Income Tax Alert: Certain Taxpayers May Receive Scrutiny Notices Under Section 143(2) by June 30, 2026

What Is a Section 143(2) Notice?

A notice under Section 143(2) is issued when the Income Tax Department selects a return for scrutiny assessment.

The purpose is to verify whether the taxpayer has correctly reported:

• Income earned during the financial year

• Deductions claimed

• Exemptions claimed

• Capital gains transactions

• Business income details

• Tax payments and refunds

Receiving a notice does not automatically mean tax evasion or wrongdoing.

Why June 30, 2026 Is Important

For many taxpayers who filed returns for the relevant assessment year within the prescribed timeline, June 30, 2026 represents the deadline by which the department can issue a scrutiny notice under Section 143(2), subject to applicable legal provisions.

After this period, scrutiny proceedings generally cannot be initiated under this section for those returns.

Taxpayers More Likely to Receive Notices

Returns may attract scrutiny due to various risk indicators, including:

High-Value Transactions

• Large property purchases

• Significant stock market transactions

• High-value bank deposits

• Foreign asset disclosures

Mismatch in Information

• Differences between declared income and Form 26AS

• Discrepancies in Annual Information Statement (AIS)

• TDS mismatches

Unusual Deductions or Exemptions

• Large deduction claims

• Significant loss adjustments

• Unusually high exemption claims

Business and Professional Income Issues

• Sharp fluctuations in income

• Large expenses claimed

• Inconsistencies in financial reporting

How Taxpayers Can Check for Notices

Taxpayers should regularly monitor:

Income Tax e-Filing Portal

Notices are generally communicated through:

• Registered e-filing accounts

• Email notifications

• SMS alerts linked to registered mobile numbers

What to Do If You Receive a Notice

If a scrutiny notice is received:

1. Read the notice carefully.

2. Verify the assessment year involved.

3. Gather supporting documents.

4. Respond within the prescribed timeline.

5. Seek professional assistance if necessary.

Common documents may include:

• Salary records

• Bank statements

• Investment proofs

• Property transaction records

• Business accounts

• Tax payment records

Consequences of Ignoring a Notice

Failure to respond may result in:

• Best judgment assessment

• Additional tax demands

• Interest liabilities

• Penalties in certain cases

Therefore, timely compliance is important.

Key Takeaway

A Section 143(2) notice is a verification mechanism used by the Income Tax Department and should not be viewed as evidence of wrongdoing. Taxpayers who have claimed substantial deductions, reported high-value transactions, or have mismatches in tax records should ensure that their documentation is complete and readily available.