Scrutiny under Section 143(2): the notice that has to be valid

Short answer: a notice under Section 143(2) means your return has been selected for detailed examination. It must be served within three months from the end of the financial year in which the return was furnished. That limitation is not a technicality — the Supreme Court has held the notice is mandatory, and that its absence is fatal to the assessment and not curable.

So before addressing what the officer is asking, establish whether the notice was validly issued.

What scrutiny is

Processing under Section 143(1) is automated. Scrutiny is not. A notice under Section 143(2) signals that the officer will examine the return in detail — calling for accounts and documents, usually through notices under Section 142(1) — and will pass an assessment order under Section 143(3) that either accepts the return or makes additions to it.

Selection is largely system-driven, based on risk parameters and mismatches against third-party data, with some cases selected on specified criteria. Being selected is not itself an allegation.

The limitation, and why it decides cases

The notice must be served within three months from the end of the financial year in which the return was furnished. That period was reduced by the Finance Act 2021; for earlier years it was six months, so the applicable window depends on the year.

A time-barred notice invalidates the scrutiny built on it. This is the first thing to check, and it is checked by comparing two dates: when the return was filed, and when the notice was actually served.

The authority that matters

Two Supreme Court decisions define the position, and both are worth knowing precisely.

ACIT vs Hotel Blue Moon (2010) 321 ITR 362 (SC) held that issuing a notice under Section 143(2) is mandatory, not a procedural irregularity. Its omission is fatal to an assessment under Section 143(3), and Section 292BB does not save it. The Court applied the same reasoning to block assessment. This remains good law and is a cornerstone of assessment jurisprudence.

CIT vs Laxman Das Khandelwal (2019) 417 ITR 325 (SC) refined the boundary of Section 292BB. That section can cure defective service of a notice that was in fact issued, where the assessee co-operated in the proceedings. It does not cure the complete absence or non-issue of a Section 143(2) notice. The distinction is between a notice badly served and a notice never issued — only the first is curable.

The practical consequence: participating in the assessment does not waive the defect where no notice was issued at all. Jurisdiction cannot be conferred by conduct.

Limited scrutiny and its boundaries

Where a case is selected on specific parameters, the scrutiny is confined to those issues, and the notice ordinarily identifies them. The officer cannot roam into unrelated matters without following the prescribed route for converting a limited scrutiny into a complete one.

This matters in practice because questions do stray. Where a query falls outside the stated scope, the appropriate response is to answer the point while recording on file that it falls outside the selected issues — not to refuse, and not to answer silently as though the scope had been enlarged.

Faceless assessment: the procedure is mandatory

Where the assessment is conducted under the faceless scheme, additional requirements apply and they are not optional:

• an adverse variation requires a draft order or show-cause giving you the opportunity to respond before it is finalised;
• a personal hearing must be granted where properly requested.

High Courts have repeatedly held these to be mandatory, and that an order passed in breach — no draft order, or a hearing requested and effectively denied — is non-est. The line of authority is developing but consistent.

One expectation to set: the usual remedy is remand for a fresh hearing, not permanent quashing. A successful challenge on this ground reopens the assessment rather than ending it.

Natural justice: material must be put to you

An addition cannot rest on material you were never shown. In Kishinchand Chellaram vs CIT (1980) 125 ITR 713, the Supreme Court held that material used against an assessee must be put to them; behind-the-back evidence cannot sustain an addition. That remains good law.

So where an assessment order relies on information — a third-party statement, a report, data from another proceeding — that was never confronted to you, that is a substantive ground, not a complaint about manners.

How to approach the reply

Working in order:

1. Was the notice validly issued and served, within limitation? Compare the filing date to the service date. Check that it identifies the year and the issues.
2. What is the actual scope? For a limited scrutiny, hold the officer to the selected issues.
3. Answer with documents. Bank statements, agreements, invoices, certificates. Each claim supported separately rather than by a general narrative.
4. Ask to see anything relied on that you have not been shown, and say so on the record if it is not provided.
5. Request a personal hearing where the matter is substantial, and press it if the assessment is faceless — the right exists and its denial is a ground.
6. Preserve the fallback. If some addition is likely to survive, the correct quantum and the penalty position, including immunity under Section 270AA where its conditions are met, should be addressed rather than left to the appeal.

If additions are made

An assessment order under Section 143(3) can be appealed to the Commissioner (Appeals) under Section 246A, generally within 30 days of service of the demand notice. Where the objection is a mistake apparent from the record rather than a substantive disagreement, rectification under Section 154 is the route — the distinction, and the trap in the differing time limits, is set out in the Section 143(1) guide.

Recovery pending appeal is a separate application under Section 220(6), covered in the refund adjustment guide.

Under the Income-tax Act 2025

The section mapping guide covers the wider renumbering.

Assessment procedure is closely fact- and year-dependent, and the authorities cited should be checked for current status before being relied on. This note sets out the general framework rather than advice on a particular assessment.