CBDT Clarifies Important Issues On Scope Of Scrutiny In CASS Assessments

The CBDT has issued Instruction No. 20/2015 dated 29.12.2015 in which it has issued clarifications on several issues in order to facilitate the conduct of scrutiny assessments in cases selected through Computer Aided Scrutiny Selection (‘CASS’). The CBDT has also stated that as far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year – one is ‘Limited Scrutiny’ and other is Complete Scrutiny’. The assessees concerned have duly been intimated about their cases falling either in ‘Limited Scrutiny’ or ‘Complete Scrutiny’ through notices issued under section 143(2) of the Income-tax Act, 1961 (‘Act’). The procedure for handling ‘Limited Scrutiny’ cases has been explained in detail by the CBDT.

Instruction No. 20/2015

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi, the 29th of December, 2015

Subject: Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection (‘CASS’)-reg .-

The Central Board of Direct Taxes (‘CBDT’), vide Instruction No. 7/2014 dated 26 09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized.

2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made.

i Year of applicability : As stated in the Instruction No. 7/2014 , the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014

ii Whether the said Instruction is applicable to al l cases selected under CASS : The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s ) of AIR/CIB/26AS data . If a case has been selected under CASS for any other reason(s)/parameter (s) besides the AIR /CIB/26AS data, then the said Instruction would not apply.

iii Scope of Enquiry : Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s ) of AIR/CIB/26AS data . In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014.

iv Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data , the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned.

3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year – one is ‘Limited Scrutiny’ and other is Complete Scrutiny’. The assessees concerned have duly been intimated about their cases falling either in ‘Limited Scrutiny’ or ‘Complete Scrutiny’ through notices issued under section 143(2) of the Income-tax Act, 1961 (‘Act’). The procedure for handling ‘Limited Scrutiny’ cases shall be as under:

a. In ‘Limited Scrutiny ‘ cases, the reasons/issues shall be forthwith communicated to the assessee concerned.

b. The Questionnaire under section 142( 1) of the Act in ‘Limited Scrutiny’ cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the ‘Limited Scrutiny ‘ issues.

c. These cases shall be completed expeditiously in a limited number of hearings.

d. During the course of assessment proceedings in ‘ Limited Scrutiny’ cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for ‘Complete Scrutiny ‘ with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating ‘Complete Scrutiny’ in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, ‘Metro charges’ would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad).

4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/ reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances due consideration shall be given to the submissions made by the assessee in response to the show cause notice.

5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance.

6. Hindi version to follow.

(Ankita Pandey)
Under Secretary to Government of India
(F. No. 225/269/2015-ITA.II)

5 comments on “CBDT Clarifies Important Issues On Scope Of Scrutiny In CASS Assessments
  1. manish parekh says:

    Current CBDT members needs to be applauded for taking the measures which have till now been not taken. But at the same time they need to be made aware what is exactly happening at the grass root level. Till now hardly few officers have adhered to the “limited scrutiny ” norm. Its the age old mentality of government officers to where they have been used to an atmosphere and lifestyle of relaxed attitude in offices and arrogant behaviour

  2. i see there is a complete confusion in the ministry as also in CBDT.

    Always issue instructions very simple, after all AOs are not great lawyers, though they might hold some LL.B degrees.

    Having a law degree and practice have vast differences.

    Again CAs just holding an LL.B degree or some Bar council membership cannot qualify one to be a great advocate, sans practice of law i mean any specific law nothing less than ten solid legal practice.

    Same applies to Advocates too.
    Today every law is unnecessarily complicated, thanks to misreading of any section any where in the statute, after all every statute has too many explanations and other paragraphs.

    Today language proficiency is very law due to advent of internet language, besides people do not have any meaningful ability in any language, worse still today literature or history are discarded subjects that way the ability in any person to patiently to probe in just falls short miserably.

    Like in RBI for clerical posts just allow only matriculates, some assistants position just a graduate and so on need be brought in the government income tax services that would really make the officers be having some humility gets built in them, but if you give so called qualifications , mostly not well armed with good drilling would only boosts one’s ego that ego kills the clarity in man.

    I remember when I was in Ministry of finance in 1960s, when a central excise and customs commissioner requested then CBR to permit him to recruit for LDC posts in Calcutta region, instead of matriculates, he be allowed to recruit graduates as there were too many unemployed graduates were there languishing for jobs, the CBR after due consideration rejected his request, saying posts meant for matriculates shall be only for matriculates, no higher qualified persons is the policy then.

    thus his request was rejected.

    Again that gentleman came to delhi and requested the change, then the finance and revenue secretary Mr Dhehejia ICS., flatly rejected, and the commissioner went back disappointed. What that shows, any intelligent man can read in between the lines of the thought.

    Again there is a provision, the AO is not supposed to consult his higher ups but he has to take his own decision idea under ‘sufficient reasons’ he has to be convinced before he issues notices and proceeds in the action is also messed up.

    so i think ministry officers ought to develop fool proof ideas instead of quick fixes would work.

    Just because you have trawlers at your command could you get hold of all fishes in the zone your trawlers re plying.

    More and more complications you make, the tax payer with the help of lawyering, i mean eminent lawyering would resort to look for loop holes in your so called statutes.

    You ought to trust taxpayers, might be some taxes might be escaped by oversight/errors, after all it is called governance not dictatorial approaches the government might approach.

    See under the Constitution of India, the arms of governments are trusted by the people, if the instruments behave with overbearing attitudes, naturally bigger and bigger chasm would develop between taxpayers and the government which is in place not as a meaningful government .

    After all advocacy is definitely is not judgement but it is to protect the client , that is as simple as that.

    If governments are to be meaningful, it ought to develop the sense of trusting that way the tax payers also would trust the officers; if officers misbehave like the government, naturally more and more conflict zones would develop, there would be no end at all, even f you go on appointing too many officers at the cost of exchequer which is funded by tax payers only not by any political party in power or any minister, is it not?

    Without trust element nothing could succeed any where, in the world is the factum of life.

    It is high time education shall be right education, all universities must cooperate, governments cannot educate any one meaningfully except at primary or middle school levels, earlier the governments understand it is better. Else they live in Eldorado.

    • Rajesh Bhardwaj says:

      I agree with you Sir. The crucial word is ” trust” between the tax payer and tax department . I was told by a CGM of a public sector bank who was earlier in Singapore that when the bank branch there made some technical error in report to the tax department there, the bank was advised by the tax officer to correct the same and pay requisite tax. The day is not far when in India too the tax officers will get the genuine mistakes corrected and taxes paid. CBDT has issued instructions to it’s officers to help the tax payers way back in 1950s and it should be followed in letter and spirit.

      • Varaprasad Daitha says:

        Sir, in Tax India also there are certain positive measures taken place like formation of LTU (Large Tax Payer Units). The concept is very good wherein a large tax payer unit is heard by all direct and indirect taxes departments together. Such units were first located in Bengaluru, Chennai, Mumbai, Delhi and latest in Kolkota. These had been rendering simplified process of hearing and filing of all information together. It was also stated that similar units would be located at all other field formations and if it successful it would be extended to all sorts of category of assessees. The functioning is said to be well done. I think the Finance Ministry is awaiting for the passing of GST bill to continue this concept. Let us pray God that the GST bill is passed early.

  3. Varaprasad Daitha says:

    Here is another positive attitude of CBDT (apparently at the instance of Revenue Secretary).

    The highlight of the instructions are clear cut directions to all AOs in respect of “selective” “complete” and “CASS” scrutiny cases. It has given clear intentions of the CBDT about the probable escapement of income in Metro and non-metro regions.

    I happen to see the pattern of selection of scrutiny cases under CASS for the last 3 years. There is a marked improvement in the selection such as cash deposits in to bank accounts. Hitherto all cases of exceeding limit of Rs. 10 lakhs was selected irrespective of the turn overs as in the cases of daily cash transaction cases viz. petrol bunks etc. Now the trend had changed to select cases of cash deposits exceeding turn overs. That means the selection mechanism has taken all possible explanations or events of a trader.

    Now it is for the AOs and their administrative bosses to see that the spirit of the instructions are implemented in letter and spirit.

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