Limited Scrutiny selected under Computer Assisted Scrutiny Selection (CASS)

At present, income tax return filed by tax payers are mostly accepted by income tax department without any questions except processing and sending intimation u/s 143(1) of income tax Act.  In a very small percentage of cases scrutiny assessment are conducted u/s 143(3) of the income tax act and cases for this purpose are selected through Computer Aided Scrutiny Selection (CASS)

Two type of selection of cases for Scrutiny assessment:

• Computer Assisted Selection of cases for Scrutiny (CASS)
• Manual Selection of cases for Scrutiny: (Read: Manual Income Tax Scrutiny Criteria for Financial Year 2015-16)

Income Tax Department has implemented the computer aided scrutiny selection (CASS) system to select cases for audit using a centralised rules-based system. The parameters for selection are reviewed and fine tuned every year. At present more than 70% of the scrutiny cases are selected through CASS. If you want to know more about how department is capturing information on high-value transaction and used  for selection of scrutiny under CASS, you can read our other article  How to handle notice received for Non-Filing of Income Tax Return.

Selection of cases for scrutiny for the assessment year 2014-15 has been done primarily through CASS. Manual selection for scrutiny for the year will be limited only for few cases.

Department has started sending notices under section 143(2) of the income tax Act, 1961 for the return filed during the Year 2014-15 (Return filed for Asst Year 2014-15) selected through CASS which reads like this

Notice under Section 143(2) of the Income – Tax Act, 1961

PAN No:  xxxxx1234x

Dated: 03-08-2015

Limited Scrutiny

Selected Under Computer Assisted Scrutiny Selection (CASS)

Madam/Sir,

There are certain points in connection with the return of income  submitted by you on 20th Sep 2014 for the assessment year 2014-15 on which I would like some further information.

You are hereby required to attend my office on 14th September 2015 at 11:10 AM either in person or by a representative duly authorised in writing in this behalf or produce or cause there to be produced at the said time any documents, accounts and any other evidence on which you may rely in support of the return filed by you.

Yours faithfully,

The above notice u/s 143(3) can be served on the assessee within a period of 6 months from the end of the financial year in which return is furnished. For example Mr. X has filed his return of income for the Asst Year 2013-14 on 20^th March 2015 (belated return, Due date was 31-07-2013). In his case notice can be served before 30^th Sept 2015.

So, if you don’t get notice before 30^th Sept 2015 for the return filed in the financial year 2014-15, you can relax as department can’t take up your case for scrutiny u/s 143(3) of income tax after 30^th Sept 2015.

The salient features of CASS are as under:

• The rules and parameters for selection are reviewed and fine-tuned every year.

• Likelihood and quantum of addition made in previous year is computed to suggest modifications in the rules and parameters.

• Information collected from third party is increasingly being used to select cases for audit.

• Different financial limits for different geographical areas are used for equal distribution of work.

• The practice of manual discretionary scrutiny selection by the assessing officers was discontinued from 2013

• Data analysis is conducted to flag 10% of the cases selected under CASS as high priority cases for enhanced follow-up and monitoring

This automated system has brought efficiency and transparency in the process of selection of case for scrutiny.

Presently selection of cases under CASS are generally made under two categories:
(a) Limited Scrutiny
(b) Complete Scrutiny

CBDT Instruction on scrutiny selected under Computer Aided Scrutiny Selection (CASS):

CBDT vide instruction no. 7/2014 dated 26.09.2014, directs that the cases selected for scrutiny during the Financial Year 2014-2015 under CASS, on the basis of either Annual Information return (AIR) data or Central Information Branch (CIB) information or for non-reconciliation with 26AS Data, the scope of enquiry should be limited to verification of these particular aspects only.  Therefore, in such cases, an Assessing Officer shall confine the questionnaire and subsequent enquiry or verification only to the specific point(s) on the basis of which the particular return has been selected for scrutiny.

The reason(s) for selection of cases under CASS is provided to Assessing Officer and notice under section 143(2) is issued to the tax payer with the remark “Selected under Computer Aided Scrutiny Selection (CASS)”. The Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be made to ensure that assessment proceedings are completed expeditiously in minimum possible number of hearings without unnecessarily dragging the case till the time-barring date.

In case during the course of assessment proceedings if it is found that there is potential escapement of income exceeding Rs. 10 lakhs (for non-metro charges, the monetary limit shall be Rs. 5 lakhs) on any other issue(s) apart from the AIR/CIB/26AS information based on which the case was selected under CASS requiring substantial verification, the case may be taken up for comprehensive scrutiny with the approval of the Pr. CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl. CIT concerned.

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

Time limit for completion of scrutiny assessments selected under CASS:

An assessment selected under CASS (u/s 143 (3) of income tax Act) shall be completed within 2 years from the end of the relevant assessment year. For instance, assessment for the assessment year 2014-15 should be completed before 31^st March 2017.

We would be glad to know your doubts or queries. In case you need our assistance in handling scrutiny notice received u/s 143(3) of income tax Act, please feel free to contact us at team@simplifiedlaws.com

Did you get scrutiny notice, If so comment your experience.

Also Read:

• Scrutiny notice (CASS) u/s 143(2) of income tax to be served before 30-09-2015
• How to handle notice received for Non-Filing of Income Tax Return – Asst Year 2013-14
• Information sought by ITO during scrutiny assessment u/s 142(1)
• What is Annual Information Return (AIR Information)?
• Income Tax Scrutiny Criteria for Financial Year 2015-16
• Does the Income Tax Officer have the discretionary powers to take up scrutiny of IT returns?
• Why you have to be careful while making high value spending or investments
• Manual scrutiny of small service providers under Service Tax Laws
• Can Income Tax department issue refunds pending scrutiny assessments

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