Under the Income Tax Act, complete scrutiny means, the act of summoning the assessee for making some detailed inquiries about the returns filed and the details furnished in the same pertaining to a particular assessment year.
Prescription for the Compulsory Selection of Returns for the Full Scrutiny during the FY 2021- 22
For the FY 2021-22, the CBDT or Central Board of Direct Taxes issued certain guidelines with regard to the compulsory selection of returns for complete scrutiny. This was done by the CBDT or Central Board of Direct Taxes through F.No. 225/61/2021/ITA-II, which is dated 10th June 2021, specified certain parameters for the compulsory selection of returns for Complete scrutiny during the above-mentioned financial year. Such categories or types of cases, parameters, and procedures for proceedings have been described in detail below:
- A survey conducted under section 133A of the Income Tax Act
- Books of accounts, documents, etc., were impounded, the return shall be selected for complete scrutiny, and the procedure of assessment proceedings shall be as below:
– issue of a notice as per section 143(2) of the Income Tax Act by the Jurisdictional Assessing Officer or the AO; and
– Transferring cases to the Central Charges as per section 127 of the Income Tax Act within a period of 15 days of the issue of aforesaid notice.
- b) Books of accounts, the documents, etc., were not impounded, but the assessee has retracted from disclosure made during the Survey, then the returns shall be selected for complete scrutiny for which the procedure of assessment proceedings would be as follows:
– issue of notice pertaining to section 143(2) of Income Tax Act by the Jurisdictional AO; and
– assessment proceedings will be conducted by the NFAC or National Faceless Assessment Centre.
– the AO or the Assessing Officer shall upload the report which is a Survey Report in the ITBA at the time of issue of notice under section 143(2) of the Act.
- c) Books of accounts, documents, etc., were not impounded, and returned income is not less than the returned income of the preceding assessment year (“AY”); then, the return shall not be selected for compulsory proceedings.
- Search and seizure cases
Assessment in search and seizure cases u/s 153A, 153C read with section 143(3) of the Act, and for return filed for AY relevant to the previous year in which the search was conducted u/s 132 or requisition was made u/s 132A of the Act, the returns shall be selected for complete scrutiny as per these guidelines. The procedure of assessment proceedings shall be as follows;
– In cases where the return is furnished u/s 153C of the Act, a Notice u/s 143(2) of the Income Tax Act shall be served by the Jurisdictional AO, which would be seeking or calling for information.
– In cases where no return is furnished u/s 153C of the Act, a notice u/s 142(1) shall be furnished by the Jurisdictional AO, which would be calling for information.
The above-said cases shall be transferred to Central Charges u/s 127 of the Income Tax Act within 15 days of the issue of notice u/s 143(2) or 142(1) of the Act.
- Notice u/s 142(1) of the Act has been issued.
3. a) No return has been furnished in response to a notice u/s 142(1) of the Act; then, the return shall be selected for complete scrutiny, and the procedure for assessment proceedings would be compulsory scrutiny by NFAC, i.e., National Faceless Appeal Centre.
3. b) Return has been furnished in response to notice u/s 142(1) of the Act where such notice was issued due to the information contained in Non-Filers Monitoring System (NMS)or AIR information or information received from the Directorate of Intelligence and Crime Investigation (I&CI), the return shall not be taken for complete scrutiny as the same shall be done through Computer Aided Scrutiny Selection Cycle (CASS).
3. c) Return has been furnished in response u/s 142(1) of the Act where such notice was issued due to the specific information received from Law Enforcement Agencies, including the Investigation wing; Intelligence or Regulatory Authority or Agency, Audit Objection, etc, then such returns shall be taken for complete scrutiny. The procedure for assessment procedures shall include the following:
– issue of notice as per the section 143(2) of the Income Tax Act by the Jurisdictional AO, and
– The NFAC will conduct the assessment procedure.
- Notices provided, as per section 148 of the Act, have been issued.
4. a) No return has been furnished in response to the notice; then such return shall be taken for complete scrutiny.
The procedure for assessment proceedings shall include the following:
– the issue of notice issued as per section 142(1) of the Income Tax Act by the Jurisdictional AO, calling for information regarding the issues which were raised in the notice under section 148 and
– assessment proceedings will be conducted by NFAC.
4. b) Return is furnished in response to notice, then the case shall be taken for complete scrutiny. The procedure for assessment proceedings shall include the following;
– issue of notice under section 143(2) of the Income Tax Act by the Jurisdictional AO, and
– assessment proceedings will be conducted by NFAC.
- Cases related to registration or the approval under sections 12A, 35(1)(ii)/ (iii)/ (iii), 10(23C), etc. of the Income Tax Act relating to certain exemptions or deductions
5. a) Registrations or approvals have not been granted or have been cancelled or withdrawn by the Competent Authority, yet the assessee has been found to be claiming tax exemption or deduction in return, and then the return shall be taken for complete scrutiny. The proceedings for assessment procedures shall be as follows:
– issue of notice as per section 143(2) of Income Tax Act by the Jurisdictional AO, and
– assessment proceedings will be conducted by NFAC.
5. b) Orders of withdrawal of registration/approval have been reversed/set aside in appellate proceedings; the returns shall not be taken for complete scrutiny.
It is to be noted that
– Cases that have been selected for compulsory scrutiny by the International Taxation and Central Circle charges, after following the guidelines that have been provided above, shall continue to be handled by the same charges as before.
– Amendments which were brought through Finance Act 2021, provide for the reduction of time period or limit for service of notice u/s 143(2) of the Income Tax Act from 6 months to 3 months from the end of the financial year during which the return has been filed.
