the usual annual average, drawing significant attention from taxpayers across the country.
But what does this mean for you? Should you be concerned? And what actions should you take if your return is among those selected?
This article aims to provide a clear, structured overview of the scrutiny process and how to respond appropriately.
What Is a Scrutiny Assessment Under Section 143(2)?
A scrutiny assessment under Section 143(2) refers to a detailed examination of the income tax return filed by a taxpayer. The Income Tax Department initiates this process to ensure that:
- Income has been accurately reported,
- Deductions and exemptions claimed are legitimate,
- There are no discrepancies, omissions, or suspicious transactions.
Importantly, receiving a scrutiny notice does not imply wrongdoing. Many cases are selected based on random sampling or data-driven risk parameters.
Why Has the Number of Scrutiny Cases Increased?
The sharp rise in scrutiny cases this year can be attributed to several key developments:
- Enhanced Data Analytics
The department now uses advanced algorithms to compare returns with third-party data (e.g., bank statements, TDS filings from third parties, Form 26AS, AIS). - Monitoring of High-Value Transactions
Unusual or large financial activities—such as real estate purchases, substantial stock market trades, or high credit card spending—may trigger scrutiny. - Improved Taxpayer Coverage
As more individuals and businesses file returns, the scope of tax oversight naturally expands, leading to a proportional increase in scrutiny assessments.
Should Taxpayers Be Concerned?
Only in cases of misreporting or concealment of income. For compliant taxpayers, scrutiny is a standard verification process.
However, failure to respond or providing incomplete information can result in serious consequences, including:
- Monetary penalties
- Reassessment of income
- Legal proceedings in extreme cases
Timely and accurate response is therefore critical.
Steps to Follow Upon Receiving a Scrutiny Notice
1. Review the Notice Carefully
- Verify that the notice has been issued under Section 143(2).
- Check whether it refers to a limited or complete scrutiny.
- Note the assessment year and response deadline (usually 30 days).
2. Confirm the Notice on the Income Tax Portal
- Log in to the official Income Tax e-filing portal.
- Verify the Document Identification Number (DIN) to ensure authenticity.
3. Re-examine Your Filed Return
- Ensure that all sources of income have been disclosed.
- Cross-verify details with Form 26AS, Annual Information Statement (AIS), and Taxpayer Information Summary (TIS).
- Reconfirm the validity of all claimed deductions and exemptions.
4. Compile Supporting Documentation
Organize and prepare scanned copies of relevant documents such as:
- Form 16, salary slips
- Bank statements, investment records
- Proof of deductions (e.g., LIC, tuition fees, HRA, 80C/80D claims)
- Books of accounts and GST filings (for business/professionals)
5. Submit Your Response Promptly
- Upload the required documents through the Income Tax portal.
- Ensure submission within the stipulated timeline to avoid escalation.
6. Seek Professional Assistance If Required
- Engage a professional consultant if you are uncertain about your response or the scrutiny involves complex issues.
Conclusion:
A scrutiny notice under Section 143(2) should not cause undue stress if your tax return has been filed accurately and honestly. The current increase in scrutiny volume reflects the department’s commitment to transparency, data-driven assessments, and compliance enforcement.
Being proactive, responsive, and well-prepared is the best way to navigate the process. When in doubt, always consult a tax professional to ensure your response is correct and complete.
