Resolving Section 143(2) Scrutiny Notices Issued in 2025 Before 31.03.2026

1. Context: Why So Many Section 143(2) Notices in 2025?

During the middle of calendar year 2025, the Income Tax Department initiated a large volume of scrutiny proceedings by issuing notices under Section 143(2) for A.Y. 2024–25. These notices were not confined to a single area like foreign remittances; instead, they spanned multiple risk categories where the Assessing Officer (AO) or other prescribed authority considered it necessary or expedient to verify:

  • Whether income has been understated
  • Whether loss has been overstated
  • Whether tax has been underpaid

A key driver behind this surge was the statutory time limit. For A.Y. 2024–25, the last permissible date to serve a Section 143(2) notice was 30.06.2025. To avoid potential cases becoming time-barred, the Department proactively issued scrutiny notices to all cases flagged through its risk parameters and data-analytics systems.

While this article touches upon the broader scrutiny triggers, it specifically dives deeper into one common ground of selection: foreign payments / payments made outside India.

2. Common Triggers for Selection Under Section 143(2)

There is no public, exhaustive list of parameters used for scrutiny selection. However, experience across cases indicates several recurring categories that frequently lead to Section 143(2) notices and follow-up queries (often through Section 142(1) notices):

  • Mismatch between return and information systems

    • Differences between ITR and AIS/26AS/TIS/SFT regarding:
      • Income amounts
      • TDS/TCS credits
      • High-value transactions

  • Capital gains inconsistencies

    • Discrepancies relating to equity, mutual funds, or immovable property vis-à-vis reported data

  • Unusual cash flow patterns

    • Substantial cash deposits or withdrawals that are not commensurate with the disclosed income

  • Turnover vs profit anomalies

    • Especially where signals from GST data and SFT reports do not tally with the returned figures

  • Flags around deductions and exemptions

    • High or inconsistent claims under various provisions considered risk-prone

  • Foreign remittance / cross-border payments

    • Outward remittances or card spends abroad
    • Payments to non-residents for services, software, commissions, royalty/FTS, etc.

The remainder of this article focuses on this last bucket—foreign payment / payment made outside India—as it has been a major reason for scrutiny selection in 2025.

3. Why Payments Made Outside India Are Coming Under the Scanner

3.1 Policy and Data-Analytics Backdrop

In the middle of 2025, numerous assessees—both individuals and business entities—started receiving:

  • Communications via the Compliance Portal
  • Statutory notices under Section 143(2) and follow-up Section 142(1) queries

A recurring theme in these communications was outward remittance / foreign remittance / overseas card usage.

In the majority of these cases, the Department was already in possession of detailed transaction data from:

  • Bank reporting
  • Authorised dealer filings
  • SFT filings
  • Forms filed under Rule 37BB

The purpose of the notice was usually to:

  • Reconcile the remittance with the returned income
  • Verify the correctness of TDS/TCS treatment
  • Examine whether the payment attracted tax in India under domestic law or DTAA

This aligns with a broader policy emphasis on:

  • Monitoring outward remittances under the Liberalised Remittance Scheme (LRS)
  • Ensuring adherence to both Income Tax compliance and foreign exchange controls

4. How the Department Tracks Your Foreign Remittances

The increased visibility on cross-border payments is largely due to data consolidation and reporting through multiple channels.

4.1 Annual Information Statement (AIS)

The Annual Information Statement (AIS) serves as a centralised compilation of third-party information relating to an assessee. It aggregates data received from sources such as:

  • Banks and authorised dealers
  • Financial institutions
  • Market intermediaries
  • Various reporting entities

AIS may reflect, for example:

  • Foreign currency purchases
  • Overseas card spends
  • Remittances under LRS
  • Investment-related cross-border flows

This consolidated view equips the Department to:

  • Segment assessees based on risk
  • Identify inconsistencies between ITR and external data
  • Trigger scrutiny where large or unexplained foreign outflows exist

4.2 Forms Under Rule 37BB: 15CA, 15CB, 15CC

For outward remittances, Rule 37BB establishes a reporting regime involving: