Scrutiny of income tax
This query is : Resolved
11 August 2011
WHAT IS THE GUIDELINE FOR FILE IN SCRUTINY IN INCOME TAX.
11 August 2011
Guidelines for selection of cases for Scrutiny During financial year 2010-11
1. Selection of cases for scrutiny during the financial year 2010-11 will be done primarily through CASS this year.
2. Selection criteria Applicable to all return at all stations are as follows:-
a) Value of International transaction as defined in 92B exceeds 15 Crore.
b) Cases involving addition in an earlier assessment year in excess of Rs 10/- lacs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before on appellate authority.
c) Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs 10/- Lakh or more.
d) Assessment in survey cases for the financial year in which survey was carried out. This criteria will not apply if all of the following conditions are fulfilled:-
a)There are no impounded books or documents.
b)There is no retraction of disclosure, if any, made during the survey.
c)Declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.
d)Assessment in search & Seizure cases to be made under section 158B, 158BC, 158BD, 153A, 153C & 143(3) of the IT Act,1961.
e)Assessment Initiated under section 147/148 of the IT Act,1961.
f) Assessing officer may select any return for scrutiny after recording he reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS.
1. Selection of cases for scrutiny during the financial year 2010-11 will be done primarily through CASS this year.
2. Selection criteria Applicable to all return at all stations are as follows:-
a) Value of International transaction as defined in 92B exceeds 15 Crore.
b) Cases involving addition in an earlier assessment year in excess of Rs 10/- lacs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before on appellate authority.
c) Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs 10/- Lakh or more.
d) Assessment in survey cases for the financial year in which survey was carried out. This criteria will not apply if all of the following conditions are fulfilled:-
a)There are no impounded books or documents.
b)There is no retraction of disclosure, if any, made during the survey.
c)Declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.
d)Assessment in search & Seizure cases to be made under section 158B, 158BC, 158BD, 153A, 153C & 143(3) of the IT Act,1961.
e)Assessment Initiated under section 147/148 of the IT Act,1961.
f) Assessing officer may select any return for scrutiny after recording he reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS.
11 August 2011
WHAT TYPE OF INTERNATIONAL TRANSACTION IMPORT & EXPORT OR ANY OTHER TRANSACTION PLEASE CLEAR. AND IS IT SALE CRITERIA FOR SCRUTINY IN THE COMPANY OR FIRMS , IF SALE BECOMES MORE THAN ANY CERTAIN FIGURE.
section 92B where i can read it.
section 92B where i can read it.
23 July 2025
### **Guidelines for Scrutiny Selection in Income Tax - Financial Year 2010-11**
In the **Income Tax** system, **scrutiny assessments** are conducted to verify the correctness of the tax returns filed by the taxpayer. The **Centralized Scrutiny and Selection System (CASS)** was introduced to select cases for scrutiny in an efficient and systematic manner, ensuring that resources are allocated effectively.
Below are the guidelines for the selection of cases for scrutiny in **Financial Year 2010-11**:
### **Key Guidelines for Selection of Scrutiny Cases**:
1. **Selection through CASS**:
* **CASS** is the primary system used to select cases for scrutiny during the financial year 2010-11. This automated system streamlines the process and ensures that scrutiny is applied based on certain predefined criteria.
2. **General Selection Criteria for Scrutiny**:
The following criteria are applicable to all returns at all stations:
a) **International Transactions Exceeding ₹15 Crore**:
* If the value of **international transactions** as defined in **Section 92B** of the Income Tax Act exceeds ₹15 crore, the case will be selected for scrutiny. This includes transactions between related parties across borders.
* **International Transaction**: As per Section 92B, international transactions refer to transactions between two or more associated enterprises (companies, firms, etc.) located in different countries. These could include sales, purchases, or any other business activities between the entities.
b) **Additions in Previous Assessments Exceeding ₹10 Lakh**:
* If an addition was made in any previous assessment year exceeding ₹10 lakh due to substantial and recurring issues related to law or facts, the case may be selected for scrutiny, especially if the addition was confirmed in an appeal or is still pending.
c) **Transfer Pricing Issues Exceeding ₹10 Lakh**:
* If any case involved **transfer pricing issues** and the addition was over ₹10 lakh, it would be selected for scrutiny. This ensures that the correct arm’s length price has been declared for international transactions between related parties.
d) **Survey Cases**:
* Cases where a **survey** has been conducted during the financial year will be selected for scrutiny. However, the case will not be selected if:
* No books or documents were impounded during the survey.
* No retraction has been made of any disclosure made during the survey.
* The declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.
e) **Search and Seizure Cases**:
* If an assessment is made under sections **158B, 158BC, 158BD, 153A, 153C**, or **143(3)** (all related to search and seizure), these will be scrutinized.
f) **Assessment Initiated under Section 147/148**:
* If the assessment has been initiated under **Section 147 (Income escaping assessment)** or **Section 148 (Issue of notice for re-assessment)**, it will automatically trigger scrutiny.
g) **Assessing Officer’s Discretion**:
* The Assessing Officer (AO) can select any return for scrutiny after recording the reasons and obtaining the approval of the **CCIT/DGIT** (Chief Commissioner of Income Tax/Director General of Income Tax). These cases are selected when there are **compelling reasons**, but the case was not selected through CASS.
---
### **International Transactions - Section 92B Explanation**:
**Section 92B** of the Income Tax Act defines **international transactions** and covers all forms of cross-border transactions between **associated enterprises**. This includes:
* **Import and Export** of goods or services.
* **Provision of services** (such as management, technical services, etc.) across borders.
* **Sale and purchase** of tangible assets or intangible assets (like intellectual property).
* **Loans or financing arrangements** between related parties across countries.
For **scrutiny purposes**, **Section 92B** is particularly relevant for **transfer pricing** assessments. If a company or firm engages in international transactions exceeding ₹15 crore, it must ensure that the transactions are at **arm’s length price** (i.e., the price that would be charged between unrelated parties in an open market).
The **Transfer Pricing Officer (TPO)** is responsible for determining whether the declared prices are appropriate, and if not, the AO will scrutinize the assessment.
---
### **Sale Criteria for Scrutiny in Companies/Firms**:
Regarding your question about sales, the **Income Tax Department** does not have a specific scrutiny threshold for sales alone. However, **large sales figures** may indirectly raise scrutiny triggers if:
* There are discrepancies in sales reporting or mismatched income recognition.
* **Related party transactions** (which involve associated enterprises) are involved, especially if they exceed the ₹15 crore limit under **Section 92B**.
* If there are **unexplained discrepancies** or large shifts in sales patterns compared to the previous year, the case may be flagged for scrutiny, particularly if the company operates in sectors with a history of tax avoidance.
---
### **Where to Read Section 92B**:
You can read **Section 92B** in detail in the **Income Tax Act, 1961** under the **Transfer Pricing** provisions. This section explains the types of transactions that fall under the category of **international transactions** and outlines the compliance required from companies and firms involved in such transactions.
---
### **Conclusion**:
* **International transactions exceeding ₹15 crore** trigger scrutiny, and these transactions could include **imports/exports**, loans, services, and asset transfers.
* **Sale figures** in themselves aren’t an explicit criterion for scrutiny, but they can raise red flags if they involve unusual patterns or related-party transactions.
* You should refer to **Section 92B** for further details on **international transactions** and **transfer pricing** regulations.
If you have any further questions or need more specific examples or case studies, feel free to ask!
In the **Income Tax** system, **scrutiny assessments** are conducted to verify the correctness of the tax returns filed by the taxpayer. The **Centralized Scrutiny and Selection System (CASS)** was introduced to select cases for scrutiny in an efficient and systematic manner, ensuring that resources are allocated effectively.
Below are the guidelines for the selection of cases for scrutiny in **Financial Year 2010-11**:
### **Key Guidelines for Selection of Scrutiny Cases**:
1. **Selection through CASS**:
* **CASS** is the primary system used to select cases for scrutiny during the financial year 2010-11. This automated system streamlines the process and ensures that scrutiny is applied based on certain predefined criteria.
2. **General Selection Criteria for Scrutiny**:
The following criteria are applicable to all returns at all stations:
a) **International Transactions Exceeding ₹15 Crore**:
* If the value of **international transactions** as defined in **Section 92B** of the Income Tax Act exceeds ₹15 crore, the case will be selected for scrutiny. This includes transactions between related parties across borders.
* **International Transaction**: As per Section 92B, international transactions refer to transactions between two or more associated enterprises (companies, firms, etc.) located in different countries. These could include sales, purchases, or any other business activities between the entities.
b) **Additions in Previous Assessments Exceeding ₹10 Lakh**:
* If an addition was made in any previous assessment year exceeding ₹10 lakh due to substantial and recurring issues related to law or facts, the case may be selected for scrutiny, especially if the addition was confirmed in an appeal or is still pending.
c) **Transfer Pricing Issues Exceeding ₹10 Lakh**:
* If any case involved **transfer pricing issues** and the addition was over ₹10 lakh, it would be selected for scrutiny. This ensures that the correct arm’s length price has been declared for international transactions between related parties.
d) **Survey Cases**:
* Cases where a **survey** has been conducted during the financial year will be selected for scrutiny. However, the case will not be selected if:
* No books or documents were impounded during the survey.
* No retraction has been made of any disclosure made during the survey.
* The declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.
e) **Search and Seizure Cases**:
* If an assessment is made under sections **158B, 158BC, 158BD, 153A, 153C**, or **143(3)** (all related to search and seizure), these will be scrutinized.
f) **Assessment Initiated under Section 147/148**:
* If the assessment has been initiated under **Section 147 (Income escaping assessment)** or **Section 148 (Issue of notice for re-assessment)**, it will automatically trigger scrutiny.
g) **Assessing Officer’s Discretion**:
* The Assessing Officer (AO) can select any return for scrutiny after recording the reasons and obtaining the approval of the **CCIT/DGIT** (Chief Commissioner of Income Tax/Director General of Income Tax). These cases are selected when there are **compelling reasons**, but the case was not selected through CASS.
---
### **International Transactions - Section 92B Explanation**:
**Section 92B** of the Income Tax Act defines **international transactions** and covers all forms of cross-border transactions between **associated enterprises**. This includes:
* **Import and Export** of goods or services.
* **Provision of services** (such as management, technical services, etc.) across borders.
* **Sale and purchase** of tangible assets or intangible assets (like intellectual property).
* **Loans or financing arrangements** between related parties across countries.
For **scrutiny purposes**, **Section 92B** is particularly relevant for **transfer pricing** assessments. If a company or firm engages in international transactions exceeding ₹15 crore, it must ensure that the transactions are at **arm’s length price** (i.e., the price that would be charged between unrelated parties in an open market).
The **Transfer Pricing Officer (TPO)** is responsible for determining whether the declared prices are appropriate, and if not, the AO will scrutinize the assessment.
---
### **Sale Criteria for Scrutiny in Companies/Firms**:
Regarding your question about sales, the **Income Tax Department** does not have a specific scrutiny threshold for sales alone. However, **large sales figures** may indirectly raise scrutiny triggers if:
* There are discrepancies in sales reporting or mismatched income recognition.
* **Related party transactions** (which involve associated enterprises) are involved, especially if they exceed the ₹15 crore limit under **Section 92B**.
* If there are **unexplained discrepancies** or large shifts in sales patterns compared to the previous year, the case may be flagged for scrutiny, particularly if the company operates in sectors with a history of tax avoidance.
---
### **Where to Read Section 92B**:
You can read **Section 92B** in detail in the **Income Tax Act, 1961** under the **Transfer Pricing** provisions. This section explains the types of transactions that fall under the category of **international transactions** and outlines the compliance required from companies and firms involved in such transactions.
---
### **Conclusion**:
* **International transactions exceeding ₹15 crore** trigger scrutiny, and these transactions could include **imports/exports**, loans, services, and asset transfers.
* **Sale figures** in themselves aren’t an explicit criterion for scrutiny, but they can raise red flags if they involve unusual patterns or related-party transactions.
* You should refer to **Section 92B** for further details on **international transactions** and **transfer pricing** regulations.
If you have any further questions or need more specific examples or case studies, feel free to ask!
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