Every year, CBDT issues some guidelines for the selection of cases which are picked up for scrutiny. Similarly such guidelines have been issued this year. Though the guidelines are supposed to be confidential, but based on media reports it can be inferred that the guidelines consist of the following.
Cases are selected for scrutiny generally at the following two levels:
(a) Centrally through CASS;
(b) Manually through Assessing Officers.
The guidelines are generally laid down by the Central Board of Direct Taxes (CBDT) but the department has revealed some of the basic guidelines to the public as per an order of the Delhi High Court which was passed last year.
Cases which are selected for scrutiny:
(i) Those cases where an addition of Rs. 10, 00,000/- or more has been made in the previous year which has been confirmed by the appellate authorities;
(ii) Those cases which involve search and seizure proceedings;
(iii) Those cases where reassessment proceedings have been started as per the provisions of section 148 of the Income Tax Act;
(iv) Those cases which involve addition of Rs. 10 lakhs or more according to the provisions of Transfer pricing in the previous year;
(v) Those cases where value of international transaction as described in the provisions of 92 B of the Act is more than Rs. 15 crores;
(vi) Those assessments in connection with Survey as per section 133A of the Income Tax Act;
(vii) Those cases claiming exemption as per section 10(23C) along with Section 2(15) of the Income Tax Act;
(viii) Cases where entities have received donations from foreign countries amounting to more than Rs. one crore during a Financial Year as per provisions of the Foreign Contribution Regulation Act (FCRA).
However, the Assessing Officer is empowered to select any case after recording the grounds and upon getting approval from the Chief Commissioner of Income Tax or the Director General of Income Tax.
Other cases where scrutiny is done compulsorily include cases where surveys or raids are done though there are few exceptions, and those filed returns where the tax department issued notices as per Section 147 or 148 of the Income Tax Act on the suspicion that some income has escaped assessment.
The tax department also scrutinizes those cases where the companies or individuals claim deduction for donation towards charitable organizations under Section 11 of the Income Tax Act.
Norms when a case is picked up for scrutiny:
If a case is selected for scrutiny, the Assessing Officer issues a notice to the company asking for further details regarding the transaction. The return is not being proceeded and the refund, if any, is not released till the case is open.