An income tax scrutiny notice is not the same as an ordinary intimation, and most CA firms know the difference the moment it lands in a client's e-filing account. The return has been picked for detailed examination, a timeline has started, and every answer the firm files will be read by an assessing officer looking for gaps. Teams using AskSolique to handle an income tax scrutiny notice tend to follow the same discipline described below: read the notice closely, build the evidence file before drafting, and make sure every legal position is backed by authority that still holds.
This guide walks through that process step by step, so a practice can respond with less last-minute scrambling and fewer follow-up queries.
What a Scrutiny Notice Actually Asks For
A scrutiny notice, usually issued under section 143(2) of the Income-tax Act, 1961, tells the taxpayer that the return will be examined in detail. It is often followed by a notice under section 142(1) listing the specific documents and explanations the officer wants. Under the faceless assessment scheme, these come through the e-proceedings tab of the income tax portal, and replies are filed the same way.
The first job is to separate three things that are often bundled together in the notice text:
- The reason for selection. Limited scrutiny cases name specific issues, such as a mismatch between reported income and information in the AIS, or a large cash deposit. Complete scrutiny cases are open-ended.
- The questions raised. Each query should be listed separately, numbered, and assigned to someone in the team.
- The deadline. Note the compliance date on day one. If more time is genuinely needed, an adjournment request should go in before the date, with a reason, not after it.
Firms that skip this breakdown tend to file one long narrative reply that answers half the questions and invites a second round.
Build the Evidence File Before You Write a Word
The strongest replies are boring to read: each query is answered with a short statement and a matching annexure. Before drafting, collect:
- The filed return, computation of income and tax audit report (if applicable)
- The client's AIS, TIS and Form 26AS, with any mismatches reconciled line by line
- Bank statements for the period under question, with large entries explained
- Agreements, invoices, ledger extracts and confirmations for each disputed item
- Any earlier assessment orders or appeal outcomes on the same issue
A simple index, Annexure A to Annexure Z, mapped to each query, saves the officer time and signals that the firm has nothing to hide. It also makes the eventual assessment order easier to challenge if the officer ignores evidence that was clearly on record.
Mismatch-driven selections are common across both direct and indirect tax. The pattern of how small reporting gaps escalate into notices is covered well in this note on common GST non-compliances that trigger a notice, and much of that thinking applies equally to income tax.
Check Which Law Applies to the Year Under Scrutiny
This is the step that catches firms out in 2026. The Income Tax Act 2025 came into force from 1 April 2026 and renumbers most provisions. But scrutiny proceedings for returns of earlier years continue to deal with the 1961 Act, and the notice itself will cite the section numbers that apply to that year.
Practical rules that help:
- Cite the section the notice cites. Do not "upgrade" references to the new numbering in a reply for an older year.
- Where a submission draws on a principle that now sits in a renumbered section, mention both, so the reply stays clear on review.
- Keep a section-mapping table in the working file. It avoids mistakes when the same team is handling older assessments and current-year advisory work side by side.
A reply that quotes the wrong provision is not fatal, but it weakens the submission and gives the officer an easy reason to discount it.
Back Every Legal Position With Current Authority
Facts win most scrutiny cases, but where the dispute is about treatment, such as whether a receipt is capital or revenue, or whether a deduction is allowable, the reply needs case law. This is where many replies fall down. A partner remembers a favourable ruling, the junior cites it from an old article, and nobody checks whether a later High Court or Supreme Court decision has narrowed or overruled it.
A good research routine looks like this:
- Frame the exact question in one line before searching.
- Search a reliable income tax case law database for India, filtering by court and year.
- Read the operative part of each ruling, not just the headnote.
- Check for later decisions on the same point, especially from the jurisdictional High Court.
- Record the citation, the paragraph relied on, and why the facts are comparable.
The same habits apply on the indirect tax side. This piece on how CA firms can find the governing GST ruling faster sets out a similar method for GST disputes, and the principle carries over: the governing ruling matters more than the number of rulings cited.
Drafting the Reply: Structure That Works
Once the evidence and authority are in place, the reply itself becomes straightforward. A structure most officers find easy to follow:
- Reference block. PAN, assessment year, notice number and date, and DIN.
- Brief background. Two or three lines on the assessee and the return filed.
- Query-wise responses. Repeat each query, then answer it, pointing to the annexure that supports the answer.
- Legal submissions. Only where treatment is disputed, with citations and the paragraph relied on.
- Closing request. Ask that the return be accepted as filed, or that any proposed variation be shared with an opportunity of being heard.
Keep tone factual and polite. Avoid arguing with the officer's motive for selection; argue the numbers and the law.
Where AI Fits in This Workflow
AI does not replace the judgement involved in a scrutiny reply, but it removes a lot of the slow, repetitive work: summarising long rulings, finding the right provision across the old and new Acts, and producing a first draft that the reviewer then sharpens. Firms comparing options in this space may find this overview of what to compare before choosing an AI tax research tool a useful starting point.
The practical test is simple. A tool is worth using if it shortens the time from notice to well-supported draft without the partner having to re-verify every citation from scratch.
Final Checklist Before Filing
- Every query answered, in the same order as the notice
- Every factual claim tied to an annexure
- Every citation checked for later contrary rulings
- Correct Act and section numbering for the year under scrutiny
- Reply uploaded before the due date, with acknowledgement saved
If your firm is handling a growing volume of scrutiny cases and wants a faster, better-documented way to research and draft responses, you can contact us at AskSolique to see how the platform fits your practice.