Section 143 of the Income-tax Act, 1961: Processing of Returns and Scrutiny Assessment
Section 143 governs the processing of income-tax returns, scrutiny notices and regular assessment. It explains when a return may be adjusted, when the taxpayer can be asked for evidence and how the Assessing Officer determines taxable income, tax payable or refund.
What does Section 143 cover?
Under the 1961 Act, Section 143(1) concerns processing of a return and issue of an intimation; Section 143(2) provides for a notice selecting a return for scrutiny; Section 143(3) deals with the scrutiny assessment order; and Section 143(4) addresses the treatment of tax and refunds already paid or issued when a regular assessment is made.
| Provision | Purpose | Practical effect |
|---|---|---|
| 143(1) | Return processing | Specified prima facie adjustments, calculation of tax/refund and intimation |
| 143(1A)-(1C) | Centralised processing framework | Enables processing schemes and related notifications |
| 143(2) | Scrutiny notice | Requires attendance or evidence to verify the return |
| 143(3) | Scrutiny assessment | Written determination of total income/loss and tax or refund |
| 143(3A)-(3C) | Assessment scheme provisions | Framework for technology-enabled assessment; read with Section 144B and applicable notifications |
| 143(4) | Adjustment on regular assessment | Accounts for earlier payments and excess refunds |
Section 143(1): Processing of income-tax returns
Returns filed under Section 139 or in response to a notice under Section 142(1) may be processed under Section 143(1). The processing mechanism computes income or loss after only those adjustments permitted by the applicable statutory text. These include arithmetical errors, incorrect claims apparent from the return, certain losses or deductions where a statutory filing condition is not met, and audit-report discrepancies where covered by the law for the relevant year.
Where a proposed adjustment requires prior intimation, the taxpayer must be informed in writing or electronically. The response, if received, must be considered; the provision contemplates a 30-day response period. The processing then determines tax, interest, fees and credit for eligible payments or relief, and generates an intimation showing a demand or refund. Where there is neither adjustment nor demand/refund, the acknowledgement may be deemed the intimation.
Important qualification: The list of permissible adjustments has been amended over time. In particular, the former Form 26AS/Form 16 mismatch adjustment under Section 143(1)(a)(vi) is not applicable to returns for assessment years beginning on or after 1 April 2018. Always read the version applicable to the assessment year.
Time limit for intimation
Under the Section 143(1) framework, an intimation is ordinarily not to be sent after nine months from the end of the financial year in which the return is furnished, subject to the version and transitional rules applicable to the return. Older versions provided a one-year period; that older period should not be treated as universally current.
Section 143(2): Notice for scrutiny assessment
A notice under Section 143(2) is issued when the tax authority considers scrutiny necessary to check whether income has been understated, loss overstated or tax underpaid. It may require the taxpayer to attend or furnish evidence supporting the return.
For the amended 1961 Act framework, the notice must generally be served within three months from the end of the financial year in which the return is furnished, subject to the law applicable to the relevant return and any valid statutory extensions. Earlier versions prescribed six months.
Receipt of a Section 143(2) notice does not by itself establish that the return is incorrect. Taxpayers should verify the notice through the official e-filing portal, identify the assessment year and due date, and submit the requested evidence within time.
Section 143(3): Regular scrutiny assessment
After considering the return, taxpayer submissions, evidence required on specified issues and other relevant material, the Assessing Officer makes a written order assessing total income or loss and determining tax payable or refund. The authority must comply with applicable procedural safeguards, including opportunities to respond to adverse material and the faceless assessment framework where applicable.
Special conditions may apply when assessment concerns certain institutions claiming exemptions or approvals under Section 10 and related provisions. These rules have changed with the exemption and registration regime; the conditions must be checked for the relevant year instead of relying on historical provisos in older reproductions of Section 143(3).
Faceless assessment and electronic compliance
The Income Tax Department e-Filing portal supports electronic notices, responses and proceedings. Section 144B of the 1961 Act contains detailed faceless assessment procedures, subject to the applicable statutory provisions, exceptions and notifications. Taxpayers should check the notice itself for the prescribed channel and deadlines.
Section 143(4): Tax paid and refunds on regular assessment
Where a regular assessment is completed under Section 143(3) or Section 144, amounts paid pursuant to processing under Section 143(1) are treated as payments toward the regular assessment. Where a refund already issued exceeds the refund ultimately due, the excess is treated as tax payable in accordance with the Act.
Related provisions and practical remedies
- Section 142: Inquiry before assessment, including requests for records and information.
- Section 142A: Reference to a Valuation Officer for asset, property or investment valuation.
- Section 144: Best-judgment assessment where statutory conditions are met.
- Section 154: Rectification of a mistake apparent from the record, where applicable.
- Section 246A: Appeal against specified assessment orders, subject to eligibility and procedure.
- Section 153: Statutory time limits for completing assessments, subject to relevant amendments and exclusions.
What should a taxpayer do after receiving a notice?
- Verify the notice, DIN, assessment year, legal provision and response deadline using the official portal.
- Reconcile the return with Form 26AS, AIS/TIS, tax credits, books and audit reports as relevant.
- Prepare a point-by-point response with supporting documents and explanations.
- Submit through the prescribed portal and retain acknowledgements.
- Review the intimation or assessment order for computation errors and consider rectification or appeal within the prescribed period.
Frequently asked questions
Is an intimation under Section 143(1) the same as a scrutiny assessment?
No. Section 143(1) generally concerns return processing and permitted prima facie adjustments, while Section 143(3) is a substantive assessment after scrutiny.
Can an income-tax return be selected for scrutiny after processing?
Yes, subject to valid statutory notices and limitation periods. Processing under Section 143(1) does not necessarily prevent scrutiny under Section 143(2).
What if I disagree with an adjustment?
Respond to the proposed adjustment within the stated period. If an intimation or order has already been issued, check whether rectification, appeal or another statutory remedy is appropriate.
Official sources and legal references
Editorial note: The original page reproduced an older consolidated version of Section 143 with historical amendment footnotes. This article retains the substantive topics and explains the modern framework rather than presenting superseded wording as current law. For a binding interpretation, consult the authenticated statute and amendments applicable to the tax year and proceeding.