Income Tax Scrutiny Criteria for Financial Year 2015-16

In our earlier article Does the Income Tax Officer have the discretionary powers to take up scrutiny of IT returns? we have explained power of Income Tax Officer in selection of cases for income tax scrutiny.

Income tax department is selecting cases for scrutiny under  “Limited Scrutiny selected under Computer Aided Scrutiny Selection (CASS)” based on the information gathered from Annual Information Returns (AIR) and based on the information directly gathered by Central Information Branch (CIB).

Read: C&AG Audit finding on Scrutiny of Service Tax Returns

During financial year 2015-16 (Assessment Year 2016-17), the department has announced the criteria (vide the Instruction No 8/2015 dated 31st August 2015) for selection of returns/cases for scrutiny. Instruction is as under

Instruction No. 08/2015

Government of India
Ministry of Finance
Department of Revenue (CBDT)

North-Block, IT (A-II) Division, New Delhi

Dated- 31st of August, 2015

To
All Pr. Chief-Commissioners of Income-tax/Chief-Commissioners of Income-tax
All Pr. Directors-General of Income-tax/Directors-General of Income-tax

Sir/Madam

Subject: Compulsory manual selection of cases for scrutiny during the Financial Year 2015-2016-regd:-

1. In supersession of earlier Instructions on the above subject, the Board hereby lays down the following procedure and criteria for manual selection of returns/cases for scrutiny during the financial year 2015-2016:-

(a) Cases involving addition in an earlier assessment year in excess of Rs. 10 lakhs on a substantial and recurring question of law or fact which is either confirmed in appeal or is pending before an appellate authority.

(b) Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs. 10 crore or more on a substantial and recurring question of law or fact which is either confirmed in appeal or is pending before an appellate authority.

(c) All assessments pertaining to Survey under section 133A of the Income-tax Act, 1961 (‘Act’) excluding those cases where books of accounts, documents etc. were not impounded and returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year. However, where assessee retracts the disclosure made during the Survey, such cases will not be covered by this exclusion.

(d) Assessments in search and seizure cases to be made under section(s) 158B, 158BC, 158BD, 153A & 153C read with section 143(3) of the Act and also for the returns filed for the assessment year relevant to the previous year in which authorization for search and seizure was executed u/s 132 or 132A of the Act.

(e) Returns filed in response to notice under section 148 of the Act.

(f) Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assessee has been found to be claiming tax-exemption under section 11 of the Act. However, where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.

(g) Cases where the approval already granted u/s 10(23C)/35(1)(ii)/35(1)(iii)/10(46) of the Act has been withdrawn by the Competent Authority, yet the assessee has been found claiming tax-exemption/benefit under the aforesaid provisions.

(h) Cases in respect of which specific and verifiable information pointing out tax-evasion is given by Government Departments/Authorities. The Assessing Officer shall record reasons and take prior approval from jurisdictional Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned before selecting such a case for scrutiny.

2. Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS on the basis of broad based selection filters. List of such cases shall be separately intimated in due course by the Pr.DGIT(Systems) to the jurisdictional authorities concerned

3. It is reiterated that the targets for completion of scrutiny assessments and strategy of framing quality assessments as contained in Central Action Plan document for Financial-Year 2015-2016 have to be complied with and it must be ensured that all scrutiny assessment orders including the cases selected under the manual criterion are completed through the AST system software only. Further, in order to ensure the quality of assessments being framed, Pr. CCsiT/CCsiT/Pr. DsGIT/DsGIT should evolve a suitable monitoring mechanism and by 30th April, 2016, such authorities shall send a report to the respective Zonal Member with a copy to Member (IT) containing details of at least 50 quality assessment orders from their respective charges. In this regard, IT Authorities concerned must ensure that cases selected for publication in ‘Let us Share’ are picked up only from the quality assessments as reported.

4. These instructions may be brought to the notice of all concerned.

5. Hindi version to follow.

(Rohit Garg)
Deputy-Secretary to the Government of India

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