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INCOME TAX SCRUTINY






Income tax srutiny



Income Tax Department reviews the Income-tax returns of thousands of Indians each year. They monitor the pattern of the individual's income tax return filing. Random selection of some scrutiny cases done by the Income Tax Department and others are selected deliberately as they fall under the criteria of pre-set watch lists that have been laid down by the Income Tax Department. One must remember that if you have received an Income Tax scrutiny notice, there no need to sweat about the same.

Income Tax department sends a scrutiny notice to a large number of businessmen and salaried individuals who file Income Tax returns every year. Getting noticed does not mean that you are found guilty; it is just a normal action undertaken by the IT department every year as a routine checkup. The idea is to assess the pattern of Income Tax Return filing. To ensure that everything is in order and as per the standard protocols and norms laid down by the department.



Reasons for income tax scrutiny notices



  •  When you fail to file a return
  •  Sudden rise or the fall of income
  •  High- value transaction taken place in the financial year
  •  Any mismatch in TDS Credit
  •  Non-declaration of exempted income


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Types of scrutiny assessments



  • 1. Manual scrutiny cases
  • 2. Complete scrutiny cases
  • 3. Limited scrutiny
  • 4. Re-assessment

MANUAL SCRUTINY CASES: Some of the cases are selected for complete scrutiny based on the criteria defined by the Central Board of Direct Taxes (CBDT) and such criteria may vary every year.

COMPULSORY SCRUTINY CASES: "A complete scrutiny will be undertaken on the return filed and all supporting documents. The cases will be flagged based on CASS (computer-assisted scrutiny selection). As the scope of scrutiny is not limited, the assessing officer can verify various aspects of the tax return filed for a particular assessment year along with supporting documentation," said Sirwalla.

LIMITED SCRUTINY: This is a computer-assisted scrutiny selection (CASS) where cases are selected based on set parameters. The scrutiny will be limited to the particular area of return mentioned in the notice. So if you have reported capital gains, the tax department may ask you to show the supporting documents such as sale deed and stamp duty paid, among others, related to the transaction.

RE-ASSESSMENT: Such scrutiny notices are issued when the assessing officer believes that one of the incomes was not assessed by the tax department then it can re-open the assessment.
 




Consequences of non - compliance(penalty)



Non-response to the notice may result in a penalty of Rs. 10,000, in addition to additional taxes. It may also force the Assessing Officer to complete the scrutiny on the basis of 'Best Judgement', whereby the assessment can be confirmed and finalized as the Assessing Officer deems fit. Taxpayers who are defaulting could be targeted for a more rigorous assessment in the form of a survey, or search and seizure operation.




Scrutiny handling process



Do not Panic: An individual need to understand that there is no need to get panic at the sight of Income Tax scrutiny notice. It is a result of random selection and in that case, there is not to worry about the notice. It can be a regular check on income and return statements.

Read properly all details of the notice: After receiving the scrutiny notice, one needs to check all the details of the notice which includes your PAN details, name and fiscal year to which it refers.

Arrange your documents: Even if your case is clear, then also it must to do aligning for all your documents well in advance as it may be required to get submitted at the time of investigation. Essential documents which may be required are salary slips from previous or current employer.

Never Ignore the scrutiny notice: Income Tax Department has all the details of transactions done by an individual in a financial year. So do not try to hide information from the Income Tax Department which you need to declare and show in the first place. By doing so, you will become vulnerable and get liable for heavy penalties and fines.

Always respond on time: It is important to tackle the matter with full sincerity and paying due attention. Any information or documents required by the Income Tax Department must be submitted before the due date. Do not delay any of your responses and comply with all the deadlines always.

Keep a note of your scrutiny number: Scrutiny number or notice number works in the form of reference for future communications with the IT Department. You must always keep reference number handy.

Take experts advise: There is a possibility that you are not able to understand each term of the notice. Ignoring those terms upfront and not taking any action on those just because incognizance is no right way to handle the notice. In case of not understanding properly the notice, you can seek professional help or expert advice. You can get into a consultation with a Chartered Accountant who can then give you proper direction as to how to deal with the notice.




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