Cases of Compulsory Scrutiny of Income Tax-Edueasify

Compulsory Income Tax Scrutiny criteria/Guideline FY 2022-23: Recent guidelines are given by CBDT for Compulsory selection of cases for Scrutiny of Income Tax! 

CBDT has provided Guidelines for compulsory selection of returns for Complete Scrutiny for FY 2022-23 also the procedure for compulsory selection has also been provided in the guidelines provided by CBDT.

What is a Scrutiny of Income Tax?

Once the assessee files his return of income, whether filed within the due date or in pursuance of a notice requiring the assessee to file his return, the department may initiate inquiry proceedings if it has reason to believe that income is evading assessment. i.e. income is understated or expenses are overstated.

Therefore, a notice is issued to the taxpayer asking him to attend the office of the department and produce additional documents if any are required. Mere receipt of notice does not indicate an offense; It simply indicates conducting an inquiry to find out whether any income has escaped assessment. It shows the difference between the opinion of the AO and the opinion of the assessee.

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Guidelines and Procedures provided by CBDT for Compulsory Selection of Returns in Scrutiny?

The returns filed under the following categories shall be taken for compulsory Scrutiny:

    • If any case pertains to Survey u/s 133A of Income Tax Act shall receive compulsory Scrutiny with prior approval of concerned officer but following people are excluded even though the case pertains to survey u/s 133A if books of accounts were not seized during the survey and Income shown in return is not less than the Income assessed during the assessment.
    • If any case pertains to Search and Seizure.
    • Cases where no return has been furnished in response to notice u/s 142(1) shall be selected for Scrutiny but AO shall upload the underlying documents based on which notice u/s 142(1) was issued and then the Directorate of Income-tax shall forward these cases to NaFAC(National Faceless Assessment Centre) which will take the further necessary action.
    • Cases in which notices u/s 148 were issued whether or not a response was furnished to notices u/s 148.
    • Cases where registration/approval u/s 12A, 35(1)(ii)/(iia)/(iii), 10(23C), etc have not been granted or have been canceled or withdrawn, yet the assessee claims tax deductions in his ITR. However, if the order of withdrawal has been reversed by authority, then cases such shall not be selected for Scrutiny.
    • Cases, where additions have been made during the earlier assessment, shall also be compulsorily selected for scrutiny if the addition during the earlier assessment exceeds Rs 25 Lakhs in Metro cities and Rs 10 Lakhs in cities other than metro cities.
    • Cases, where specific information regarding tax evasion is available, shall also be selected for Scrutiny.

The department has sent a message to taxpayers to beware of the consequences if their return falls under the above category.

Hence this is a warning sign for taxpayers to be very careful while filing their income tax returns, the department is also trying to keep track of assessees who have made mistakes earlier and ensure that such mistakes are not repeated by them in the future.

Read More: 6 Common Tax Filling Mistakes You Must Avoid

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