The Central Board of Direct Taxes (CBDT) has released the Guidelines for Compulsory Selection of Returns for Complete Scrutiny during Financial Year 2026-27, prescribing the categories of income tax returns that will be mandatorily selected for detailed examination by the Income Tax Department.
The guidelines apply to returns filed during FY 2025-26 and have been issued under Section 536(2)(c) of the Income Tax Act, 2025.
Key Categories for Compulsory Scrutiny
CBDT has identified six specific scenarios under which returns will be selected for complete scrutiny.
1. Survey Cases (CS-01)
Returns will be selected for compulsory scrutiny where a survey under Section 133A of the Income-tax Act, 1961 (excluding Section 133A(2A) surveys) has been conducted on or after 1 April 2024.
These cases will be identified based on information provided by the Investigation Wing and approved by the Directorate of Income-tax (Systems).
2. Search and Requisition Cases (CS-02)
Cases involving:
- Search operations under Section 132, or
- Requisitions under Section 132A
initiated on or after 1 April 2024 will be subject to compulsory scrutiny.
For searches conducted on or after 1 September 2024, scrutiny will be carried out for the assessment years covered under the block assessment provisions.
3. Reassessment Cases Where Notice Under Section 148 Has Been Issued (CS-03)
Compulsory scrutiny will apply in:
- Search or survey-related reassessment cases where notice under Section 148 has been issued; and
- Other reassessment cases pending completion by 31 March 2027.
The jurisdictional assessing officers will be required to upload supporting documents forming the basis for issuing the reassessment notice.
4. Trusts and Institutions with Cancelled or Denied Registrations (CS-04)
CBDT has mandated scrutiny of entities that:
- Have been denied registration or approval under provisions such as Sections 12A, 12AB, 35(1)(ii), 35(1)(iia), 35(1)(iii), and 10(23C); or
- Whose registrations/approvals have been cancelled or withdrawn on or before 31 March 2025,
but continue to claim exemption or deduction in their Income Tax Return (ITR-7).
However, cases where cancellation orders have been reversed by appellate authorities will not be selected under this parameter.
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5. Recurring Additions in Earlier Assessment Years (CS-05)
Returns may be selected where additions made in earlier years on a recurring issue of fact or law:
- Exceed ₹50 lakh in metro jurisdictions (Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune); or
- Exceed ₹20 lakh in non-metro jurisdictions,
and such additions have either become final or have been upheld in favour of the Revenue by appellate authorities.
6. Specific Information Indicating Tax Evasion (CS-06)
Cases will also be compulsorily scrutinized where:
- Specific information pointing towards tax evasion is received from law enforcement, intelligence, regulatory or investigation agencies; and
- The taxpayer has filed the return for the relevant assessment year.
CBDT has clarified that returns filed in response to notices under Section 142(1) based solely on NMS, AIS, SFT, CPC-TDS or Directorate of I&CI information will not automatically qualify for compulsory scrutiny unless covered under this category.
Approval and Selection Process
For categories CS-05 and CS-06, jurisdictional assessing officers must prepare and submit lists of eligible cases through the prescribed administrative hierarchy. The consolidated lists are required to be forwarded to the Directorate of Income-tax (Systems) by 15 June 2026.
Special Provision for International Taxation and Central Charges
CBDT has clarified that cases handled by International Taxation and Central Charges may also be selected under these parameters with prior administrative approval. Such cases will continue to be handled by the respective jurisdictions and will not be transferred to the National Faceless Assessment Centre (NaFAC).
Time Limit for Issue of Scrutiny Notices
The Board has reiterated that the last date for service of notice under Section 143(2) for returns filed during FY 2025-26 is 30 June 2026, in accordance with the Income-tax Act provisions.
Impact on Taxpayers
The latest guidelines indicate that the Department's scrutiny focus during FY 2026-27 will remain concentrated on:
- Search and survey cases,
- Reassessment proceedings,
- High-value recurring disputes,
- Trusts claiming exemptions despite registration issues, and
- Cases backed by credible tax-evasion intelligence.
Taxpayers falling within these categories should ensure that supporting documentation and compliance records are readily available to respond to scrutiny proceedings effectively.
Click here to view/download the official copy of the notification
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