01 September 2007
The CBDT has issued the following norms for scrutiny for 2007-2008.
Subject : Income Tax Law Circular Date : 30 Jul 07 Topic : Procedure for selection of cases for 'Scrutiny' for non-corporate assessees Circular Details :
Jul, 30th 2007
Procedure for selection of cases for 'Scrutiny' for non-corporate assessees
In super cession of earlier instructions on the above subject the Board hereby lays down the following procedure for selection of returns / cases of *Non-Corporate Assessees* for scrutiny during the current financial year i.e. 2007-08.
2. The following categories of cases shall be compulsorily scrutinized; -
i) All assessment pertaining to search and seizure cases.
ii) All assessment pertaining to surveys conducted u/s 133A of the Income tax Act.
iii) [1]All returns where deduction claimed under Chapter VIA of the Income tax Act is Rs. 25 lakhs or above in stations other than the cities on computer network.
iv) All returns, including those of non-residents, where refund claimed is Rs. 5 lakhs or above in stations other than the cities on computer network.
v) (a) All cases in which the CIT (Appeals) or ITAT has confirmed an addition / disallowance of Rs.5 lakhs or above or if the assessee has conceded on addition in any proceeding Assessment year and Identical issue is arising in the current year. But if the issue involves a substantial question of law, the cases may be picked up for scrutiny irrespective of the quantum of tax involved. However, if the addition has been deleted by a superior appellate authority and the Department has accepted that decision, the case need not be taken up for scrutiny.
(b) All cases in which an appeal is pending before the CIT (Appeal) against an addition / disallowance of Rs.5 lakhs or above, or the department has filed an appeal before the ITAT against the order of the CIT (Appeal) deleting such an addition / disallowance and an identical issue is arising in the current year. However, as in (i) above, the quantum ceiling may not be taken into account if a substantial question of law is involved.
(vi) All returns filed by statutory bodies, marketing committees and other authorities assessable to income tax.
(vii) All cases of banks and Non-banking financial institutions with deposits of Rs. 5 crores and above
(viii) Cases of universities , educational institutions, hospitals, nursing homes and other institutions for rehabilitation of patients (other than those, which are substantially financed by the Government), the aggregate annual receipts (including donations credited to the corpus / any other fund) of which exceed Rs 10 crores in Delhi, Mumabi, Chennai, Kolkota, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 5 crores in other places (Ref. S 10 (23c) & Rule 2 BC)
(ix) All cases where exemption is claimed under section 11 of Income Tax Act and the gross receipts (including donations credited to the corpus / any other fund) exceed Rs. 5 crores in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 1 crores in other Places.
(x) (a) All cases where total value of International Transactions (as defined u/s 92 B of the Income tax Act) exceed Rs.15 crores)
(b) In all other cases where the Transfer Pricing Audit carried out in the earlier year had led to an adjustment / addition to the total income.
(xi) All cases of stockbrokers and commodity brokers as well as their sub brokers where brokerage received is disclosed at Rs. 1 crore or above.
(xii) All cases of stockbrokers and commodity brokers as well as their sub brokers where there are claims of bad debts of Rs. 5 lakhs or more.
(xiii) All cases of professionals with gross receipts of Rs.20 lakhs or more if total income declared is less than 20% of gross professional receipts.
(xiv) All cases of deductions under sections 10 A / 10 AA / 10BA / 10 B of the I.T. Act exceeding Rs.25 lakhs.
(xv) All cases of contractors (excluding transporters) whose gross contractual receipts exceed Rs. 1 crores if total income declared from contract work is less than 5% of gross contractual receipts.
(xvi) All cases of builders following project completion method.
(xvii) All cases in which fresh capital introduced during the year exceed Rs.50 lakhs in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangaloreand Ahmedabad and Rs.10 lakhs in other cities.
(xviii) ¹All cases in which new unsecured loan introduced during the year exceed Rs.25 lakhs.
(xix) All cases in which deduction u/s 80IA(4), 80 IB, 80IC, 80JJA, 80JJAA, 80LA, 10 (21), 10(22B), 10(23A), 10(23B), 10(23C), 10 (23D), 10 (23EA), 10 (23FB), 10 (23G), 10(37), 10 A, 10AA, 10B, or 10BA of the I.T. Act is claimed for the first time.
(xx) *All cases in which loss from house property is more than Rs.2,50,000/-
(xxi) *All cases in which investment in property is more than five times the gross receipts (i.e. purchase of property (008 from AIR) / (Gross Total Income (746) + Agricultural Income (762) + Income Claimed exempt (125)>5)
(xxii) *All cases in which sum of short term capital gains u/s 111A and long term capital gain is more than Rs 25 laksh.
(xxiii) *All cases in which sale of property has been shown as per AIR return but no capital gains have been declared in the return of Income.
(xxiv) *All cases in which commission paid is more than Rs. 10 lakhs
(xxv) *All cases having business of real estates with gross turnover exceeding Rs. 5 crores.
(xxvi) *All cases having business of hotels/tour operations with gross turnover exceeding Rs. 5 crores if net profit shown is less than 0.05%
(xxvii) *All cases in which total depreciation claimed at the rates of 80% and 100% is more than Rs.25 lakhs.
(xxviii) All cases in which net agricultural income is more than Rs 10 lakhs.
(xxix) All cases covered by retrospective amendment in setion 80 IA of the I.T. Act, 1961 brought by the Finance Act, 2007 i.e. all persons who merely executive the civil construction work or any other works contract entered into with the undertaking or enterprise reffered to in Sec 80 IA of I.T Act 1961.
NOTE: If a case has been assessed earlier under scrutiny for at least 2 A.Y.s but in each of the immediately proceeding two years assessed u/s 143(3) of the I.T. Act, total additions or disallowances made / sustained in appeal are less than 5 lakhs in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and less than Rs. 1 lakhs in other places then such a case should be excluded from compulsory scrutiny under clauses (ii). (vi), (vii), (viii), (ix), (x), (xii), (xiii) Provided that the above exclusion clause shall not apply in cases involving substantial question of law.
3. In addition to above, where the CCIT / DGIT (International taxation) / DGIT (Exemptions) , on the matter having been brought to his notice by an authority below, is satisfied that the case needs to be taken up for scrutiny, the CCIT / DGIT (International taxation) / DGIT (Exemptions) , for reasons to be recording in writing, may approve the selection of the case for scrutiny.
4. The CCIT / DGIF (International Taxation) / DGIT (Exemptions) may issue suitable guidelines for reducing / increasing the number of cases selected under specific clauses of para 2, for proper management of the workload as well as to avoid large scale transfer of cases from one jurisdiction to another.
5. All returns field in response to notice issued U/s 148 of the I.T. Act shall be selected for scrutiny.
6. In addition to above, selection of cases out of returns processed on AST will be made through a Computer Assisted Scrutiny System (CASS). Separate instructions in this regard will be issued by the DIT (Systems).
7. List of cases up for scrutiny during each month shall be submitted by the Assessing Officer to the CIT and Addl. CIT, Range by 15th of the following month and shall also be displayed on the Notice Board of the office.
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[1] Selection of cases under these criteria shall not be done manually in the cities on computer network but through Computer Assisted Scrutiny System (CASS), for which necessary provisions have been made in the CASS software being issued by Directorate of Income tax (Systems)
¹ Selection of cases under these criteria in the cities on the Computer network would be made through Computer Assisted Scrutiny Systems (CASS) in respect of cases where audit report U/s 44 AB has been filed. In all other cases in threes cities and in all cases in cities not on the Computer Network, the selection would be made manually.
* Selection of cases under these criteria shall not be done manually in the cities on computer network but through Computer Assisted Scrutiny System (CASS), for which necessary provisions have been made in the CASS software being issued by Directorate of Income tax (Systems)
The norms for 2006-2007 were as follows:
Subject : Income Tax Law Circular Date : 24 Sep 06 Topic : Scrutiny norms announced by CBDT for F.Y.2006-07 Circular Details :
Scrutiny norms announced by CBDT for F.Y.2006-07.
Income-tax returns of professionals will come under compulsory scrutiny this fiscal if they earn Rs.10 lakh or more annually but declare an income of less than Rs.2 lakh. The Central Board of Direct Taxes (CBDT) has tightened the scrutiny norms for professionals including film professionals, lawyers, doctors, chartered accountants and architects to track small assessees short paying or evading taxes.
So is the case for salaried assesses, claiming refunds above a certain threshold, and contractors. It is status quo, though, for stockbrokers the norms have neither been tightened nor eased. Overall, close to 5.4 lakh tax filers in the country will find their income tax returns scrutinized this fiscal, with the CBDT setting an overall cap of 2% on the number of cases to be selected for scrutiny.
Professionals are non-corporate assessees while stockbrokers and contractors can either be non-corporate assesses or corporate assesses.
During 2006-07, assessing officers have been directed to scrutinize returns of all professionals whose gross receipts exceed Rs10 lakh but income declared is less than 20% of the amount. The cut off limit was higher at Rs.50 lakh in 2005-06. I-T returns of stockbrokers (including sub brokers) who receive brokerage income of Rs. 1 crore or more but declare less than 10% of the amount will be taken up for scrutiny.
All cases of brokers (including sub-brokers) with a claim of bad debts of Rs 10 lakh or more will also be under compulsory scrutiny. The limits were the same in 2005-06 as well.
Besides brokers, all banks and public sector undertakings, NSE 500 and BSE A group companies listed on the exchange as on March 31, 2006, non banking companies and investment companies with a paid up capital of Rs. 10 crore or more are in the compulsory scrutiny basket. Cases will be selected through the computer assisted scrutiny system (CASS) in 60 cities on the computer network, and manually in others. The selection criteria will be the same for both.
With tax evasion reckoned to be rampant among contractors, the CBDT has decided to bring to bring all cases where gross receipts exceed Rs 2 crore but net income declared is less than 5% of the amount under scrutiny (for corporate assesses). The limit was higher at Rs. 5 crore in 2005-06.
All assessment pertaining to survey, search and seizure cases.
All returns where deduction claimed under chapter VIA of the I.T. Act is Rs. 10lakh (Rs.5 lakhs for non corporate) or above in stations other than 60 cities on computer network
All returns where refund claimed is Rs 5 lakh or above in stations other 60 cities on computer network.
All cases in which the CIT (appeals) or ITA has confirmed and addition disallowance of Rs 5 lakh. Or above in any preceding assessment year and identical issue is arising in the current year.
All banks and public sector undertakings.
All NSE-500companies & BSE- A companies listed on Bombay stock exchange.
All cases of companies liable to pay tax under section 115JB with book profit exceeding Rs. 50 lakh in DELHI, MUMBAI, CHANNAI, KOLKATA, PUNE, HYDERABAD, BANGALORE AND AHMEDABAD and Rs. 25 lakh in other places.
All case of deduction under sections 10A and or 10B of the I.T.Act with export turnover exceeding Rs. 5 crores for Non Corporate.
All Non- Banking financial corporations (NBFCs)\ Investment companies having paid up capital of more than Rs. 10 crore.
All cases of stockbrokers (including sub- brokers) where brokerage received is disclosed at Rs. Rs. 1 crore (Rs. 50 lakhs for non corporate) or above and total income declared is less than 10% of such brokerage or in which bad debts of Rs. 10 lakh (Rs. 5 lakhs for non corporate) or more have been claimed.
All cases of contractors whose gross contractual receipts exceeds Rs. 2 crore (Rs. 1 crore for non corporate) in places other than 60 cities on computer network if total income declared is less than 5% of gross contractual receipts.
All cases of builders following project completion method.
All cases in which fresh capital introduced during the year exceeds Rs. 1 crore in Delhi, Mumbai,Channai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 50 lakh (Rs. 10 lakh for non corporate) in other cities.
All cases in which new loans introduced during the year exceed Rs. 1 crore in DELHI, MUMBAI, CHENNAI, KOLKATA, PUNE, HYDERABAD, AHMEDABAD and Rs. 50 lakh ( Rs. 10 lakh for non corporate ) in other cities.
All cases in which deduction u\s 810A(4), 801AB, 801C,80JJA, 80JJAA, 80LA, 10(21), 10(22B), 10(23A), 10(23B), 10(23C), 10(23D)I, 10(23EA), 10(23FB), 10(23G), 10A, 10AA, 10B or 10BA of the I.T Act is claimed for the first time.
If a case has been assessed earlier u\s 143(3) of IT Act for at least 2 assessment years and in each of the immediately preceding two years, total additions or disallowances made or sustained in appeal are less than Rs. 10 lakh in DELHI, MUMBAI, CHENNAI, KOLKATA, PUNE, HYDERABAD, AHMEDABAD and less than Rs. 2 lakh in other places, then such a case should be excluded from compulsory scrutiny except in cases involving substantial question of law.
Cases where the CCIT\ DGIT (International Taxation) \ DGIT ( Exemption), on a matter having been brought to his notice by an authority below, satisfied that the case needs to be taken up for scrutiny, then the said officer,) for reasons to be recorded in writing, may approve the selection of the case for scrutiny. However, selection of cases under this provision should be made keeping in view the following
*
Total number of cases selected for scrutiny during the does not ordinarily exceed 2 % of total number of returns filed\ pending during the year; and *
At least 80% of all the cases picked up for scrutiny are assessed by 28.02.2007.
In addition to above, selection of cases out returns processed an AST will be made through a computer assisted scrutiny system (CASS). Separate instructions in this regard will be issued by the DIT (Systems).
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