MUMBAI: If a taxpayer does not file an Income-tax (I-T) return in response to a notice under section 142(1), the case will be picked up for scrutiny. This notice, seeking information, is issued when a taxpayer has not filed the tax return or is issued to seek additional preliminary information regarding a particular detail – say bank interest or long-term capital gains/loss on sale of a property.
This guidance is part of a comprehensive set of guidelines issued recently by the Central Board of Direct Taxes (CBDT) for compulsory selection of Income-tax (I-T) returns for the purpose of complete scrutiny.
These guidelines, which are issued annually, pertain to the selection and complete scrutiny that is to be undertaken during the current financial year 2024-25 and cover survey cases, search and seizure cases, tax evasion cases, cases where no I-T return was filed in response to an inquiry notice under section 142(1).
It also covers cases relating to non-registration or cancellation of registration under various sections – such as 12A/12AB relating to registration of charitable organizations to be eligible for tax benefit. In addition, if in an earlier year, an addition was made to the taxpayers’ income on a recurring issue, then subject to monetary limits that have been laid down, the I-T return will be picked up under compulsory scrutiny guidelines. The guidelines also prescribe the role and responsibilities of the I-T officers and the National Faceless Assessment Centre (NFAC).
According to Ketan Vajani, chartered accountant, there is no significant change in the criteria for compulsory scrutiny as compared to the present position. “The guideline points out that all I-T returns filed during financial year 2023-24, will have the outer time limit for issue of a notice by June 30, 2024. This is pursuant to the amendment carried out by Finance Act, 2021, which has reduced the time limit for service of notice under section 143(2) to three months from the end of the financial year in which the return is filed.”
Complete scrutiny is a regular feature carried out in selective cases to ascertain whether the taxpayer has declared income correctly in the I-T returns and has paid the taxes due. Complete scrutiny which is to be carried out during the current financial year, covers cases of tax evasion, where specific information in this regard has been provided by any law enforcement agency – including the I-T department’s own investigation wing and a I-T return has been filed by the taxpayer. Complete scrutiny will enable the I-T officer to know the income that has not been declared in the I-T returns (escaped assessment).
Improved technology which enables easier sharing of information between government agencies and also information from other countries, has made it easier for I-T officials to zoom down on such cases. “However, tax tribunals have in many cases, nullified reassessment orders, if the I-T officers have blindly relied on investigative reports of various agencies, without carrying out due diligence,” points out Vajani.
This guidance is part of a comprehensive set of guidelines issued recently by the Central Board of Direct Taxes (CBDT) for compulsory selection of Income-tax (I-T) returns for the purpose of complete scrutiny.
These guidelines, which are issued annually, pertain to the selection and complete scrutiny that is to be undertaken during the current financial year 2024-25 and cover survey cases, search and seizure cases, tax evasion cases, cases where no I-T return was filed in response to an inquiry notice under section 142(1).
It also covers cases relating to non-registration or cancellation of registration under various sections – such as 12A/12AB relating to registration of charitable organizations to be eligible for tax benefit. In addition, if in an earlier year, an addition was made to the taxpayers’ income on a recurring issue, then subject to monetary limits that have been laid down, the I-T return will be picked up under compulsory scrutiny guidelines. The guidelines also prescribe the role and responsibilities of the I-T officers and the National Faceless Assessment Centre (NFAC).
According to Ketan Vajani, chartered accountant, there is no significant change in the criteria for compulsory scrutiny as compared to the present position. “The guideline points out that all I-T returns filed during financial year 2023-24, will have the outer time limit for issue of a notice by June 30, 2024. This is pursuant to the amendment carried out by Finance Act, 2021, which has reduced the time limit for service of notice under section 143(2) to three months from the end of the financial year in which the return is filed.”
Complete scrutiny is a regular feature carried out in selective cases to ascertain whether the taxpayer has declared income correctly in the I-T returns and has paid the taxes due. Complete scrutiny which is to be carried out during the current financial year, covers cases of tax evasion, where specific information in this regard has been provided by any law enforcement agency – including the I-T department’s own investigation wing and a I-T return has been filed by the taxpayer. Complete scrutiny will enable the I-T officer to know the income that has not been declared in the I-T returns (escaped assessment).
Improved technology which enables easier sharing of information between government agencies and also information from other countries, has made it easier for I-T officials to zoom down on such cases. “However, tax tribunals have in many cases, nullified reassessment orders, if the I-T officers have blindly relied on investigative reports of various agencies, without carrying out due diligence,” points out Vajani.
