Sample scrutiny of cases. - Income Tax - 1381/CBDT

Extract

INSTRUCTION NO. 1381/CBDT Dated: February 5, 1981 Reference is invited to Board's Instruction No.1072 dated 1-7-77 which provides for cases to be selected by the Range IAC for sample scrutiny on random basis in the month of August in every financial year for pre-assessment scrutiny. In a study conducted by the Directorate of Organisation and Management Services, it was noticed by the Board that sufficient attention has not been paid to this area of work by the IACs and by the ITOs. Either sufficient number of cases have not been disposed of, or even if disposed of the scrutiny done in many cases was not adequate with the result that the provisions of sample scrutiny are not having adequate deterrent effect to ensure filing of correct and complete returns in cases falling under summary assessment scheme. 2. With a view to monitoring the progress regarding sample scrutiny the proforma of the monthly progress report has already been revised w.e.f. June 1980. A perusal of the reports received shows that cases for sample scrutiny were selected in certain Charges in the month of July itself which is not proper. The purpose of making selection in the month of August is to maintain an element of surprise as by and large in majority of cases returns are received upto July. It may be ensured that the selection is made only in the first week of August. 3. As per existing procedure laid down in Instructions No.1072 the sample scrutiny was to be made in the five types of cases which are as under:- i) 10% of cases where last assessed income is upto Rs.25,000 or more; ii) 2% of cases where last assessed income is less than Rs.25,000. iii) some cases in respect of which the department has received information slips survey extracts etc. involving substantial amounts which may in the opinion of the IAC prove useful. iv) cases where income returned during the immediately preceeding 5 years show substantial fall year after year and v) As per Action plan 1980-81 cases of certain trades selected by the board. 4. In order to strengthen the measures regarding sample scrutiny and to enlarge its scope the board have taken the following decisions which would be effective from the 1st April 1981 and would supercede the earlier instructions on the subject to the extent covered by it i.e. i and ii of para 3:- 1) The percentage of cases to be selected for sample scrutiny will now be as under:- a) 20 per cent in non-company cases with income over Rs.50,000 b)10 percent in respect of non-company cases with income between 25,000 to 50,000 and company cases which were disposed of under the summary assessment scheme. c) 2% for non-company cases with income below Rs.25,000 including Government salary cases. 2)It has come to the notice of the board that with the deletion of clauses ii and iii from section 143(1)(b) by Finance Act certain persons had claimed patently disallowable items in their returns and certain other persons had claimed items as exempt which are patently includible. Issue of instructions for completing such cases u/s.143(3) is under consideration. However to cover up such of those cases which have already been completed u/s.143(1) it would be necessary to specifically select these cases for sample scrutiny in the subsequent year. 3) The entries in the D CR from 1-4-81 should be made in a manner so as to facilitate selection of sample scrutiny cases as listed in item No.1 above. 4) Emphasis should be laid on proper maintenance of the register for sample scrutiny which is the primary source record for monitoring this work. 5) The fact that the case has been selected for assessment after scrutiny should be marked by rubber stamp on the order sheet, on the return of income and on the return folder fro the relevant assessment year. 6) The Commissioners must call for a list of the cases selected for sample scrutiny from the IACs by 16th of August every year and the CsIT in their turn must report to the board by 5th September the number of cases selected in their charge for sample scrutiny under different categories alongwith the number of assessments completed u/s.143(1) in different categories in the preceeding year. 7) The figures in the monthly progress report should be reported on the basis of the entries in the sample scrutiny register. 8) The Inspection Division of the board would also verify during their tours whether the work of sample scrutiny has been properly attended to and submit its report to the board for necessary action. 9) The proforma of the M.P.R. relating to sample scrutiny should be amended to provide for classification of cases selected for scrutiny into i) non-company cases with income below Rs.25,000; (ii) non-company cases with income between Rs.25,000 and Rs.50,000 and (iv) company cases which fall under the summary assessment scheme. 10) It has been decided by the board that in cases selected for sample scrutiny total wealth statement u/s.142 should invariably be obtained, scrutinised and suitable additions is that of a firm, such total wealth statement should be obtained in respect of all partners cases. 11) In all cases for sample scrutiny a detailed examination report should be left by the ITO on the file to enable the inspecting authority to verify whether assessment has been finalised after necessary examination. 12)The IACs should invariably select some of the cases completed under sample scrutiny for annual inspection. 13) Some of the cases selected for assessment after scrutiny should be chosen by the IAC for issue of suitable directions in exercise of his power u/s.144A on his own motion. 14) When a case is taken up for assessment on random basis, the ITO should go through the reports and statements for the immediately preceeding years for which summary assessment was made in that case and satisfy himself that the provisions of sec.143(2)(b)/147 are not called for in respect of those assessments. If it is found that the provisions of either of these sections is called for, action should be taken promptly. 15) In all sample scrutiny cases where claims of wrong deductions are noticed at the time of scrutiny the subsequent years assessments should also be made only after scrutiny. 16) If in a case selected for random scrutiny the concealment of income is detected, maximum penalty should be levied so as to serve as a deterent. The possibility of launching prosecution should also be examined. 17) The quota of disposal of random scrutiny is distinct from the quota of disposal of summary assessments and therefore the ITO need not have any apprehension about the correct assessment of their performance during a year. 18) During the year 1981-82 highest priority should be given for disposal of cases selected for sample scrutiny including the pending case it brought forward and all of them should be completed during the same financial year.  INSTRUCTION NO. 1381/CBDT Dated: February 5, 1981 Reference is invited to Board's Instruction No.1072 dated 1-7-77 which provides for cases to be selected by the Range IAC for sample scrutiny on random basis in the month of August in every financial year for pre-assessment scrutiny. In a study conducted by the Directorate of Organisation and Management Services, it was noticed by the Board that sufficient attention has not been paid to this area of work by the IACs and by the ITOs. Either sufficient number of cases have not been disposed of, or even if disposed of the scrutiny done in many cases was not adequate with the result that the provisions of sample scrutiny are not having adequate deterrent effect to ensure filing of correct and complete returns in cases falling under summary assessment scheme. 2. With a view to monitoring the progress regarding sample scrutiny the proforma of the monthly progress report has already been revised w.e.f. June 1980. A perusal of the reports received shows that cases for sample scrutiny were selected in certain Charges in the month of July itself which is not proper. The purpose of making selection in the month of August is to maintain an element of surprise as by and large in majority of cases returns are received upto July. It may be ensured that the selection is made only in the first week of August. 3. As per existing procedure laid down in Instructions No.1072 the sample scrutiny was to be made in the five types of cases which are as under:- i) 10% of cases where last assessed income is upto Rs.25,000 or more; ii) 2% of cases where last assessed income is less than Rs.25,000. iii) some cases in respect of which the department has received information slips survey extracts etc. involving substantial amounts which may in the opinion of the IAC prove useful. iv) cases where income returned during the immediately preceeding 5 years show substantial fall year after year and v) As per Action plan 1980-81 cases of certain trades selected by the board. 4. In order to strengthen the measures regarding sample scrutiny and to enlarge its scope the board have taken the following decisions which would be effective from the 1st April 1981 and would supercede the earlier instructions on the subject to the extent covered by it i.e. i and ii of para 3:- 1) The percentage of cases to be selected for sample scrutiny will now be as under:- a) 20 per cent in non-company cases with income over Rs.50,000 b)10 percent in respect of non-company cases with income between 25,000 to 50,000 and company cases which were disposed of under the summary assessment scheme. c) 2% for non-company cases with income below Rs.25,000 including Government salary cases. 2)It has come to the notice of the board that with the deletion of clauses ii and iii from section 143(1)(b) by Finance Act certain persons had claimed patently disallowable items in their returns and certain other persons had claimed items as exempt which are patently includible. Issue of instructions for completing such cases u/s.143(3) is under consideration. However to cover up such of those cases which have already been completed u/s.143(1) it would be necessary to specifically select these cases for sample scrutiny in the subsequent year. 3) The entries in the D CR from 1-4-81 should be made in a manner so as to facilitate selection of sample scrutiny cases as listed in item No.1 above. 4) Emphasis should be laid on proper maintenance of the register for sample scrutiny which is the primary source record for monitoring this work. 5) The fact that the case has been selected for assessment after scrutiny should be marked by rubber stamp on the order sheet, on the return of income and on the return folder fro the relevant assessment year. 6) The Commissioners must call for a list of the cases selected for sample scrutiny from the IACs by 16th of August every year and the CsIT in their turn must report to the board by 5th September the number of cases selected in their charge for sample scrutiny under different categories alongwith the number of assessments completed u/s.143(1) in different categories in the preceeding year. 7) The figures in the monthly progress report should be reported on the basis of the entries in the sample scrutiny register. 8) The Inspection Division of the board would also verify during their tours whether the work of sample scrutiny has been properly attended to and submit its report to the board for necessary action. 9) The proforma of the M.P.R. relating to sample scrutiny should be amended to provide for classification of cases selected for scrutiny into i) non-company cases with income below Rs.25,000; (ii) non-company cases with income between Rs.25,000 and Rs.50,000 and (iv) company cases which fall under the summary assessment scheme. 10) It has been decided by the board that in cases selected for sample scrutiny total wealth statement u/s.142 should invariably be obtained, scrutinised and suitable additions is that of a firm, such total wealth statement should be obtained in respect of all partners cases. 11) In all cases for sample scrutiny a detailed examination report should be left by the ITO on the file to enable the inspecting authority to verify whether assessment has been finalised after necessary examination. 12)The IACs should invariably select some of the cases completed under sample scrutiny for annual inspection. 13) Some of the cases selected for assessment after scrutiny should be chosen by the IAC for issue of suitable directions in exercise of his power u/s.144A on his own motion. 14) When a case is taken up for assessment on random basis, the ITO should go through the reports and statements for the immediately preceeding years for which summary assessment was made in that case and satisfy himself that the provisions of sec.143(2)(b)/147 are not called for in respect of those assessments. If it is found that the provisions of either of these sections is called for, action should be taken promptly. 15) In all sample scrutiny cases where claims of wrong deductions are noticed at the time of scrutiny the subsequent years assessments should also be made only after scrutiny. 16) If in a case selected for random scrutiny the concealment of income is detected, maximum penalty should be levied so as to serve as a deterent. The possibility of launching prosecution should also be examined. 17) The quota of disposal of random scrutiny is distinct from the quota of disposal of summary assessments and therefore the ITO need not have any apprehension about the correct assessment of their performance during a year. 18) During the year 1981-82 highest priority should be given for disposal of cases selected for sample scrutiny including the pending case it brought forward and all of them should be completed during the same financial year.  INSTRUCTION NO. 1381/CBDT Dated: February 5, 1981 Reference is invited to Board's Instruction No.1072 dated 1-7-77 which provides for cases to be selected by the Range IAC for sample scrutiny on random basis in the month of August in every financial year for pre-assessment scrutiny. In a study conducted by the Directorate of Organisation and Management Services, it was noticed by the Board that sufficient attention has not been paid to this area of work by the IACs and by the ITOs. Either sufficient number of cases have not been disposed of, or even if disposed of the scrutiny done in many cases was not adequate with the result that the provisions of sample scrutiny are not having adequate deterrent effect to ensure filing of correct and complete returns in cases falling under summary assessment scheme. 2. With a view to monitoring the progress regarding sample scrutiny the proforma of the monthly progress report has already been revised w.e.f. June 1980. A perusal of the reports received shows that cases for sample scrutiny were selected in certain Charges in the month of July itself which is not proper. The purpose of making selection in the month of August is to maintain an element of surprise as by and large in majority of cases returns are received upto July. It may be ensured that the selection is made only in the first week of August. 3. As per existing procedure laid down in Instructions No.1072 the sample scrutiny was to be made in the five types of cases which are as under:- i) 10% of cases where last assessed income is upto Rs.25,000 or more; ii) 2% of cases where last assessed income is less than Rs.25,000. iii) some cases in respect of which the department has received information slips survey extracts etc. involving substantial amounts which may in the opinion of the IAC prove useful. iv) cases where income returned during the immediately preceeding 5 years show substantial fall year after year and v) As per Action plan 1980-81 cases of certain trades selected by the board. 4. In order to strengthen the measures regarding sample scrutiny and to enlarge its scope the board have taken the following decisions which would be effective from the 1st April 1981 and would supercede the earlier instructions on the subject to the extent covered by it i.e. i and ii of para 3:- 1) The percentage of cases to be selected for sample scrutiny will now be as under:- a) 20 per cent in non-company cases with income over Rs.50,000 b)10 percent in respect of non-company cases with income between 25,000 to 50,000 and company cases which were disposed of under the summary assessment scheme. c) 2% for non-company cases with income below Rs.25,000 including Government salary cases. 2)It has come to the notice of the board that with the deletion of clauses ii and iii from section 143(1)(b) by Finance Act certain persons had claimed patently disallowable items in their returns and certain other persons had claimed items as exempt which are patently includible. Issue of instructions for completing such cases u/s.143(3) is under consideration. However to cover up such of those cases which have already been completed u/s.143(1) it would be necessary to specifically select these cases for sample scrutiny in the subsequent year. 3) The entries in the D CR from 1-4-81 should be made in a manner so as to facilitate selection of sample scrutiny cases as listed in item No.1 above. 4) Emphasis should be laid on proper maintenance of the register for sample scrutiny which is the primary source record for monitoring this work. 5) The fact that the case has been selected for assessment after scrutiny should be marked by rubber stamp on the order sheet, on the return of income and on the return folder fro the relevant assessment year. 6) The Commissioners must call for a list of the cases selected for sample scrutiny from the IACs by 16th of August every year and the CsIT in their turn must report to the board by 5th September the number of cases selected in their charge for sample scrutiny under different categories alongwith the number of assessments completed u/s.143(1) in different categories in the preceeding year. 7) The figures in the monthly progress report should be reported on the basis of the entries in the sample scrutiny register. 8) The Inspection Division of the board would also verify during their tours whether the work of sample scrutiny has been properly attended to and submit its report to the board for necessary action. 9) The proforma of the M.P.R. relating to sample scrutiny should be amended to provide for classification of cases selected for scrutiny into i) non-company cases with income below Rs.25,000; (ii) non-company cases with income between Rs.25,000 and Rs.50,000 and (iv) company cases which fall under the summary assessment scheme. 10) It has been decided by the board that in cases selected for sample scrutiny total wealth statement u/s.142 should invariably be obtained, scrutinised and suitable additions is that of a firm, such total wealth statement should be obtained in respect of all partners cases. 11) In all cases for sample scrutiny a detailed examination report should be left by the ITO on the file to enable the inspecting authority to verify whether assessment has been finalised after necessary examination. 12)The IACs should invariably select some of the cases completed under sample scrutiny for annual inspection. 13) Some of the cases selected for assessment after scrutiny should be chosen by the IAC for issue of suitable directions in exercise of his power u/s.144A on his own motion. 14) When a case is taken up for assessment on random basis, the ITO should go through the reports and statements for the immediately preceeding years for which summary assessment was made in that case and satisfy himself that the provisions of sec.143(2)(b)/147 are not called for in respect of those assessments. If it is found that the provisions of either of these sections is called for, action should be taken promptly. 15) In all sample scrutiny cases where claims of wrong deductions are noticed at the time of scrutiny the subsequent years assessments should also be made only after scrutiny. 16) If in a case selected for random scrutiny the concealment of income is detected, maximum penalty should be levied so as to serve as a deterent. The possibility of launching prosecution should also be examined. 17) The quota of disposal of random scrutiny is distinct from the quota of disposal of summary assessments and therefore the ITO need not have any apprehension about the correct assessment of their performance during a year. 18) During the year 1981-82 highest priority should be given for disposal of cases selected for sample scrutiny including the pending case it brought forward and all of them should be completed during the same financial year.

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