Income Tax Scrutiny Notice 2026: Know What to Do & Reply Confidently

“I have received an Income Tax Scrutiny Notice. Is something wrong with my ITR?”

You may have filed your return on time, reported your income correctly and claimed eligible deductions — yet a notice from the Income Tax Department asks you to explain your return or submit supporting documents.

If you are unsure how a scrutiny notice differs from other tax communications, read our guide to different types of Income Tax notices.

Naturally, questions arise: Why was my return selected? Does this mean the Department suspects tax evasion? Will I have to pay additional tax?

The good news is that receiving a scrutiny notice does not automatically mean you have done anything wrong. It means the Department wants to examine specific aspects of your return in greater detail, giving you an opportunity to explain and substantiate the income, deductions, losses or transactions reported in your ITR.

Before responding, review the figures and supporting records relevant to the notice. The ArthikDisha Tax Utility can also help you review your tax calculations where applicable.

But one thing is important:

Don’t ignore the notice or reply without first understanding what the Department is asking.

This guide explains why an ITR may be selected for scrutiny, what Section 143(2) means, which documents you may need, how to verify the notice and submit your reply, and what the 2026 tax law changes mean for your case.

What Is an Income Tax Scrutiny Notice?

An Income Tax Scrutiny Notice 143(2) is a formal communication from the Income Tax Department informing a taxpayer that their filed ITR has been selected for detailed examination. The notice may require the taxpayer to provide information, documents or explanations to substantiate specific details reported in the return.

An Income Tax Notice under Section 143(2) is generally issued when the Assessing Officer considers it necessary to examine whether the taxpayer has:

• understated income;
• claimed an excessive loss; or
• underpaid tax in any manner.

In simple terms, the process can be understood as:

ITR filed → Return selected for scrutiny → Specific information examined → Documents/explanation requested → Taxpayer responds → Assessment completed

Does receiving a Section 143(2) Scrutiny Notice mean you have done something wrong?

Not necessarily.

An Income Tax Scrutiny Notice 143(2) is not itself a finding of tax evasion, nor is it a tax demand or penalty notice. It allows the Income Tax Department to examine relevant aspects of your return, while allowing you to explain and substantiate the information reported in your ITR.

The final outcome depends on the facts of the case, information available with the Department, documents submitted and explanations provided by the taxpayer.

A 143(2) notice Income Tax means “your return requires examination” — not “you have been found guilty of tax evasion.”

2026 Important Update

For proceedings governed by the Income-tax Act, 1961, including Assessment Year 2026–27 and earlier where applicable, Section 143(2) remains relevant, subject to transition provisions. For Tax Year 2026–27 onwards under the Income-tax Act, 2025, the corresponding scrutiny-notice provision is Section 270(8).

Old Section 143(2) → New Section 270(8): The 2025 Act Renumbering

The Income-tax Act, 2025 takes effect from 1 April 2026. Proceedings relating to tax years beginning before that date continue under the old 1961 Act, so if your notice cites 143(2), it isn’t outdated — it just means your case falls under the pre-2026 framework. Here’s exactly how the relevant provisions map across:

You can refer to the official CBDT guidelines for compulsory selection of returns for complete scrutiny during FY 2026–27 (PDF) for the prescribed categories and procedures.

Why Did You Get an Income Tax Scrutiny Notice? Common Reasons

The first question after receiving a scrutiny notice is usually: “Why was my ITR selected?”

There is no single reason. A return may be selected because of a mismatch in reported information, a transaction requiring verification, a risk parameter, or a category covered under CBDT scrutiny guidelines.

1. Mismatch in ITR, AIS or Form 26AS

Your ITR may show different figures from those reported by your employer, bank, broker or other reporting entities. Common examples include interest, TDS, dividends, capital gains and securities transactions.

To understand how these differences arise, read our guide on AIS vs Form 26AS and learn how to compare the information reported in these statements with your ITR.

A mismatch does not necessarily mean an error, but you should be able to explain the difference.

2. Large deductions or exemptions

Claims such as HRA, 80C, 80D, donations or home-loan interest may require supporting evidence. The issue is not that a large claim is automatically wrong — the Department may simply want to verify whether you are eligible for it.

3. Capital gains don’t match reported information

Differences can arise from multiple brokers, mutual fund investments, share transactions or property sales. Your capital-gain calculation may therefore need to be reconciled with the information available to the Department.

4. High-value transactions

Transactions such as large cash deposits, property purchases, substantial investments or certain foreign transactions may require the Department to verify their source and tax treatment. A high-value transaction, by itself, does not mean tax evasion.

5. Similar issue in an earlier year

If a significant addition or tax issue arose in an earlier assessment year and a similar issue appears again, the Department may examine the matter more closely.

Remember: A scrutiny notice does not mean you concealed income; it simply means the Department needs to verify certain aspects of your return. If you receive one, focus on understanding the request, gathering evidence, and replying accurately on time.

CBDT’s Compulsory Scrutiny Rules for FY 2026-27 — What’s New This Year

Separately from algorithm-driven (CASS) selection, the CBDT issues an annual circular naming categories of returns that must be picked for complete scrutiny regardless of risk score.

For FY 2026-27 (covering returns filed in FY 2025-26), these guidelines — issued under F.No.225/56/2026/ITA-II dated 4 June 2026 — define six categories, CS 01 through CS 06:

Two clarifications you should know:

• A Section 142(1) request based purely on AIS, SFT, or CPC-TDS data mismatches does not, by itself, trigger compulsory scrutiny under CS 06 — it would need to independently qualify.
• The hard deadline for serving a Section 143(2) notice for returns filed in FY 2025-26 for FY 2024-25 is 30 June 2026. No compulsory-scrutiny notice under these categories can go out after that date for that filing year.

If none of CS 01–CS 06 apply to you, you can still be selected — just through the separate, risk-based CASS route.

Types of Scrutiny: Limited vs Complete Scrutiny

An Income Tax Scrutiny Notice may cover specific issues in your return or involve a broader examination. Understanding the scope helps you identify what the Department expects you to explain.

A safeguard in Limited Scrutiny

In limited scrutiny, the Assessing Officer focuses only on the identified issues. Expanding to complete scrutiny requires following specific CBDT procedures. Therefore, read the notice and accompanying questionnaire carefully to understand exactly what is being examined.

Can a Salaried Employee Get a Scrutiny Notice?

Yes — being a salaried employee offers no automatic protection. An Income Tax Scrutiny Notice for Salaried Employees may be issued when the Department needs to verify details reported in the ITR.

A salaried taxpayer’s data trail includes Form 16, employer-reported TDS, AIS, Form 26AS, bank interest, share and mutual fund transactions, property deals, foreign holdings, HRA claims and other deductions. Any mismatch or claim requiring verification may lead to further scrutiny.

If most of this feels specific to your situation as a salaried employee, it’s worth reading a dedicated breakdown of salaried-employee notice triggers alongside this guide.

How to Respond to Income Tax Scrutiny Notice?

Receiving a scrutiny notice can be stressful, but the first step is to stay calm and understand what the Department is asking.

A proper Income Tax Scrutiny Notice Reply should address each query clearly, reconcile your ITR with AIS, Form 26AS and supporting records, and include relevant evidence.

Avoid generic replies or submitting unnecessary documents. Respond through the prescribed online channel within the specified deadline and save the acknowledgement for your records.

Remember: A scrutiny notice does not automatically mean you owe additional tax. Focus on providing an accurate, evidence-backed explanation.

Step-by-Step Checklist to Reply to an Income Tax Scrutiny Notice

Follow these steps before submitting your Income Tax Scrutiny Notice Reply.

Step 1: Verify the notice: Check the Document Identification Number (DIN), the issuing authority and the notice details. Verify the notice through the Income Tax Department’s official portal if required.

Step 2: Check the Assessment Year and deadline: Confirm the Assessment Year mentioned in the notice and note the response deadline. Do not assume that the deadline is the same for every notice.

Step 3: Read the questions carefully: Identify exactly what the Assessing Officer wants you to explain or substantiate. If the notice specifies particular transactions, deductions or income, address each point separately.

Step 4: Reconcile your tax records: Compare the relevant figures in your ITR with Form 16, AIS, Form 26AS, bank statements, investment records and other applicable documents. Investigate any differences before preparing your reply.

Step 5: Gather supporting documents: Collect only the documents relevant to the queries raised. Depending on the case, these may include salary slips, interest certificates, investment proofs, capital gains statements, HRA evidence or bank statements.

Step 6: Draft a clear, point-wise reply and submit the response online: Answer every question in the notice in simple, factual language. Explain discrepancies honestly and support your explanation with appropriate evidence. Avoid vague statements, unnecessary information or unsupported claims.

Log in to the Income Tax Department’s e-Filing portal and open the relevant e-Proceedings or response facility specified in the notice. Upload your reply and supporting documents in the prescribed format, following the instructions provided.

Step 7: Save the acknowledgement: After submission, save the acknowledgement or submission reference, along with a copy of your reply and uploaded documents. Check the portal periodically for further notices, requests or updates.

Important: If you discover an error in your ITR, the appropriate corrective action will depend on the assessment stage, applicable law and available statutory remedies.

If the notice involves substantial amounts, complex transactions or possible additions to income, consider consulting a qualified tax professional before replying.

How to Check If Your Income Tax Scrutiny Notice Is Genuine?

Before acting on an Income Tax Scrutiny Notice, verify its authenticity. Do not share sensitive information or make payments based solely on an unsolicited email, WhatsApp message or phone call.

1. Log in to the official e-Filing portal: Visit incometax.gov.in and check Pending Actions → e-Proceedings for the relevant communication.
2. Verify the DIN: Use the portal’s Authenticate Notice/Order Issued by ITD facility. This service can also be used without logging in. Income Tax Department communications issued on or after 1 October 2019 are generally required to carry a Document Identification Number (DIN).
3. Check the notice details: Confirm that the PAN, Assessment Year, issuing authority and other particulars match your records.

What is the time limit for issue of scrutiny notice?

Under Section 143(2), the notice cannot be served after three months from the end of the financial year in which the return was furnished (this time limit carries over identically to Section 270(9) under the new Act).

Example: If you filed your ITR for FY 2025-26 in FY 2026-27, the three-month window is counted from the end of the FY in which the original return is filed, i.e. 31 March 2027 — so the statutory outer date for that notice would be 30 June 2027.

Don’t apply this date blindly to every situation. However — always check the specific assessment year, your actual filing date, and which Act governs your case, since transition-year proceedings can shift the applicable timeline.

Is a Scrutiny Notice the Same as a Tax Demand?

No. It’s important to understand the difference. A scrutiny notice does not mean you automatically owe additional tax. It simply means the Income Tax Department wants to examine certain details of your return more closely. Depending on the facts of your case and the explanations you provide, the assessment may end in different ways:

• No adjustment at all — your explanation is accepted as-is
• A limited adjustment — a specific deduction disallowed or a specific addition made
• A larger addition — if your response doesn’t satisfy the AO
• Occasionally, additional interest or other consequences depending on the findings

Receiving a scrutiny notice does not automatically mean you owe additional tax. The demand notice, if any, only follows after the assessment order is passed — it’s a separate, later step, not something bundled into the scrutiny notice itself.

What Happens After You Submit Your Response?

Submitting your first reply rarely ends the process immediately. The Assessing Officer may:

• Review your submission and accept it as sufficient
• Ask follow-up questions or request additional clarification
• Propose a variation to your return and give you a chance to respond before finalising it
• Conduct a video-based hearing where the case genuinely needs one, under the faceless assessment framework
• Eventually pass the final assessment order under Section 143(3) (Section 270(10) under the new Act)

What If You Discover a Genuine Mistake in Your Own Return?

This comes up more often than people expect — maybe a bank interest entry was missed, a capital gain was miscalculated, an HRA claim was overstated, or income from a side source wasn’t reported. The right response is straightforward:

• Identify the actual error precisely
• Reconcile what the correct figure should have been
• Disclose the accurate position honestly in your reply
• Get professional advice if the amount or issue is material

Never fabricate or backdate documents to cover a mistake. Creating false evidence is far more damaging than the original error, as assessing officers can easily spot inconsistencies.

What If You Ignore the Scrutiny Notice?

Ignoring it is consistently the worst option, for concrete reasons:

• The AO can proceed to a best-judgment assessment under Section 144 (Section 271 under the new Act), estimating your income without your side of the story.
• Penalties can apply for non-compliance with a valid notice.
• In serious or repeated non-compliance cases, prosecution provisions can be invoked.

If you genuinely can’t meet the deadline, request an extension through the portal before it lapses — approval isn’t automatic, so don’t treat a filed request as a guaranteed extension, but it’s still far better than silence.