Managing Section 143(2) Income Tax Scrutiny Notices for AY 2024–25: A Guide for Tax Practitioners with Checklist for Taxpayers
The Income Tax Department has issued a flurry of Income Tax Scrutiny Notices for the Assessment Year 2024-2025, owing ITR-Form 26AS-AIS Mismatches
The Central Board of Direct Taxes has initiated the widespread issuance of scrutiny notices under Section 143(2) of the Income Tax Act for the Assessment Year 2024–25. As tax professionals, it is our responsibility to guide clients through this verification exercise efficiently. Below is a structured overview of the process, followed by a practical checklist that you can share...
The Central Board of Direct Taxes has initiated the widespread issuance of scrutiny notices under Section 143(2) of the Income Tax Act for the Assessment Year 2024–25.
As tax professionals, it is our responsibility to guide clients through this verification exercise efficiently. Below is a structured overview of the process, followed by a practical checklist that you can share directly with your clients.
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- Understanding Section 143(2) Notices
A Section 143(2) notice indicates that the Assessing Officer requires further information or clarification on certain entries in the client’s Income Tax Return (ITR). It is not an accusation of fraud but a routine review to reconcile reported figures with departmental records.
- Typical Triggers for Scrutiny Selection
Clients are most frequently selected when data reported in their ITR does not align with the Annual Information Statement (AIS) or Form 26AS. Common discrepancies arise when a client files a salary-only return despite additional income heads appearing in the AIS; when mutual fund redemptions or dividend income go unreported; when foreign assets such as RSUs held overseas are undeclared; or when high-value deductions under Sections 80C to 80G are claimed without corresponding proofs.
- Initial Response Workflow
Upon receiving the notice, instruct the client to send it to you immediately and note the deadline for response on the e-Proceedings portal. The client should also forward a copy of the filed ITR for AY 2024–25 along with Form 26AS and the AIS for the same assessment year. Your office can then schedule a document-collection session to obtain all supporting evidence.
- Document Assembly and Verification
Organize all relevant records, including capital gains statements for mutual funds, equities or property; the salary and perquisite breakup certified by the employer; bank statements confirming dividend credits; and receipts for donations, insurance premiums, medical expenses and other deductions. Reconcile each line of the ITR with the AIS and Form 26AS to identify and prepare explanations for any variances.
- Crafting the Reply
Draft a concise, point-by-point response that references each query raised in the notice, attaches clear and labelled PDF exhibits (avoiding compressed archives), and includes a brief cover memorandum summarising the client’s position. Submit this response via the e-Proceedings portal well before the stipulated deadline.
- Risks of Non-Compliance
Failure to respond in time exposes the client to a Best Judgment Assessment under Section 144, which can result in disallowed deductions, denial of refunds and taxation at the highest applicable slab rate.
- Advising on Preventive Practices
To reduce the likelihood of future notices, implement pre-filing procedures for clients that reconcile the AIS against Form 26AS before ITR submission, ensure all income heads are declared and the correct ITR form (ITR-2 or ITR-3) is used, and disclose foreign assets and RSUs under Schedule FA.
Client Checklist for Scrutiny Notice Response
- Forward the original scrutiny notice PDF to your tax advisor.
- Confirm and communicate the portal reply deadline date.
- Share the filed ITR copy for AY 2024–25.
- Provide Form 26AS and the Annual Information Statement.
- Supply statements of mutual fund redemptions and capital gains.
- Furnish the salary and perquisite breakup certified by your employer.
- Attach bank statements evidencing dividend receipts.
- Submit receipts for donations, insurance premiums, medical bills and other deductions.
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By following this structured approach, you can ensure that your clients’ responses are complete, timely and professionally presented, facilitating a smoother scrutiny process.
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