Compulsory Scrutiny Tax 2025
Dated 17.06.2025 : The Central Board of Direct Taxes (CBDT) has recently issued new guidelines for the compulsory scrutiny tax returns for complete scrutiny. These guidelines are for Financial Year 2025-26 (Assessment Year 2026-27).
Several news reports, including those from June 13-16, 2025, confirm the issuance of CBDT Instruction No. 02/2025, dated June 13, 2025.
What is compulsory scrutiny of Income Tax Returns ?
Compulsory scrutiny tax returns in India refers to an in-depth examination of a taxpayer’s income tax return (ITR) that is mandatorily triggered by certain specific conditions or events, as laid down by the Central Board of Direct Taxes (CBDT). Unlike regular scrutiny cases which are often selected through a Computer Assisted Scrutiny Selection (CASS) system based on risk parameters, compulsory scrutiny cases are selected automatically if they meet the prescribed criteria.
The purpose of compulsory scrutiny is to ensure that the taxpayer has accurately reported their income, claimed legitimate deductions and exemptions, and complied with all provisions of the Income Tax Act.
- Applicability: These guidelines specify the criteria for compulsory scrutiny of Income Tax Returns for Financial Year 2025-26 (Assessment Year 2026-27).
- Deadline for Notice: The statutory deadline for issuing scrutiny notices under Section 143(2) for ITRs filed in FY 2024-25 is June 30, 2025. This means that if your return for AY 2025-26 (FY 2024-25) falls under these compulsory scrutiny criteria, you could receive a notice by the end of June 2025.
- Possible Reasons for Compulsory Scrutiny Tax :
- Survey Cases (Section 133A): Returns related to surveys conducted on or after April 1, 2023.
- Search and Seizure/Requisition Cases (Sections 132/132A): Cases where search or requisition was conducted between April 1, 2023, and April 1, 2025.
- Cancelled Registration Cases (for trusts/institutions): If registrations under sections like 12A, 12AB, or 10(23C) were cancelled or withdrawn before March 31, 2024, but the entity still claims exemption in their ITR. An important exclusion is if the cancellation was later reversed on appeal.
- Recurring Additions in Past Assessments: Where significant additions (now ₹50 lakh+ in metros, ₹20 lakh+ in non-metros) were made in previous assessments on recurring issues of law or fact, and these additions have become final (no appeal filed or upheld by appellate authorities). This threshold has been doubled from the previous year.
- Specific Information Indicating Tax Evasion: If concrete information about tax evasion is received from other law enforcement or regulatory agencies (like CBI, ED).
Exclusions: Returns filed in response to automated notices under Section 142(1) due to information from AIS, SFT, or CPC-TDS will generally not be selected under compulsory scrutiny but will be processed through the Computer Assisted Scrutiny Selection (CASS) system.
Important points to note:
- Once a case falls under these prescribed conditions, a notice under Section 143(2) of the Income Tax Act will be issued to the taxpayer, informing them about the scrutiny.
- These guidelines aim to bring transparency and objectivity to the tax administration process.
- For taxpayers, it’s crucial to ensure all details related to income, deductions, exemptions, and investments are correctly and adequately substantiated with evidence to avoid potential tax demands if their case is selected for compulsory scrutiny.
- In most cases, the assessment proceedings under compulsory scrutiny are conducted through the Faceless Assessment system, though certain specialized cases (like international taxation or central circles) might follow a different procedure.
These latest guidelines highlight the CBDT’s continued focus on ensuring compliance and addressing high-risk cases of potential tax evasion. Taxpayers whose cases fall into these categories are advised to prepare their documents and evidence thoroughly.
Note : The article is based on answers we got from AI apps on our queries and have been edited by us .
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