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When the Income Tax Department decides to select a file for scrutiny, a notice is sent u/s 143(3). The new scrutiny selection criteria provides guidelines to select tax return cases for scrutiny. Read this guide by H&R Block India to know more about scrutiny selection criteria u/s 143(3)

Section 143(3) – Scrutiny Selection Criteria 2017-18

Last Update Date : June 27, 2018

scrutiny selection criteria

As children getting caught doing something wrong by our parents, while had consequences, it was not drastic. However, as adults getting caught doing something wrong, whether intentionally or intentionally can land you in deep trouble. When filing your annual tax return, mistakes can occur and there are few individuals, who willingly hide certain details. To counter discrepancies in tax returns filed by taxpayers, the ITD follows scrutiny selection criteria to decipher which returns need further clarification, which we will be discussing in this guide.

Scope of assessment u/s 143(3)

A Scrutiny Notice is a random notice issued by the Income Tax Department under section 143(2), in case if Assessing Officer(AO) finds some mistakes or has doubts regarding an individual’s income. Scrutiny Assessment is done under section 143(3). Let us now discuss about the criteria for selection of Scrutiny.

During the scrutiny assessment, the concerned AO will try to find out whether the reported income, deductions and claims, etc. made by you in your tax return are genuine and correct. Generally, everyone’s tax return can be subjected to scrutiny. There were times when scrutiny was taken up on everyone, but now that they have set criteria, scrutiny is picked on a random basis.

Scrutiny Selection Criteria

This criterion is given under Instruction No. 05/2017 Government of India Ministry Finance Department of Revenue, CBDT Subject to this Instruction: Guidelines for selection of cases for scrutiny during the financial-year 2017-2018-regd:

Selection of Cases for Scrutiny Assessment

  1. Procedure and Criteria: In replacement to earlier instructions, CBDT frames the following procedure and criteria for compulsory manual selection of returns/cases for scrutiny for the Financial Year 2017-18:
    1. Cases involving addition to previous years assessment on recurring a issue of facts or law of below amounts:
      • Amounts exceeding Rs. 25 lakhs in 8 metro cities charges at Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune respectively.
      • While in cities other than those mentioned above if such addition amount exceeds Rs. 10 lakhs.
      • In case of transfer pricing cases, such addition should exceed Rs. 10 Crores provided that,
      • Such an addition has become final as no further appeal has been preferred against such addition.; or.
      • such an addition has been confirmed at any stage of appellate process in favour of revenue and assessee has not filed further appeal; or
      • such an addition has been confirmed at 1st appeal stage in favour of revenue or subsequently and further appeal of assessee is pending.
    2. Assessments concerned to Survey under section 133A of the Income-tax Act, 1961 excluding those cases where books of accounts, documents etc, were seized and returned income (excluding any disclosure made during the Survey) should not be less than returned income of preceding assessment year. However, cases will not be covered by this exclusion, if the assessee retracts from the disclosers made during the survey.
    3. Assessments to be made under sections 158B, 158BC, 158BD, 153A & 153C read with section 143(3) of the Act and for the returns filed for the assessment year relating to the previous year in which authorization for search and seizure was executed u/s 132 or 132A of the Act.
    4. Returns filed in response to notice u/s 148 of Income Tax Act, 1961.
    5. Registration/approval under various sections of the Income Tax Act such as 12A, 35(1)(ii)/(iii), 10(23C) etc. have not been granted or cancelled/withdrawn by the competent authority, still the assessee has been claiming tax-exemption/deduction in the return. However, where such order of withdrawal of registration/approval has been reversed or selected for court proceedings, such cases will not be selected under this clause.
    6. Cases containing such specific and verifiable information referring to tax-evasion that is given by any Government Department/Authority. However, before the case is selected for scrutiny under this criterion, Assessing Officer shall take prior administrative approval from the concerned jurisdictional Principal Commissioner of Income Tax/Commissioner of Income Tax/Principal Director of Income Tax/Director of Income Tax.
  2. Computer Aided Scrutiny (CASS): Selection of cases under CASS are based on selection filters and in a non-discretionary manner in two categories such as Limited Scrutiny and Complete Scrutiny. List of cases that are separately intimated by Principal Director of Income Tax to the concerned authorities for further action in such cases.
  3. These instructions may be brought to the notice of all concerned for necessary compliance.

How H&R Block Can Help You?

Any scrutiny notices received should not be ignored. There must be an immediate response/action taken. If you have received any notices and are worried about how to respond to it, get in touch with our highly qualified tax experts at H&R Block India who will resolve your issues/concerns efficiently and in a timely manner.

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