What Is Section 143 Of The Income Tax Act: Detailed Explanation On Sections 143(1),(2),(3) And Deadlines

Section 143 of the Income Tax Act is an autogenerated intimation message sent to the taxpayer if there are any errors in tax filing. It is sent via email within one year of the financial year within which tax was filed. There could be various reasons why you may get an intimation message from the tax department.  

Read on to know all about Section 143 of the Income Tax Act, its provisions, the process of assessment and the deadline for issuance of the final assessment.

What is Section 143 of the Income Tax Act?

Section 143 of the Income Tax Act automatically generates messages informing the taxpayer of any imminent fines or refunds. Taxpayers are liable to receive such intimation under Section 143 within 1 year of filing their return. 

The Finance Act of 2008 simplifies the central processing of tax return filing and has adopted a jurisdiction free procedure. The Central Board of Direct taxes aims to organise a hassle-free method of tax filing and returns. 

Any communication made to taxpayers from the Centralised Processing Centre (CPC) is termed as intimation, and it includes errors, inconsistencies and verification, etc. 

Provisions of Section 143 of Income Tax

Intimations to taxpayers consider every detail, including their total gross income, deductions under Section 80C, advance tax payments, etc. The CPC presents a two-way intimation procedure: taxpayer’s input in Income returns and as computed by Section 143.

CPC provisions the intimation under section 143 of the Income Tax Act either in writing or electronically (via email). Taxpayers are liable to respond to the intimation within 30 days from the issuance date. However, CPC incorporates the original adjustments in case the taxpayer does not respond.  

Section 143(1) – Preliminary Assessment

Section 143 of the Income Tax Act acknowledges taxpayers’ information and generates an automated message. A preliminary assessment tabulates information under two significant headings – income tax information provided by taxpayers and computed by the Centralised Processing Centre.  

The assessment takes into consideration several factors prompting the taxpayer to make appropriate adjustments. These include income from all sources, total gross income, deductions under Section 80C/80D and TDS (wherever applicable).

Under Section 143 (1), taxpayers may be liable to pay the difference (if any) or await refunds. Additionally, they should respond to the intimation within 30 days.   

a. Scope of Assessment under Section 143(1)

Section 143(1) processes taxpayers’ tax information and provisions returns, subject to certain adjustments. These include-

• Returns made under section 139
• Arithmetic errors in filing returns
• Incorrect claims and disallowance of expenditure and losses claimed 
• Intimation of income appearing in Form 26AS or form 16

b. Process of Assessment under Section 143(1)

Section 143(1) of the Income Tax act makes way for corrections of errors and incorrect claims computed on the basis of adjusted income. CPC intimates the amount payable or refundable to the taxpayer and also if there are disputes regarding income or loss declaration. The section also acknowledges income returns even when no adjustments are required. 

c. Duration and Deadline for Section 143(1)

Income tax assessments take into consideration taxpayers’ income-related data within 9 months from the end of the financial year in which the return was filed. 

Also Read: How To File Income Tax Return Using The New Tax Filing Portal?

Section 143(2) – Notice for Scrutiny Assessment

A notice under section 143(2) aims to find discrepancies in income tax returns. Discrepancies include under-reporting income or over-reporting losses. This section makes sure that there are no unpaid taxes. 

Taxpayers receive intimations under section 143(2) via email or are sent directly to their address. Additionally, taxpayers should produce all documents that support their claim for deductions and allowances. 

a. Scope of assessment under section 143(2)

The IT department issues notice under section 143(2) only after the taxpayer has already submitted his/her tax file. Section 143 of Income Tax prompts the taxpayer to file returns beforehand. 

Additionally, the notice requires proof of all income sources, and the assessing officer makes a detailed enquiry for the same. Notices issued under section 143(2) require individuals to respond immediately, failing which he/she is liable to pay a fine of Rs. 10,000 under section 272A. 

b. Process of Assessment under Section 143(2)

Assessments made under section 143(2) include-

• Limited Scrutiny: A Computer-Assisted Scrutiny Selection (CASS) procedure involves cases with inaccurate return information or disparity. Inspection is limited to particular areas of return mentioned in the notice, viz., foreign tax credit claims and property sales. 
• Complete Scrutiny: Based on cases flagged by CASS, the section carries out thorough scrutiny of the filed returns and documents supporting them. However, verification is strictly limited to the particular assessment year.  
• Manual Scrutiny: Criteria for manual scrutiny are subject to conditions set by the Central Board of Direct Taxes.  

Section 143(3) – Scrutiny Assessment

Section 143 (3) of the income tax act scrutinises the income tax return details. The primary objective is to confirm the correctness and accuracy of tax return filing. In addition, it checks all the claims and deductions filed by taxpayers and validates the authenticity of all information provided. 

a. Scope of assessment under Section 143(3)

This section aims to confirm the information stated by the taxpayer. It checks whether they have understated their income or missed the excess loss. The assessing officer scrutinises details and intimates the same to the taxpayer. 

b. Process of Assessment under Section 143(3)

After scrutinising preliminary return details under Section 143 (2), the assessing officer sends an appropriate notice. Therefore, taxpayers are required to produce all necessary documents and proofs in support of their return claims. 

The IT Dept. issues notices under section 143 (2) within six months of income tax return filing. Taxpayers are thereafter required to produce all evidence and documents supporting their cause. The assessing officer then produces a declaration and states the amount payable/refundable. 

c. Duration and Deadline for Section 143(3)

Section 143 states that the time limit for issuance of the final assessment is 12 months from the end of the assessment year. 

Also Read: 6 Ways To e-Verify Your Income Tax Returns Online

Final Word

Section 143 of Income Tax ensures vigilance and zero disparity. Taxpayers must respond to the notices issued without fail to avoid fines.

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