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Power of income tax officer to take up scrutiny
Power of income tax officer to take up scrutiny

Does the Income Tax Officer have the discretionary powers to take up scrutiny of IT returns?

‘How come I received an income tax notice this year? I have been filing my returns for the last 10 years. So far, I didn’t get any notices. Has someone has tipped the department to take up my case for scrutiny?” are the questions asked to us by one of the clients.

Though we explained to him that scrutiny selection is done centrally through a computer assistant program, he appeared not that convinced with the answer. Recently, I happened to read an article in Economic Times where the CBDT Chairperson has clarified this point. Here is what she said –

There is a lot of miss-information going around that the Assessing Officer will put a case into scrutiny… No AO (income tax officer) can, at his choice, select a case for scrutiny. There are certain mandatory criteria and if you fall within that you will get selected which is done by our electronic platform called the Computer Assisted Scrutiny System (CASS)

“The selection process is kind of taken away and there is no discretion involved (on the part of the taxman). There are certain risk parameters (fed in the CASS system). You hit a flag, you get selected. You don’t hit a flag, you don’t get selected,”

“We have told our officers just limit your scrutiny to that indicator (for which the case was flagged for scrutiny) and don’t go beyond that indicator so that even that little bit of detailed requirement which an AO normally would ask… (is not asked). We have asked our AO that please get limited to the point of scrutiny and that takes care of our normal scrutiny (procedure)”

What is CASS? The CASS is an intelligent risk-based system where the I-T department has fed some red-flag indicators like multiple cash transactions in quick time, transactions of large unexplained sums and credit or debit of money from an assesses account to an overseas location among others, to select cases for scrutiny

How many cases are taken up for scrutiny in a year?

Only one per cent of the total cases amounting to 3-4 lakh assesses are selected for the scrutiny procedure every financial year.

Caution – It is only in cases where the AO suspects “blatant” tax evasion (means they must have sufficient and strong evidence)  that they are fully authorized and empowered to undertake a detailed scrutiny of the case and call for additional documents.


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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]