The Income-tax department has issued guidelines for the selection of IT returns for full verification and selection in the current financial year and said that such scrutiny would be applicable in cases where tax evasion information was obtained from any other authority.
The guidelines for full screening have added an additional element of obtaining prior administrative approval from the Principal Commissioner / Principal Director / Commissioner / Director in certain cases for selecting such cases for full screening.
For example, cases involving surveys, investigations and seizures, and cases in which charities have sought exemptions without valid approval, are subject to prior permission to issue the required scrutiny notices before being sent to the National Faceless Assessment Center (NaFAC).
Under full verification, the tax authorities carry out a detailed verification of the income return to ensure the veracity of various claims, deductions, etc. made by the taxpayer.
The purpose is to ensure that the taxpayer does not underestimate the income, does not calculate excessive losses, or pays less tax in any way.
Nangia Andersen LLP partner Sandeep Jhunjhunwala said cases involving recurring issues of law and / or truth are subject to thorough scrutiny only where Rs 25 lakh for taxpayers in eight metro cities and Rs 10 lakh in other cities, with prior approval, have been added to the previous assessment.
“Tax evasion cases where information from the enforcement agency is available have also been brought under the purview of a mandatory full investigation under the Income Tax Act.
“The inclusion of the requirement to obtain a prior approval and the imposition of thresholds can be seen as a step in the right direction towards taxpayers’ efforts to reduce litigation and channelization in more complex cases,” he said.
AKM Global Partner-Tax Sandeep Sehgal said that any information obtained from any authority on tax evasion would also be subject to a full investigation.
Om Rajpurohit, AMRG & Associates Director Corporate and International Tax, said the CBDT publishes internal rules for verification and selection every year.
It has been clarified that a return has been issued as a result of a notice based on SFT (Statement of Financial Transaction) information, such return will not be selected for compulsory verification.
Rajpurohit added, “These guidelines will give extra clarity to both the evaluating governments in understanding the real basis of scrutiny.”