Compulsory scrutiny cases have been a matter of grievance for many taxpayers due to fears of harassment by I-T officials as one has to undertake many visits and submit numerous documents in order to prove that he or she has not escaped the tax due on income.

The I-T department, according to officials, picks up only 2 percent of the total tax returns cases for scrutiny in an assessment year and these too are selected by a computerised system in order to totally rule out any scope for human intervention.

The Central Board of Direct Taxes (CBDT), the apex policy making body of the Income Tax department, has now mandated that, henceforth, the ambit of these enquiries should be limited to the verification of specific questions.

The board said it is issuing these directions following an analysis of taxpayers' grievances in this regard, which were found to be true.

"Feedback and analysis of such orders indicates that, many times, the core issues which formed the basis of selection of the case for scrutiny were not examined properly. This (scrutiny process) has been causing undue harassment to the taxpayers and has also drawn criticism from several quarters.

"Therefore, in such (computer-based scrutiny) cases, an Assessing Officer (AO) shall confine the questionnaire and subsequent enquiry or verification only to the specific point(s) on the basis of which the particular return has been selected for scrutiny," the CBDT said.

The board made it clear while issuing the new directive (on Sept. 26) for AY 2014-15 that it has "suppressed" all orders circulated earlier in this regard.
The CBDT order said that, "in such cases, all efforts would be made to ensure that assessment proceedings are completed expeditiously in the minimum possible number of hearings without unnecessarily dragging the case till the
time-barring date".

It also said that beginning Oct. 15, an I-T notice sent by the AO to the taxpayer for scrutiny will have further details as to the reason why his or her case has been called for examination.

The CBDT ordered that in specific cases where scrutiny has been launched, if it is found that there are chances of escapement of income exceeding Rs 10 lakh (metro cities) or Rs 5 lakh (non-metro cities), the case will be further probed by the AO only after the "written approval" of the Principal Commissioner or Director of I-T.

The CBDT, under this mechanism, too, has kept in mind the need to spare taxpayers any harassment.

"However, such approval shall be accorded by the Principal CIT/DIT in writing after being satisfied about merits of the issue necessitating wider and detailed scrutiny in the case.

Cases so taken up for detailed scrutiny shall be monitored by the Joint CIT/Addl CIT concerned," the order specified.

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