Guidelines Issued For Compulsory Selection Of Income Tax Returns For Complete Scrutiny During FY 2024-25 (2024)

• June 18, 2024

Income tax returns are selected for scrutiny through the automations set into income tax softwares. However, there are certain cases which are compulsorily selected for scrutiny. Every year, Central Board of Income Tax (CBDT) defines certain parameters on the basis of which cases are selected for compulsory scrutiny.

Similar to earlier year, Central Board of Income Tax (CBDT) has again issued the guidelines vide F.No.225/72/2024/ITA-II dated 3rd May, 2024 specifying the parameters for selection of Income tax return for compulsory scrutiny during FY 2024-25.

1. What is the security assessment

• A scrutiny assessment involves a detailed examination of the income tax return. During this assessment, the tax authorities check the authenticity and accuracy of various claims, deductions, and other details furnished in Income tax return.
• The Ministry of Finance, Government of India, through the Central Board of Direct Taxes (CBDT), has issued guidelines for the compulsory selection of returns for complete scrutiny during the Financial Year 2024-25 vide instructions No. F.No.225/72/2024/ITA-II dated 3rd May, 2024
• These guidelines aim to ensure effective tax administration and compliance while streamlining procedures for assessments.

2. Parameters prescribed for compulsory scrutiny of Income Tax returns

As per guidelines, following are the parameters and procedure for compulsory selection of Income tax returns for scrutiny:

2.1 Cases pertaining to survey u/s 133A of the Income-tax Act,1961 (Act)

Parameter: Return filed for the assessment year during which survey was conduction under Section 133A of Income Tax Act.

Procedure:

• Prior administrative approval of concerned officer is required for selection for compulsory scrutiny.
• Such officer shall ensure that such cases are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer (JAO) concerned.

2.2 Cases pertaining to Search and Seizure.

a. Search & seizure/ requisition prior to 01.04.2021:

• Such Assessments shall be carried out under Section 153A, 153C read with section 143(3) of the Income Tax Act,
• and also for return filed for assessment year relevant to previous year in which the search was conducted u/s 132 or requisition was made u/s 132A of the Act.

Procedure:

• Prior administrative approval of the concerned officer is required.
• Such case shall be transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)/142(1) of the Act
• Where such cases are not centralized and ITR is filed in response to notice u/s 153C, then the concerned officer shall issue the notice u/s 143(2) of the Act. Otherwise, notice shall be issued u/s 142(1) of the Act

b. Search & seizure/ requisition on or after 01.04.2021

Where Assessments in search & seizure cases/ requisitions cases u/s 132/132A conducted on or after 01.04.2021:

• Prior approval of the concerned officer is required for selection of case for compulsory scrutiny
• Case shall be transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)/142(1) of the Act

2.3 Notice is issued u/s 142(1) of the Act calling for return but no return has been furnished

• Jurisdictional Assessing Officers (JAOs) shall upload the documents on the basis of which notice u/s 142(1) was issued on ITBA, for access by National Faceless Assessment Centre (NaFAC).
• The Directorate of Income-tax (Systems) shall forward these cases to NaFAC, which will take further necessary action.
• Notice u/s 142(1) shall be served on the Assessee through NaFAC.

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

Cases where return is either furnished or not furnished in response to notice issued under Section 148 of the Act.

Procedure:

1. Cases where notice u/s 148 has been issued pursuant to search & seizure conducted on or after 01.04.2021:

• Prior administrative approval of concerned officer shall be obtained for selection for compulsory scrutiny.
• Such officer shall ensure that such cases are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer (JAO) concerned.

2. Cases other than search & seizer/Survey

• For cases which are to be completed by NaFAC on or before 31.03.2024, Jurisdictional Assessing Officers (JAOs) shall upload the underlying documents, on the basis of which notice u/s 148 was issued.
• The Directorate of Income-tax (Systems) shall forward these cases to NaFAC for further action.
• Notice u/s 143(2)/142(1) of the Act calling for information shall be served on the assessee through NaFAC.

2.5 Cases related to registration/ approval under various sections of the Act, such as 12A, 12AB, 35(1)(ii)/ (iia)/ (iii), 10(23C)(iv)/(v)/(vi)/(via), etc

Where tax exemptions or registrations have been canceled or withdrawn and the Assessee is still claiming the benefit of such exemption or deduction. (where orders of withdrawal of registration/approval have been reversed/set-aside in appellate proceedings such cases will not be selected under this clause)

Procedure:

• The concerned AO shall list down the cases falling under this parameter with prior administrative approval.
• Consolidated list of such cases shall be submitted by the Pr.CIT/Pr.DIT/CIT/DIT to the Pr.CCIT concerned.
• Pr.CCIT shall forward the list to Directorate of Income-tax (Systems).
• Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC.
• The Jurisdictional Assessing Officers shall upload the underlying documents containing specific information regarding this parameter immediately.

2.6 Cases involving addition in an earlier assessment year(s) on a recurring issue of law or fact and/or law and fact

Parameter: where the addition is carried out in income of any person in earlier assessment year on question of law or fact of an amount:

1. exceeding Rs. 25 lakh in eight metro charges at Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune;
2. exceeding Rs. 10 lakh in other

And such addition has become final as no further appeal has been preferred against the assessment order; or the same has been upheld by the Appellate Authorities in favour of Revenue; even if further appeal of assessee is pending, against such order.

Procedure:

• The Concerned AO shall prepare the list of cases falling under this parameter with approval.
• Such list shall be submitted to the Pr.CCIT concerned and shall be further shared with Directorate of Income-tax (Systems).
• Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC.
• The Jurisdictional AO shall upload the underlying documents containing specific information regarding this parameter immediately.

2.7 Cases related to specific information regarding tax-evasion

Cases where specific information about tax-evasion is provided by any law-enforcement agency for relevant assessment year and return for such year is furnished by the assessee.

Procedure:

• The Concerned AO shall prepare the list of cases falling under this parameter with approval.
• Such list shall be submitted to the Pr.CCIT concerned and shall be further shared with Directorate of Income-tax (Systems).
• Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC.
• The Jurisdictional AO shall upload the underlying documents containing specific information regarding this parameter immediately.

3. Additional Notes

• 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 TIS / AIS/ Statement of Financial Transactions (SFT)/ CPC-TDS information/ information received from authority, then such return will not be taken up for compulsory scrutiny. Such return shall be selected for scrutiny 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.
• 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.
• During the course of Search & Seizure action, information relating to some other persons may be found. In such cases, the relevant information is generally passed on to the jurisdictional AO for assessing them u/s 148.

4. Due date of issuance of Notice

The Finance Act, 2021, has reduced the time limit for service of notice u/s 143(2) of the Act to 3 months from the 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 June, 2024.

cordingly, the following timelines shall be followed with regards to returns filed in the Financial Year (FY) 2023-24:

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