CBDT issues instruction to help the conduct of scrutiny assessments

The CBDT has issued an Instruction being No. 20/2015 on 29.12.2015 wherein it has clarified many issues to help the conduct of scrutiny assessments in cases which are picked up through Computer Aided Scrutiny Selection ( in short referred to as ‘CASS’).

Kinds of Scrutiny:

It has also been stated that in the scrutiny of income tax returns selected through CASS-2015, two types of cases have been selected for scrutiny in the present Financial Year – ‘Limited Scrutiny’ and ‘Complete Scrutiny’.

The concerned assessees have been informed about their category of Scrutiny of cases through notices issued as per provisions of section 143(2) of the Income Tax Act, 1961.

The procedure to deal with ‘Limited Scrutiny’ cases has been explained by the CBDT. To clarify the issues arising out of the aforesaid Instruction, following clarifications are being made.

The procedure to deal with ‘Limited Scrutiny’ cases has been explained by the CBDT. To clarify the issues arising out of the aforesaid Instruction, following clarifications are being made.

a) Year of application: In the Instruction No. 7/2014 it has been stated that the said Instruction applies only to the cases picked up for scrutiny through CASS-2014.

b) Whether the Instruction applies to all cases selected under CASS: The said Instruction applies to cases that are selected for scrutiny under CASS only as per the parameter(s) of AIR/CIB/26AS data. If a case has been selected under CASS for some other reason other than the AIR /CIB/26AS data, the Instruction would not be applicable.

c) Scope of Enquiry: Enquiry based on specified issue should be conducted only in the cases that have been selected on the basis of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall confine the queries only to the specific issues relating to AIR/CIB/26AS data. Scrutiny in such cases can only be done according to the guidelines provided in Instruction No. 7/2014.

d) Ground of selection: In cases of scrutiny for the purpose of verification of AIR/CIB/26AS data, the Assessing Officer should specify the reason for selection of the said case for scrutiny to the assessee.

The procedure for dealing with ‘Limited Scrutiny’ cases:

The procedure for dealing with ‘Limited Scrutiny’ cases shall be as follows:

In ‘Limited Scrutiny’ cases, the reasons shall be communicated to the assessee. The queries under section 142(1) of the Act shall be confined only to those issues for which such case has been chosen for scrutiny.

Moreover, the scope of enquiry shall be confined to the ‘Limited Scrutiny ‘ reasons. These cases shall be completed in few hearings. During the assessment proceedings, if the Assessing Officer comes to learn that there is escapement of income amounting to more than Rs. five lakhs or Rs.10 lakhs in metro cities, as the case may be, requiring verification on any other issue, such case may be picked up for ‘Complete Scrutiny ‘ with the consent of the CIT .

However, such consent shall be in writing after being satisfied about merits of the case requiring ‘Complete Scrutiny’ in that case.

Such cases shall be supervised by the Range Head. The CBDT further desires that in all cases, where the Assessing Officer tends to make additions or disallow deductions, the assessee would be given an opportunity to explain his stand on the proposed additions/disallowances according to the principle of natural justice.

The Assessing Officer, in such cases, shall serve a show-cause notice stating the reasons for the proposed additions or disallowances along with necessary reasons forming the basis of the same.

Before passing the final order the submissions of the assessee in response to the notice shall be considered by the Assessing Officer.