Scrutiny Selection Criteria for Fy 2016-17 Out ! All Kinds of Cases Now Under Digital Scrutiny in 7 Cities

CBDT publishes scrutiny selection criteria every year. The criteria is important and if your case is selected for reasons other that the criteria, the courts have held the scrutiny illegal. This year ,  instruction no 4 / 2016 dated 13th July 2016 decides what type of tax return will be selected for scrutiny . Most of the criteria is just repeat of earlier year , however some points are worth noting . One of them – digital scrutiny in 7 cities – is the clear reslove of Modi Government to usher in transparency in the behaviour of tax officer as far as scrutinizing the tax returns of citizens are concerned. As per the instruction,now the digital scrutiny is fully implemented in seven cities – Ahmedabad, Bengluru, Chennai, Delhi,Hyderabad, Kolkata and Mumbai . What the digital it means is explained later in this post. 

Types of Cases for Scrutiny in FY 2016-17

Following types of cases are compulsorily to be selected for scrutiny

  1. For Ahmedabad, Bengluru, Chennai, Delhi,Hyderabad, Kolkata and Mumbai, if the identical facts or legal issue is involved on which addition was made to the extent of Rs 25 Lakhs in earlier year and
    1. assessee did not file appeal or
    2. appeal order was passed in favour of Revenue and assessee did not file appeal
    3. Appeal order by CIT(A) was passed in favour of department
  2. Survey cases u/s 133A except in a survey case
    1. when there no impounding of any document and
    2. income declared ( exclusing any disclousre made during survey) is not below last year tax return and
    3. assessee does not backtrack the survey disclosure
  3. All search & seizure case .
  4. Return filed in response to notice under section 148 of the Act.

  5. Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assesseehas been found to be claiming tax-exemption under section  11 of the Act.  However, where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.

  6. Cases of entities,  being ‘scientific  research association’   or ‘university, college or other institution’,  having approval under section(s) 35(1)(ii)/35(1)(iii)  of the Act.

  7. Cases in respect of  which   specific and verifiable  information  pointing  out tax-evasion  is given by any Government Department/Authority.  However, before selecting a  case for scrutiny under this  criterion,  Assessing Officer  shall  be  required  to   take   prior   administrative   approval  from   the   concerned  jurisdictional   Pr. CIT/Pr.DIT/CIT.

  8. Apart from that , cases are also being selected under CASS-2016 on the basis of broad based selection filters.  

Fully Digital Scrutiny : What Does it Mean ?

Last year , in order to implement the policy of givernment to bring transparency and lower the harassment to taxpayers whose case is selected for scrutiny , CBDT initiated a pilot project under which a taxpayer could submit replies and  documents by email.Now this system has been implemented fully on all kinds of scrutiny cases – CASS , Manual selection or sec. 148 or any type of case-selected during FY 2016-17 . So now if your case is selected for scrutiny under Instruction 4/2016 , you can opt for email as a way to reply the notices of the A.O and need not visit the office of the income tax authority.

Read the instruction on selection of scrutiny cases below :

Instruction No.  4/2016

North-Block, New Delhi the 13th of July, 2016

To

All Pr.  Chief-Commissioners of Income-tax/Chief-Commissioners of Income-tax

All Pr.  Directors-General of Income-tax/Directors-General of Income-tax

Sir/Madam

Subject:  Compulsory  manual  selection  of cases for scrutiny during  the  Financial Year  2016-2017- regd:-

  1. In  supersession of earlier Instructions  on the  above subject, the  Board hereby lays down the following procedure and criteria   for  manual selection of returns/cases for compulsory scrutiny during the financial-year 2016-2017:-

(i) Cases involving addition on a substantial and recurring question of law or fact in earlier assessment year(s),  in excess  of Rs.  25 lakhs in metro charges at Ahmedabad, Bengaluru,   Chennai,  Delhi, Hyderabad, Kolkata,  Mumbai and Pune, while for other charges,  quantum of such addition   should exceed Rs.  10 lakhs (for transfer pricing cases,  quantum of such addition should exceed Rs.  10 crore) and where:

  1. a. such an addition in assessment has become final as no further appeal was/has been filed; or
  2. such an addition has been confirmed at any stage of appellate process in favour of revenue and assesseehas not filed further appeal; or
  3. such an addition  has been confirmed at 1st  appeal stage in favour of revenue or subsequently and further appeal of assesseeis pending before any Authority in the appellate process.

(ii) All assessments pertaining to Survey under section  133A of the Act excluding those cases where books of accounts, documents etc.  were not impounded and returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year.  However, where assessee retracts the disclosure made during the Survey,  such cases will not be covered by this exclusion.

(iii) Assessments in search and seizure cases to be made under section(s) 1588,  158BC, 15880,  153A & 153C read with section 143(3) of the Act and also for the returns filed for the assessment year relevant to the previous year in  which authorization for search and seizure was executed u/s 132 or 132A of the Act.

(iv)  Return filed in response to notice under section 148 of the Act.

(v) Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assesseehas been found to be claiming tax-exemption under section  11 of the Act.  However, where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.

(vi)   Cases of entities,  being ‘scientific  research association’   or ‘university, college or other institution’,  having approval under section(s) 35(1)(ii)/35(1)(iii)  of the Act.

(vii)  Cases in respect of  which   specific and verifiable  information  pointing  out tax-evasion  is given by any Government Department/Authority.  However, before selecting a  case for scrutiny under this  criterion,  Assessing Officer  shall  be  required  to   take   prior   administrative   approval  from   the   concerned  jurisdictional   Pr. CIT/Pr.DIT/CIT.

  1. Computer Aided Scrutiny Selection  (CASS):  Cases are also being selected under CASS-2016on the basis of broad based selection filters.  List of such cases has been/is being separately intimated by the Pr.DGIT(Systems) to the jurisdictional authorities concerned.
  1. As a  taxpayer friendly  measure, to reduce the departmental interface with the assessee  and reduce the compliance burden of tax payers in scrutiny  assessment proceedings,  the scheme of Assessment through e-mail is  being extended to all scrutiny cases including the cases selected under above parameters in seven cities of Ahmedabad, Bengaluru,  Chennai,   Delhi, Hyderabad, Kolkata and Mumbai. However,  assessees   in  these seven cities can exercise the option of not being  scrutinized  under the e-mail  based paperless assessment proceedings after informing the Assessing Officer concerned in writing in the beginning or subsequently during the course of assessment proceedings. Further,  in cases which  require submission  of voluminous documents and it  is not practicable to submit the scanned copies thereof through e-mail, in such instances; the Assessing Officer may decide to receive such documents in physical form after recording  reasons for the same.
  1. It  is  reiterated that  the  targets  for  completion of  scrutiny assessments and strategy of  framing   quality assessments as contained in Central Action Plan document for  Financial-Year 2016-2017  have to  be complied with and it must be ensured that all scrutiny assessment orders including   the cases selected under the manual criterion are completed through  the AST system software only.   It  should be the endeavour of the Assessing Officers and his supervisory authorities to ensure that scrutiny assessment cases are disposed in a  well planned manner  without   dragging   the   assessment  proceedings  till   the   last   date   of   limitation.   Further,   Pr. CCsIT/CCIT(Central)/Pr. CCIT(International  tax)/CCIT(Exemption)/DsGIT  should evolve a   suitable monitoring mechanism in their  respective charges in order to  ensure quality  of  assessments being framed  during the financial year.  In this  regard, by 31st   January, 2017, such authorities shall send a  report to the respective Zonal Member with  a  copy to  Member (IT)  containing details of  at  least 25 quality  assessment orders from  their respective charges. It  may further  be the endeavour that  cases selected for  publication in ‘Let us Share’ are picked up only from the quality assessmentsas reported.
  1. These instructions may be brought to the notice of all concerned for necessary compliance.
  1. Hindi version to follow.

(Rohit Garg)

Deputy-Secretary to the Governmentof India

Leave a Reply