When you file your ITR, the Income Tax Department doesn't just take your word for it. Section 143 lays out the three-stage journey every return goes through — from a quick computer check to a full-blown scrutiny — and knowing the rules at each stage can save your client from nasty surprises.
Stage 1 — Intimation under 143(1): Your return first goes to the Centralised Processing Centre (CPC) in Bengaluru. The computer cross-checks your arithmetic, matches TDS credits, and either confirms your return, raises a demand, or grants a refund. No human AO is involved. This intimation is NOT a regular assessment — it's just a preliminary check. The CPC scheme exists under sub-section (1A), which allows the Board to set up centralised processing for efficiency.
Stage 2 — Scrutiny Notice under 143(2): If the Assessing Officer (AO) suspects understated income, excessive loss claims, or under-payment of tax, they can send you a scrutiny notice asking you to attend their office or produce evidence. The critical rule here — and this is asked frequently as a 4-mark question — is the time limit: notice must be served within 6 months from the end of the financial year in which the return was filed. So if Mr. Sharma files his AY 2024-25 return in July 2024 (FY 2024-25), the AO must issue the 143(2) notice by 30 September 2025 (6 months from 31 March 2025). Miss this window? The scrutiny is barred.
Stage 3 — Regular/Scrutiny Assessment under 143(3): After hearing the assessee's evidence and gathering his own, the AO passes a written assessment order determining total income/loss and the tax payable or refund due. Under sub-section (3A), the government introduced Faceless Assessment — eliminating direct interface between AO and assessee, using team-based dynamic jurisdiction. Under sub-section (4), any tax already paid on the 143(1) intimation is credited toward the 143(3) demand — the assessee only pays the shortfall (or gets the excess back).
📊 Worked example
Example 1 — Time limit for 143(2) notice
Ms. Iyer files her ITR for AY 2025-26 on 28 October 2025 (within the extended due date). The AO wants to scrutinise her business income claim.
Working:
- Return filed in FY 2025-26 (April 2025 – March 2026)
- End of that FY = 31 March 2026
- 6 months from 31 March 2026 = 30 September 2026
Answer: The AO must serve the 143(2) notice on or before 30 September 2026. Any notice after this date is invalid and the scrutiny assessment cannot proceed.
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Example 2 — Tax credit under 143(4)
Rajesh & Co. Pvt. Ltd. received a 143(1) intimation demanding ₹1,20,000 and paid it. Later, a 143(3) scrutiny assessment was completed, which determined total tax payable as ₹3,50,000.
Working:
- Tax determined under 143(3) = ₹3,50,000
- Less: Tax already paid under 143(1) intimation = ₹1,20,000 (treated as paid toward regular assessment)
- Balance demand = ₹2,30,000
Answer: Rajesh & Co. need only pay ₹2,30,000 more. The ₹1,20,000 paid earlier is NOT wasted — it is adjusted against the scrutiny assessment demand under Section 143(4).
⚠️ Common exam mistakes
- Students confuse 143(1) intimation with 143(3) assessment. 143(1) is a computer-generated intimation — not a full assessment. Don't say 'assessment was done' when only an intimation was received.
- Getting the 6-month time limit wrong. The 6 months for 143(2) notice is counted from the end of the FY in which the return is furnished, NOT from the date of filing or the end of the assessment year. Always identify the correct FY of filing first.
- Forgetting the 143(2) notice is a prerequisite for 143(3). A scrutiny assessment under 143(3) CANNOT be made without first issuing a valid 143(2) notice. If the notice is time-barred, the entire 143(3) assessment falls.
- Ignoring the 143(4) credit mechanism. In exam problems, students sometimes show the full 143(3) demand as payable without deducting tax already paid under 143(1). Always check if an earlier payment exists.
- Mixing up Faceless Assessment with e-filing. Faceless Assessment (143(3A)) means no physical interface with the AO and team-based jurisdiction — it does NOT just mean filing online. These are different concepts entirely.**
📖 Bare Act text — Section 143, Income Tax Act 1961
(click to expand)
(1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section.
(1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, 2012.
(1C) Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2): Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the 1st day of April, 2017.
(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.
(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.
(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) so as to impart greater efficiency, transparency and accountability by—— (a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a team-based assessment with dynamic jurisdiction.
(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2020.
(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,— (a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment; (b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
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