Scrutiny and Faceless Assessment: What to Expect

Most income tax returns are only processed by the Central Processing Centre (CPC): arithmetic and claims are checked, and a refund or demand is issued. A small share are picked for scrutiny, a detailed examination by an Assessing Officer. Being selected does not mean you have done anything wrong, but you need to handle it carefully. Since 2020, nearly all scrutiny in India has been faceless, so you deal with the department online, not across a table.

How a return gets selected

Computer-Aided Scrutiny Selection (CASS): risk parameters, e.g. large refunds, AIS mismatches, high-value transactions inconsistent with declared income, or unusual deductions.
Compulsory scrutiny under the CBDT’s annual guidelines, e.g. cases with information from investigating agencies, survey or search cases, or earlier additions on recurring issues.

Scrutiny can be limited (only the specific issues listed in the notice) or complete (the whole return). The notice tells you which.

The scrutiny notice and its time limit

Under the 1961 Act, which still governs returns up to AY 2026-27:

The scrutiny notice is issued under section 143(2).
It must be served within three months from the end of the financial year in which the return was filed. For a return filed in July 2026, that is by 30 June 2027. A notice served after that is time-barred, which is a strong legal ground.
It is usually followed by notices under section 142(1) asking for specific documents and explanations.

Under the Income-tax Act, 2025 (tax year 2026-27 onward), scrutiny is reported to sit in section 270, with the same three-month rule for serving the notice.

How faceless assessment works

Under section 144B of the 1961 Act, assessments are run through the National Faceless Assessment Centre (NFAC) and assessment units:

All communication is electronic. Notices arrive by email and SMS and appear on the portal under Pending Actions → e-Proceedings.
Your identity and the officer’s are not disclosed to each other. The case is allotted automatically.
You reply online, with written submissions and attachments (each file up to 5 MB).
If the officer proposes an addition, you get a show-cause notice, usually with a draft assessment order. This is your most important chance to rebut it.
You can request a personal hearing by video conference where a variation is proposed, through the Seek Video Conferencing option when it is enabled.
A final assessment order and demand notice (section 156) are issued. If you disagree, you can appeal.

Time limit to complete the assessment

For returns under the 1961 Act, the assessment order must generally be passed within 12 months from the end of the assessment year (section 153). For example, an AY 2025-26 assessment must normally be completed by 31 March 2027, subject to extensions such as a transfer pricing reference. An order passed late is barred by limitation.

Documents to keep ready

Issue	Typical evidence
Salary and deductions	Form 16, investment proofs (80C, 80D), rent receipts and rent agreement for HRA, home loan certificate
Capital gains	Broker/RTA capital gains statements, contract notes, purchase and sale deeds, cost of improvement bills, indexation workings for old assets
Cash deposits	Source of cash: sales records, withdrawals, gifts with donor confirmation, cash book
Unsecured loans and gifts	Lender’s or donor’s identity, creditworthiness and genuineness: PAN, bank statement, ITR, confirmation
Business income	Books of accounts, ledgers, bank statements, GST returns, stock records, tax audit report
Foreign income/assets (NRIs, returning residents)	Residency evidence (passport stamps), foreign tax returns, TRC, bank statements, Schedule FA workings

How to respond well

Read the questionnaire closely. Answer each point in order with clear headings.
Reconcile everything first: ITR vs AIS/TIS vs Form 168 vs books vs GST returns.
Explain with documents, not just statements. For loans, gifts and cash, the burden is on you to prove the source.
Use the show-cause stage. Rebut every proposed addition with facts, law and case references. Points not raised here are harder to win later.
Ask for time if you need it. Seek an adjournment before the deadline. Do not go silent.
Don’t ignore the notice. Not complying can lead to a best-judgment assessment (section 144) and a penalty of ₹10,000 for each failure (section 272A).
Keep every acknowledgement of submissions. They matter in any appeal.

After the order

Agree with it? Pay the demand within 30 days of the demand notice to avoid interest.
Disagree? File an appeal before the CIT(A) within 30 days (see our appeals guide), and consider seeking a stay of demand.
Mistake apparent from the record? File a rectification request (section 154).
Penalty proceedings for under-reporting may be started with the order. Our penalties guide explains how to seek immunity.

Frequently asked questions

Does scrutiny mean I will have to pay more tax?
Not necessarily. Many scrutiny assessments end with the returned income accepted (“no addition”), especially when the reply is well documented.

Do I have to visit the tax office?
No. Faceless assessment is fully online. You can request a video-conference hearing where an addition is proposed.

How many years back can the department examine?
Scrutiny applies to the year whose return was filed. Earlier years can be reopened only through reassessment, which has its own time limits and procedure.

Can my CA reply on my behalf?
Yes. You can add a CA as your Authorised Representative on the portal, and they can then view and reply to the e-proceedings.

Selected for scrutiny? Garvita Jain & Co. prepares point-by-point replies with full reconciliations, handles show-cause notices and video-conference hearings, and represents you through to the final order and appeal. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.

This article is general information based on the law as of October 2026 and is not professional advice.

Sources

Official

Professional / CA publications