How ITRs are Chosen for Scrutiny: Income Tax Department Lays Out the Criteria.

The Central Board of Direct Taxes (CBDT) has recently released comprehensive guidelines pertaining to the compulsory selection of returns for complete scrutiny during the financial year 2024-25. This move aims to enhance transparency and streamline the scrutiny process for taxpayers.

Under these guidelines, the CBDT outlines the procedure for the compulsory selection of returns for complete scrutiny in cases where it deems necessary. This includes detailed criteria and parameters that will be considered during the selection process.

Important Key Points for New Guidelines

Objective for Tax Scrutiny

As per the new norms the assesses shall be informed of the particular causes why their Income tax returns need to get shortlisted for the purpose of investigation. The same action is made to furnish transparency and diminish the uncertainties in the process of investigation.

Precise Information for Tax Evasion

An investigation shall be carried out for the cases in which the particular details for the tax evasion are furnished through any statute enforcement agency and the pertinent income tax return (ITR) is provided. Such matters list shall be made and provided for the additional measure.

Cases for Tax Scrutiny

1. Survey:

2. Search and Seizure:

3. Calling for return have been issued & no returns have been furnished

4.Cases in which notices u/s 148 of the Act have been issued

5. Registration/approval under various sections

6. Additions in an earlier assessment year(s) on a recurring issue of law or fact and/or law and fact

Cases involving addition in earlier assessment years shall be selected based on the specific criterias defined by CBDT, the notice shall be served through National faceless assessment center (NaFAC)

7. Specific information regarding tax-evasion

It is clarified that where return has been furnished in response to notice u/s 142(1) of the Act and such notice was issued due to the information contained in AIS/ Statement of Financial Transactions (SFT)/ CPC-TDS information, such return will not be taken up for compulsory scrutiny. Selection of such cases for scrutiny will be done through CASS cycle.

The cases shall be selected for compulsory scrutiny by the International Taxation and Central Circle charges following the above prescribed parameters and procedure with prior administrative approval of Pr.CIT/Pr.DIT/CIT/DIT concerned. The information pertaining to Compulsory Scrutiny may not be transferred to NaFAC unless the case itself transferred. It is further clarified that communication to NaFAC for access and/or further action after selection for Compulsory Scrutiny will not apply to the International taxation and Central charges.

5. As per the amendments brought by Finance Act 2021, the time limit for service of notice u/s 143(2) of the Act has been reduced to three months from end of the Financial Year in which the return is filed. Therefore, for the ITRs filed in the Financial Year (FY) 2023-24, the time limit for service of notice u/s 143(2) of the Act is 30.06.2024.

Selection and Transfer of Cases

• Cases that comes under above scenarios will be selected by department and shall be transferred for faceless assessment to NFAC by 31/05/2024.
• Service of Notice under Section 143(2): Notice under section 143(2) of the Act to be served in cases selected for Compulsory Scrutiny by 30/06/2024.

Source: NOTIFICATION F.NO.225/72/2024IITA-II