CBDT Issues New Guidelines for ITR Scrutiny for FY 2024-25
The Central Board of Direct Taxes (CBDT) recently released a notification outlining the scrutiny process for income tax returns (ITR) for the financial year 2024-25. This notification aims to provide taxpayers with a clearer understanding of why their ITRs have been selected for closer examination. The guidelines also specify the types of cases that will be scrutinized.
Key Focus Areas of the CBDT Notification
Experts note that the CBDT continues to prioritize potential tax evasion cases, utilizing information from other agencies. This approach aligns with previous guidelines and underscores the CBDT’s commitment to enforcing tax compliance measures effectively.
Amarpal S. Chadha, Tax Partner and Mobility Leader at EY India, emphasized, “The issuance of the circular on May 3, 2024, for FY 2024-25 outlines the criteria for selecting income tax returns for complete scrutiny. These criteria include evidence of tax evasion, non-filing of returns despite receiving notices, and cases where income has escaped assessment. This serves as a reminder for taxpayers to ensure compliance with tax laws to avoid severe consequences.”
Guidelines for Compulsory Scrutiny
The guidelines detail several scenarios that warrant compulsory scrutiny:
- Survey Cases (Section 133A)
Criteria: Assessments resulting from surveys under section 133A, which uncover specific information or material indicating tax evasion.
Procedure: These cases require prior approval from the Principal Commissioner of Income Tax or equivalent authorities and must be transferred to Central Charges within 15 days of the notice under section 143(2).
- Search and Seizure Cases (Pre-April 1, 2021)
Criteria: Cases involving search and seizure actions, requiring assessments under section 153C read with section 143(3).
Procedure: These cases also need prior administrative approval and must be transferred to Central Charges within 15 days of the relevant notice.
- Non-Filing of Returns
Criteria: Cases where no return has been filed in response to a notice under section 142(1).
Procedure: Jurisdictional Assessing Officers (JAOs) will upload the underlying documents on the ITBA system, and the Directorate of Income-tax (Systems) will forward these cases to the National Faceless Assessment Centre (NaFAC) for further action.
- Specific Information on Tax Evasion
Criteria: Cases with specific information on tax evasion provided by any law enforcement agency, where the taxpayer has filed an ITR for the relevant year.
Procedure: Jurisdictional AOs will prepare a list of such cases with prior approval, and this list will be submitted to the Directorate of Income-tax (Systems).
Impact on Taxpayers
Dr. Suresh Surana, Founder of RSM India, highlighted several impacts on taxpayers:
- Increased Transparency: Taxpayers will have a clearer understanding of why their ITRs have been selected for scrutiny, reducing uncertainties and concerns.
- Reduction in Arbitrary Scrutiny: Specific guidelines may lead to fewer arbitrary selections, resulting in a fairer scrutiny process.
- Better Preparation: Taxpayers can prepare necessary documentation or explanations in advance, knowing the reasons for scrutiny.
- Enhanced Compliance: With defined criteria, taxpayers might be more diligent in filing accurate returns, knowing they could be scrutinized.
- Deterrence of Tax Evasion: Clear scrutiny criteria could discourage tax evasion, as taxpayers become more aware of the triggers for scrutiny.
The new guidelines by the CBDT, effective for the financial year 2024-25, reinforce the importance of compliance and transparency in the tax filing process. Taxpayers are advised to ensure their ITRs are accurate and adhere to tax laws to avoid potential scrutiny.
For more detailed information, refer to the official CBDT notification.
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