Scrutiny guidelines for Corporate assessees. - Income Tax - Scrutiny

PROCEDURE FOR SELECTION OF CASES FOR 'SCRUTINY' FOR CORPORATE ASSESSEES. In supercession of earlier Instructions on the above subject, the Board hereby lays down the following procedure for selection of returns / cases of Corporate Assessees for Scrutiny during the current financial year i.e. 2006-07. 2. The following categories of cases shall be compulsorily scrutinized;- (a) All assessments pertaining to Search and Seizure cases. (b) All assessments pertaining to Surveys conducted u/s 133A of the I.T.Act, (c) All returns where deduction claimed under Chapter VIA of the I.T. Act is Rs.10 lakh or above in stations other than 60 cities on computer network, (d) (i) AH returns where refund claimed is Rs.5 lakh or above in stations other than 60 cities on computer network. (ii) In cases of foreign companies, the refund limit for selecting a case for scrutiny shall be decided by the DGIT (International Taxation). (c) (i) All cases in which the CIT (Appeals) or ITAT has confirmed an addition / disallowance of Rs.5 lakh or above in any preceding Assessment Year and identical issue is arising in the current year. But if the issue involves a substantial question of law, the case 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. (ii) All cases in which an appeal is pending before the CIT (Appeal) against an addition / disallowance of Rs.5 lakh or above, or the Department has filed an appeal before the 1TAT 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, (f) All Banks and Public Sector Undertakings. (g) All NSE-500 companies BSE-A group companies listed on Bombay Stock Exchange as on 31.03.06. (h) All cases of companies liable to pay tax under section 115JB with book profit exceeding Rs.50 lakh in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs.25 lakh in other places. (i) 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 crore in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs.5 crore in other places. (Ref. S. 10 (23C) Rule 2BC) (j) (i) Cases where total value of International Transactions (as defined u/s 92B of the IX Act) exceeds Rs.15 crore. (ii) 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 as a result of the order passed by the TPO. (k) Ail Non-Banking Financial Corporations (NBFCs) / Investment Companies having paid-up capita] of more than Rs.10 crore, (I) All case of stockbrokers (including sub-brokers) where brokerage received is disclosed at Rs. 1 crore or above and total income declared is less than 10% of such brokerage. (m) All cases of stockbrokers (including sub-brokers) in which bad debts of Rs.10 lakh or more have been claimed. (n) Cases of amalgamated companies claiming set off of loss u/s 72A of the IT Act. (o) All cases of deduction under sections 10A and / or JOB of the IT, Act with export turnover exceeding Rs. 10 Crore. (p) All eases of contractors whose gross contractual receipts exceeds Rs.2 crore in places other than 60 cities on computer network if total income declared is less than 5% of gross contractual receipts. (q) All cases of builders following Project Completion Method, (r) All cases in which fresh capital introduced during the year exceeds Rs, 1 crore in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs, 50 lakh in other cities. (s) All cases in which new loans introduced during the year exceed Rs. 1 crore in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 50 lakh in other cities. (t) All cases in which deduction u/s 80IA(4), 801B, 80IAB, 80IC, 80JJA, 80JJAA, 80LA, 10(21), 10(22B), 10(23 A), 10(23B), 10(23C), 10(23D), 10(23EA), 10(23FB), 10(23G), 10A, 10AA, 10B or 10BA of the l.T. Act is claimed for the first time. NOTE: If a case has been assessed earlier under scrutiny for at least two assessment years but in each of the immediately preceding two years assessed u/s 143{3) of the I. T. Act, total additions or disallowances made or sustained in appeal are less than Rs.10 lakh in Delhi, Mumbai, Chennai, Kolkata, Pune Hyderabad, Bangalore and Ahmedabad and less than Rs. 2 lakh in other places, then such a case should be excluded from compulsory scrutiny under clauses (c), (f), (g), (h), (i), (I) and (m). 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 a 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/ DG1T (International Taxation) / DGIT (Exemptions), 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:- (iii) Total number of cases selected for scrutiny during the year docs not ordinarily exceed 2% of total number of returns filed /pending during the year; and (iv) At least 80% of all the cases picked up for scrutiny are assessed by 28.02.2007. 4. The CCIT/ DGIT (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 filed 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. Lists of cases picked 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, Selection of cases under these criteria (para 2 (c) ,(d), (h), (p)) shall not be done manually in 60 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). . Selection of cases under these criteria (para 2(r) and (s)) in 60 cities on the computer network would be made through Computer Assisted Scrutiny System (CASS) in respect of cases where audit report u/s 44AB has been filed. In all other cases in these cities and in all cases in Cities not on the computer network, the selection would be made manually.