Scrutiny u/s 143 (3)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2016 Does assessee has the power to ask AO on what grounds his case is selected for scrutiny by CPC? Can the assessee view the grounds on basis of which his case is selected for scrutiny by CPC??

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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20 May 2016 asseessee does not have power to ask the AO to disclose the reasons for scrutiny.

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Chandan sharma

Chandan sharma (Querist)
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20 May 2016 sir is there any way by which asessee can ask for reason for selection of his case for scrutiny

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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23 July 2025 Under **Section 143(3)** of the Income Tax Act, 1961, scrutiny assessments are conducted by the **Assessing Officer (AO)**. In the context of **selection for scrutiny**, the **Centralized Processing Center (CPC)** plays a role in identifying the cases that require detailed examination. Here's a detailed response to your query regarding whether the assessee can request the grounds for selection of their case for scrutiny.

### 1. **Can the Assessee Ask for the Grounds of Scrutiny?**

While an **assessee** cannot directly ask the **Assessing Officer (AO)** for the reasons behind the selection of their case for scrutiny, the following provisions are worth noting:

* **CPC’s Role in Case Selection**: The **Centralized Processing Center (CPC)** or the **Assessment Unit** uses an automated system to select cases for scrutiny, typically through the **CASS (Centralized Scrutiny and Selection System)**, which is driven by specific risk parameters (e.g., high-value transactions, large discrepancies, etc.).

* **Discretion of AO**: The **Assessing Officer** may not be obliged to disclose the specific reasons for selecting a case for scrutiny during the early stages of the process. In general, the grounds for selection are not immediately communicated to the assessee, as the scrutiny is part of the government's **assessments and verification procedures**.

### 2. **Can the Assessee View the Grounds for Scrutiny?**

The assessee does not have an inherent right to ask for the **grounds** on which their case was selected for scrutiny under the law. However, **transparency** mechanisms have been introduced that could give the assessee some insight:

* **Section 142(1) Notice**: When a case is selected for scrutiny, the AO typically issues a **Notice under Section 142(1)** asking the assessee to furnish various documents and details. The notice does not typically mention the specific reason for the selection.

* **Procedure after Scrutiny Notice**: After the scrutiny process begins, the AO will examine the records and documents submitted by the assessee. If there is a **material or substantial reason** for questioning the return, it will be explained in the **Assessment Order (Section 143(3))**.

* **Reasons for Scrutiny**: Although the assessee cannot directly request reasons for scrutiny at the initial stage, the **Assessing Officer** may eventually provide a **detailed order** (under **Section 143(3)**) after the completion of scrutiny, outlining the grounds for adjustments, additions, or disallowances.

### 3. **Can the Assessee Request for an Explanation During Scrutiny?**

The assessee can raise queries during the **scrutiny proceedings** by:

* **Appealing or raising objections**: If the assessee feels that the scrutiny is unjustified or the assessment is incorrect, they may file an **appeal** with the **Commissioner of Income Tax (Appeals)** after the assessment order is passed under Section 143(3). The **appeals process** provides an opportunity to challenge the basis of the scrutiny or the additions made by the AO.

* **Information or clarification requests**: During the proceedings, the assessee can seek clarifications on certain aspects or request a **reconsideration** of a particular issue by presenting relevant facts.

### 4. **Rational Behind Scrutiny Selection**:

Though specific reasons are generally not provided upfront, some of the common grounds that can lead to scrutiny selection include:

* **Mismatch of income** as compared to previous years.
* **High-value transactions** that don't align with normal business activities.
* **Unexplained credits** or substantial discrepancies in bank statements.
* **International transactions** or **related-party transactions**.
* **High claims for deductions** or exemptions that seem unreasonable.

### 5. **Section 142(1) & 143(3)** Clarifications:

* **Section 142(1)** allows the AO to issue a notice asking for documents and returns.
* **Section 143(3)** states that the AO will pass an assessment order after scrutinizing the information provided. This order includes details of the adjustments and the **reasons for selection**.

### 6. **Case Laws on Scrutiny Selection**:

The courts have ruled that the **Assessing Officer** does not need to explain the reason for the selection of a case for scrutiny in the early stages. For example, in some cases:

* **CIT v. Anjum M.H. Ghaswala (2001)**: The court ruled that there is no obligation on the part of the department to inform the assessee of the reasons for selecting the case for scrutiny, especially in the absence of a specific request by the taxpayer.

* **CIT v. Kalyani Steels Ltd. (2002)**: The court upheld the position that the assessing officer has the discretion to select cases for scrutiny and that the reason for selection can be disclosed in the **Assessment Order**.

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### **Conclusion**:

* **No Right to Initial Grounds**: An assessee does **not have the legal right** to ask the AO for the reasons behind the selection of their case for scrutiny at the start of the proceedings.
* **Transparency after Scrutiny**: After the **scrutiny assessment** (under **Section 143(3)**), the AO will typically provide a **detailed order**, which will include the grounds for any additions, adjustments, or disallowances made.
* **Appeals Process**: If the assessee is not satisfied with the assessment, they can appeal to the **CIT(A)**, where the grounds for scrutiny can be further questioned.

If you’re facing a specific situation, it’s often helpful to consult with a tax expert to understand your options in appealing or querying the scrutiny process more effectively.

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