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Compulsory scrutiny conditions of Income Tax Returns

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As Soon as we filed a income tax return to the income tax authorities under section 139 of IT Act,1961 it has to be assessed  as correct .The assessment includes verification and scrutiny of income declared by us.but this process not done by income tax authorities in all cases,it done for selective cases only

The Income tax department selects many cases for the purpose of scrutiny. This is for a closer look to the details filed by the assesses for final assessment and the for a particular financial year .There may be several conditions that have been identify by the Department that will be the possibility of a scrutiny case . By taking random process whereby the computerized automated system pulls several returns that should be come under the scrutiny cases. These are being selected under Computerized Scrutiny Selection on the basis of filters.

In Second system Department manually select case which should cover under compulsory scrutiny and these can be many specific conditions for further processing.

These specific conditions for manual selection of income tax returns during the financial-year 2014-2015 will include When ;–

a. An addition in an earlier assessment year was in excess of Ten lac on a substantial and recurring question of law or fact confirmed in appeal is pending.
b. An addition in an earlier assessment year on the issue of transfer pricing in excess of Ten crore or more.
c. When no books of accounts or documents was impounded and and survey was conducted in earlier years

d. Assessments in search and seizure cases to be made and also for the returns filed for the assessment year relevant to the previous year in which authorization for search and seizure was executed.
e. Returns filed in response to notice under section 142(2)
f. Registration as charitable entity not been granted or been cancelled and the assessee has been found to be claiming tax-exemption.
g. Order denying the approval u/s 10(23C).
h. Specific and verifiable information pointing out tax- evasion is given by Government Departments/Authorities.

Scrutiny cases is a closer look by the Income tax department . This is undertaken to ensure that there is no income escaping intention of the tax man as well as that no income was evaded and each and every income declare properly. This will usually involve getting additional details of the various incomes that has been mentioned including minute details and proof of the expenses and income figures that are declare in the income tax return. department would then go through this and decide as income needs to be added or expenses to be disallowed.

The triggers for scrutiny cases includes conditions of Big amount of tax free income that has already been set by the income tax authorities . It could also happen when there are large scale changes in the condition that is shown by the tax returns and hence this results in a need for the tax authorities to look at the details with greater attention. There could also be situation wherein if there is a notice given under certain sections of the income tax Act, the individual would be covered for scrutiny.

As the ITR is selected for scrutiny, Individual has to submit various details for called by the department this purpose of completion of the assessment. The individual must keep required details with them to give the required documents with proof when necessary. When assessee not done his/her home work as such, when they are called for, there is a scramble to get the various documents and this could lead to some of them being missed out.

Individual may end up having to pay higher tax on the whole income because several of the expenses for which there is no adequate proof would be disallowed and hence this is something that has to be watched out for.

Scrutiny Selection is not a bad sign but if you don’t have all details and information ready to give position , it gives you an opportunity to get a sort of ‘clearance’ from the tax authorities that all is ok with your taxes and returned income.

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