Scrutiny
Assessment Tips & Traps
Every assessee most fears the notice from Income tax
department, and that too of a scrutiny assessment U/s 143(2) & 143(3). It is
natural that the assessee becomes anxious on getting the notice, and starts
thinking How????
Although there is no exhaustive list explaining the
criteria of selection of cases under scrutiny assessment but as per instructions
issued by CBDT in past years and as per experience & media reports the following
points can be remembered which will/may lead straight to a scrutiny assessment:
Compulsory Scrutiny Cases:-
· Cases where value of
international transaction as defined u/s 92B (i.e associate enterprises) of IT
Act exceeds Rs.15crores.
· Cases involving
addition in an earlier assessment year on the issue of transfer pricing in excess
of Rs. 10 Crores or more which is confirmed in appeal or is pending before an
appellate authority.
· Cases involving
addition in an earlier assessment year in excess of Rs. 10 lacs on a
substantial and recurring question of law or fact which is confirmed in appeal
or is pending before an appellate authority.
· All assessments
pertaining to Survey under section 133A of the IT Act excluding the cases where
there are no impounded books of accounts/documents and returned income
excluding any disclosure made during the Survey is not less than returned
income of preceding assessment year. However, where assessee retracts the
disclosure made during the Survey will not be covered by this exclusion.
· Assessment in search
and seizure cases to be made under sections 158B, 158BC, 158BD, 153A & 153C
read with 143(3) of the IT Act.
· All returns filed in
response to notice u/s 147/148 of the IT Act.
· Cases claiming
exemption of income u/s 11 or u/s 10(23C) which are hit by proviso(s) to
Section 2(15) of IT Act.
· Entities which
received Donations from countries abroad in excess of Rs. One crore during the
Financial Year 2011-2012 (relevant for the A.Y. 2012-2013) under the provisions
of Foreign Contribution Regulation Act (FCRA). Such Information is maintained
by Ministry of Home Affairs and is available on its Website
(http://mha.nic.in/fcra.htm). Respective Cadre-Controlling chief Commissioners
/ Directors – General of Income-tax may identify the cases pertaining to their
respective jurisdiction after downloading from the website and disseminate the
information to various field offices.
· Cases in respect of
which information is received from other Government Department(s) or other
authorities pointing out tax-evasion. The Assessing Officer shall record reasons
in such cases and take approval from jurisdictional CCIT/DGIT before selecting
such case for scrutiny.
Other Criteria which may lead to Scrutiny
Assessment:
· Cash Deposit for Rs10lakh or more in saving account of the Assessee during a financial year.
· Purchase or sale of a
property for consideration of Rs30lakh or more. However, in case of purchase,
if the profit after tax of the assessee exceeds 1/8th of the
investment.
· Agriculture income
Exceeds Rs.10lakh.
· Deduction claimed
under head capital gains other than section 54 & 54F exceeds Rs.25lakh.
· Refund claim exceeding
Rs.5lakh & amount of refund is more than 15% of either advance tax or self
assessment tax.
· Income from short term
capital gains u/s 111A exceeds Rs.25lakh.
· Losses under house
property.
· Refund of a
non-resident exceeds Rs.5lakh.
· Sales or turnover in
business exceeds Rs.20crores.
· Gross Receipts in
profession exceeds Rs.40lakh & net profit is less than 30% of gross
receipts.
· Fresh capital
introduced during the year exceeds Rs.30lakh.
· Sundry creditors
exceeds 30lakh & exceeds 30% of total sales.
· Commission paid
exceeds Rs.10lakh.
· Commission Income
exceeds Rs.10 lakh but net profit is less than Rs.2lakh.
·
Claim of depreciation
@80% or more exceeds Rs.25lakh.
· Unsecured loans
exceeds 30% of capital employed & Rs.50lakh.
· Deduction/ Exemption
claimed first time under section 10(23A), 10(23B), 10(23C), 10(23D), 10(23EA), 10(23FB),
10(23G), 10A, 10AA, 10B, 10BA,80-IA(4), 80-IB,80-IAB,80-IC,80JJA,80LA.
· Losses for current
year or brought forward exceeds Rs.25lakh.
· As per audit report
effect of deviation from accounting methods & value exceeds Rs.20lakh.
· Contractors following
project completion method.
· Contractors other than
following project completion method whose gross receipts exceeds Rs.5crore &
net profit is less than 5%.
·
Real estate developers
where sales exceeds Rs.5crore or creditors & unsecured loans taken together
exceeds Rs5crore.
· Share/commodities
broker if gross receipts exceeds Rs2crores.
· Deduction under
chapter VI-A exceeds Rs.25lakh.
In order to ensure the quality of assessment orders,
CCsIT/DGsIT would evolve suitable monitoring mechanism. They shall analyse at
least 50 quality assessments of their respective charges and send the report to
respective Zonal Member.
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