Comprehensive Guidelines and Procedures for Compulsory Selection of Income Tax Returns for Scrutiny in FY 2023-24

The Central Board of Direct Taxes (CBDT) has recently issued important guidelines (vide F.No.225/66/2023/ITA-II dated May 24, 2023) outlining the parameters and procedures for the compulsory selection of income tax returns for complete scrutiny during the financial year 2023-24. These guidelines provide clarity on the process to be followed in cases where thorough scrutiny of tax returns is deemed necessary.

To help taxpayers understand the selection process better, we have compiled the table below, which outlines the parameters and corresponding procedures for compulsory selection:

1.       Cases pertaining to survey u/s 133A of the IT Act:

a.       Returns filed for the assessment year relevant to the previous year in which a survey was conducted under section 133A of the Act are subject to selection.

b.       Certain conditions exclude cases from compulsory scrutiny, such as non-impoundment of books of accounts, documents, etc., returned income not less than the previous assessment year, and no retraction from the disclosed income.

c.       The selected cases require administrative approval and transfer to Central Charges under section 127 of the Act within 15 days of receiving notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer (JAO).

2.       Cases pertaining to Search and Seizure:

a.       Search & seizure/requisition prior to 01.04.2021:

                                                               i.      Assessments in search & seizure cases are conducted under Section(s) 153A, 153C read with section 143(3) of the Act, including returns filed for the assessment year relevant to the previous year in which the search was conducted.

                                                             ii.      The selected cases require administrative approval and transfer to Central Charges under section 127 of the Act within 15 days of receiving notice u/s 143(2)/142(1) of the Act by the Jurisdictional Assessing Officer.

b.       Search & seizure/requisition on or after 01.04.2021:

                                                               i.      Assessments in search & seizure cases or requisitions conducted on or after 01.04.2021 fall under this category.

                                                             ii.      The selected cases require administrative approval and transfer to Central Charges under section 127 of the Act within 15 days of receiving notice u/s 143(2)/142(1) of the Act by the Jurisdictional Assessing Officer.

3.       Cases in which notices u/s 142(1) have been issued:

a.       Cases where no return has been furnished in response to a notice u/s 142(1) of the Act.

b.       The Jurisdictional Assessing Officers (JAOs) upload the underlying documents on ITBA (Income Tax Business Application) for access by the National Faceless Assessment Centre (NaFAC), which then takes further necessary action.

c.       Notice u/s 142(1) of the Act calling for information is served on the assessee through NaFAC.

4.       Cases in which notices u/s 148 have been issued:

a.       Cases where returns have been furnished or not furnished in response to notices u/s 148 of the Act.

b.       The procedure varies based on whether the notices were issued after search & seizure/survey actions conducted on or after April 1, 2021.

c.       The selected cases require administrative approval and transfer to Central Charges under section 127 of the Act.

5.       Cases related to re-opening u/s 147:

a.       Cases where the Assessing Officer issues notices u/s 148 of the Act for reopening assessments.

b.       The procedure for scrutiny varies based on whether the reopening is for cases related to search & seizure/survey actions conducted on or after April 1, 2021.

c.       The selected cases require administrative approval and transfer to Central Charges under section 127 of the Act within 15 days of receiving notice u/s 143(2)/142(1) of the Act by the Jurisdictional Assessing Officer.

6.       Cases selected under the CASS (Computer Assisted Scrutiny):

a.       The CASS system automatically selects cases for scrutiny based on risk parameters and other criteria.

b.       The selected cases require administrative approval and transfer to Central Charges under section 127 of the Act within 15 days of receiving notice u/s 143(2)/142(1) of the Act by the Jurisdictional Assessing Officer.

7.       Cases referred by other authorities:

a.       Cases referred by other authorities, such as the Director of Income Tax (Intelligence and Criminal Investigation) or the Chief Commissioner/Commissioner of Income Tax.

b.       These cases are selected for scrutiny and require administrative approval and transfer to Central Charges under section 127 of the Act within 15 days of receiving notice u/s 143(2)/142(1) of the Act by the Jurisdictional Assessing Officer.

Conclusion:
These comprehensive guidelines and procedures provide taxpayers with a clear understanding of the parameters and procedures for the compulsory selection of income tax returns for scrutiny during the FY 2023-24. By adhering to these guidelines, taxpayers can ensure compliance, mitigate the chances of scrutiny, and facilitate a smooth assessment process.

It is crucial for taxpayers to stay updated with the latest notifications and guidelines issued by the CBDT and consult tax professionals for specific queries or assistance regarding their income tax obligations. With accurate and timely filing of returns, proper documentation, and compliance with tax laws, taxpayers can navigate the scrutiny process confidently.

For detailed information and to access the complete CBDT guidelines, please refer to the official PDF document provided by the Income Tax Department: Compulsory Scrutiny Guidelines for FY 2023-24.

Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered as legal or financial advice. For specific guidance related to your tax situation, it is recommended to consult with a qualified tax professional.