Direction regarding scope of enquiry in cases under ‘Limited Scrutiny’ selected through CASS 2015 & 2016 - Income Tax - 5/2016

Instruction No. 5/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 14 th of July, 2016 Subject: Direction regarding scope of enquiry in cases under Limited Scrutiny selected through CASS 2015 2016-regd. Vide Instruction No. 20/2015 dated 29.12.2015 in File of even number, Board has laid down Standard Operating Procedure for handling of cases under Limited Scrutiny which were selected through Computer Aided Scrutiny Selection in CASS Cycle 2015 . In these cases, it was stated that the general scope of enquiry in scrutiny proceedings should be restricted to the relevant parameters which formed the basis for selecting the case for scrutiny. However, in revenue potential cases, it was further provided that Complete Scrutiny could be conducted, if there was potential escapement of income above a prescribed monetary limit, subject to the approval of administrative Pr. CIT/CIT/Pr. DIT/DIT. 2. In order to ensure that maximum objectivity is maintained in converting a case falling under Limited Scrutiny into a Complete Scrutiny case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015 , Board hereby lays down that while proposing to take up Complete Scrutiny in a case which was originally earmarked for Limited Scrutiny , the Assessing Officer ( AO ) shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under Complete Scrutiny . In this regard, the monetary limits and requirement of administrative approval from Pr. CIT/CIT/Pr. DIT/DIT, as prescribed in Para 3(d) of earlier Instruction dated 29.12.2015 , shall continue to remain applicable. 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 4. It is further clarified that in cases under Limited Scrutiny , the scrutiny assessment proceedings would initially be confined only to issues under Limited Scrutiny and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to Complete Scrutiny after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in Limited Scrutiny . The AO shall also expeditiously intimate the taxpayer concerned regarding conducting Complete Scrutiny in such cases. 5. It is also clarified that once a case has been converted to Complete Scrutiny , the AO can deal with any issue emerging from ongoing scrutiny proceedings notwithstanding the fact that the reason for such issue have not been included in the Note. 6. To ensure proper monitoring in cases which have been converted from Limited Scrutiny to Complete Scrutiny , it is suggested, that provisions of section 144A of the Act may be invoked in suitable cases. To prevent possibility of fishing and roving enquiries in such cases, it is desirable that these cases should invariably be picked up while conducting Review or Inspection by the administrative authorities. 7. The above Instruction shall be applicable from the date of its issue and would cover the cases selected under CASS 2015 which are pending scrutiny cases as well as cases selected/being selected under the CASS 2016. 8. The contents of this Instruction may be brought to the notice of all for necessary compliance. 9. Hindi version to follow. (Rohit Garg) Deputy Secretary to the Government of India (F.No. 225/269/2015-ITA.11)