Regular/Scrutiny Assessment - Section 143(2)/143(3) - Income Tax - Ready Reckoner - Income Tax

Regular/Scrutiny Assessment - Section 143(2)/143(3) Section 143(2): Notice of Scrutiny For making assessment u/s 143(3) , AO or any IT authority not below the rank of ITO is required to serve notice u/s 143(2) . Serve a notice on the assessee u/s 143(2) requiring him to attend his office or produce or cause to be produced any evidence on which the assessee may rely in support of the return on a date to be specified in the notice. However, no notice u/s 143(2) shall be served on the assessee after the expiry of 3 months from the end of the financial year in which the return is furnished. [Reduced to 3 months, by Finance Act, 2021 , w.e.f. AY 2021-22] For Example :- In case of individual return is filed on 25th July, 2022 for AY 2022-23, Notice u/s 143(2) can be issued by 30th June, 2023 (i.e., upto 3 months from the end of FY in which return is filed). Some important points based on Judicial Decisions :- Notice validly served upon assessee within prescribed time of 12 months from the end of FY in which return was furnished (6 months for AY 2020-21 3 months from AY 2021-22) is on revenue {CIT vs Lunar Diamonds (2006 ) } If assessee furnished revised return u/s 139(5) , a fresh notice must be served on the assessee. Where notice is served by affixture on last day after office hours shall not be regarded as valid notice. {CIT vs Vishnu Co. Pvt. Ltd.} Issuance of jurisdictional notice assessment order thereafter passed in name of non existing company i.e. amalgamating company having ceased to exist as a result of approved amalgamation scheme is a substantive illegality, has to be set aside. {PCIT vs Maruti Suzuki India Ltd. (2019) (SC)} Limitation for issue of notice has to be from the date of filing of original return. Therefore, in case of removing of defects within time prescribed in original return, date of removing defects shall not be considered as date of filing return for the purpose of serving notice hence, such notice will be invalid. {Atul Project India Pvt. Ltd. vs UOI} Notice deemed to be valid in certain circumstances ( Section 292BB ) Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was - a) not served upon him; or b) not served upon him in time; or c) served upon him in an improper manner. however, nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment. Consequences of failure to comply with notice u/s 143(2) The consequence of a default in complying with the notice u/s 143(2), may entail an ex parte , best judgment assessment u/s 144 . Such a default may also attract penalty u/s 271(1)(b) which has been fixed at ₹ 10,000. Section 143(3): Order of Scrutiny Assessment AO on the basis of material evidences furnished by assessee in response to notice u/s 143(2) or gathered by AO, AO shall determine the income or loss of Assessee, by way of passing an order along with determination of tax payable or refundable to assessee u/s 143(3). Following any Institution to whom exemption available research association u/s 10(21) news agency u/s 10(22B) association or institution u/s 10(23A) institution u/s 10(23B) or AO cannot himself disallow exemption on any contravention by such institution. He can under section 143(3) disallow the rescinded the notification withdrawing the exemption. The Assessing Officer shall inform the Government/ prescribed authority about the contraventions made by such institutions and the Government/ prescribed authority shall withdraw the exemption by rescinding the notification. In case of any any trust or institution section 10(23) (iv)(v)(vi)(via) or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the Explanation to section 12AB(4), as the case may be, he shall- (a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and (b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) section 12AB(4). Where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of section 35(1) are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer. Time Period for completion of Assessment Time period for completing the Assessment in such cases will excluded the period between the date on which the Assessing officer makes a reference to the Principal Commissioner or Commissioner and date on which copy of the order is received by the Assessing Officer. [ Clause (xiii) of explanation 1 of section 153 ] Meaning of Specified Violation (a) where any income of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has been applied other than for the objects for which it is established; or (b) the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has income from profits and gains of business, which is not incidental to the attainment of its objectives or separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives; or (c) any activity of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution,- (A) is not genuine; or (B) is not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or (d) the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality; or (e) the application referred to in the first proviso of this clause is not complete or it contains false or incorrect information.