Parameters for selection of cases for scrutiny. - Income Tax - 1917/1994

INSTRUCTION NO. 1917/1994 Dated: June 3, 1994 I am directed to say that the Board has finalised the following parameters for selection of cases for scrutiny during the financial year 1994-95 :- CLASS 'A' (Assessment for compulsory scrutiny) (i) all assessments involving search and seizure and survey under section 133 A; (ii) all reassessments under section 147, set aside assessments and assessments requiring compulsory scrutiny under section 44AD or 44AE of the Act; (iii) all assessments where the refund claim exceeds Rs. 50 lakhs for Bombay City, Rs. 10 lakhs for Calcutta, Delhi, Madras, Hyderabad, Bangalore, Ahmedabad and Rs. 1 lakh for other cities : (iv) any other assessment where scrutiny is recommended by the Investigation Wing based on information in their possession. CLASS 'B' (Sample Scrutiny Cases) (i) 50% of the returns with income or loss of Rs. 10 lakhs and above; (ii) 33% of the returns with income or loss of Rs. 2 lakhs and above but below Rs. 10 lakhs; and (iii) 3% of the returns with income or loss of less than Rs. 2 lakhs. 2. The following two categories of cases out of Class 'B' (sample scrutiny cases) shall not be picked up for scrutiny:- (i) all cases of resident individuals declaring total income of Rs. 1.20 lakhs or less and such total income dose not include income from business or profession and also there is no brought forward or carry forward loss (other than from house property), where the returns are filed in Form No. 2A or in Form No. 3; (ii) the returns for the assessment year 1994-95 where the total income returned is more by 30% of the total income returned for the assessment year 1993-94; PROVIDED : (a) the total income for both the assessment year exceeds the basic exemption limits; (b) the total income for the assessment year 1993-94 does not exceed Rs. 5 lakhs; and (c) tax is fully paid for the assessment year 1994-95 before the return is filed. For removal of doubts, even in cases covered by Para 2(i) and 2(ii), where conditions mentioned in Class 'A' above prevail, scrutiny is compulsory. 3. So far as the cases mentioned in Class B(i) and B (ii) in the first para are concerned, no special procedure for selection of the sample is needed since, in the first category, each case will be taken up once in two years and in the second category each case will be taken up once in three years. As regards the cases mentioned in Class B (iii) the sample should be selected purely on random basis. For this purpose, the returns falling under that category should first be serially numbered for each Ward according to the acknowledgement numbers assigned to the returns of that Ward. Thereafter, the Range Deputy Commissioner will prepare 33 identical slips numbered form 1 to 33. These slips, identically folded, will be put inside a container and one of them will be taken out as in the case of lottery. The number contained in the selected slip will be random start for that ward. Thus if the selected number for example is 12 then the 12th, 45th, 78th, 111th, etc, returns of that ward will be chosen for scrutiny. The sample cases will, for the present, be selected out of the returns filed during the financial year 1993-94 in respect of all categories of Class 'B' cases. It is expected that these cases, along with the existing brought forward workload of scrutiny assessments will provide adequate workload for the Financial Year 1994-95. However, where there is no adequate workload, current returns may also be selected for scrutiny. 5. The sample in each Ward/Circle/Range should be chosen after excluding cases already selected for scrutiny, the cases of compulsory scrutiny and also the exceptions mentioned in para 2 above. The Chief Commissioner/Director General should also ensure that there is an even distribution of work in different assessment units. 6. The Board has also decided that the non-filers should be severely dealt with. Accordingly, if returns are not voluntarily filed by the due dates specified in the Act, notices under section 142(1)/148 should be issued in all the cases and also effectively pursued thereafter. However, Where the returns are filed in response to the notices, the criteria for selecting cases for scrutiny will be the same as above.