Compulsory Income Tax Scrutiny Guidelines FY 2026-27: CS01–CS06 Explained

Summary: The CBDT has issued guidelines vide F. No. 225/56/2026/ITA-II dated 04.06.2026 prescribing compulsory selection of returns for complete scrutiny during FY 2026-27 in respect of returns filed in FY 2025-26. The guidelines identify six categories (CS 01 to CS 06), covering survey cases, search or requisition cases, reassessment cases under section 148, cases involving cancellation or non-grant of registration or approval where exemptions are claimed, recurring additions from earlier years above prescribed monetary limits, and cases based on specific information regarding tax evasion. The guidelines clarify that selection for compulsory scrutiny only initiates detailed examination and does not automatically result in additions. The Assessing Officer must follow statutory provisions, principles of natural justice, consider the assessee’s explanation, and pass a reasoned order. They also emphasise that notice under section 143(2) is mandatory, with 30.06.2026 being the prescribed time limit for returns filed in FY 2025-26, and clarify that certain mismatch-based cases will not automatically be selected unless covered under CS 06.

CBDT Compulsory Scrutiny Guidelines FY 2026-27: Complete Guide on CS 01 to CS 06, Section 143(2), Section 148, Search, Survey and Trust Cases

1. Introduction

The Central Board of Direct Taxes has issued guidelines for compulsory selection of returns for complete scrutiny during Financial Year 2026-27. These guidelines are applicable to returns filed during Financial Year 2025-26 under the Income-tax Act, 1961.

The guidelines have been issued vide F. No. 225/56/2026/ITA-II dated 04.06.2026. CBDT has prescribed specific categories under which returns will be selected for compulsory complete scrutiny. These categories are coded as CS 01 to CS 06.

The guideline is important because it clearly identifies the situations where the Income-tax Department will compulsorily select a return for detailed assessment. The selection is not random. It is based on specific events such as survey, search, reassessment notice, cancellation of charitable registration, recurring additions and specific information regarding tax evasion.

However, selection for compulsory scrutiny does not mean that addition is automatic. It only means that the case will be examined in detail. The Assessing Officer is still required to follow the provisions of the Income-tax Act, principles of natural justice, provide relied-upon material, consider the assessee’s explanation and pass a speaking order.

2. Meaning of Complete Scrutiny

Complete scrutiny means detailed examination of the income-tax return by the Income-tax Department. It is different from processing of return under section 143(1).

In processing under section 143(1), the return is processed through automated checks and limited adjustments. In complete scrutiny, the Assessing Officer or NaFAC may examine the correctness of income, deductions, exemptions, claims, transactions, books of account, third-party information and other relevant facts.

A scrutiny assessment requires valid service of notice under section 143(2). Without notice under section 143(2), a regular scrutiny assessment cannot be validly framed.

3. Statutory Basis of the CBDT Guideline

The guideline states that it has been issued in pursuance of section 536(2)(c) of the Income-tax Act, 2025. It deals with compulsory selection of returns filed during Financial Year 2025-26 for complete scrutiny during Financial Year 2026-27.

The guideline also refers to the proviso to section 143(2) of the Income-tax Act, 1961 and states that the time limit for service of notice under section 143(2) for ITRs filed in FY 2025-26 is 30.06.2026.

Therefore, for any case covered by these guidelines, the Department must ensure that notice under section 143(2) is served within the prescribed time.

4. Importance of Section 143(2)

Section 143(2) is the jurisdictional notice for scrutiny assessment. Once a return is selected for scrutiny, the Department is required to issue notice under section 143(2) to examine whether:

• the assessee has understated income;
• excessive loss has been claimed;
• tax has been underpaid;
• exemption or deduction has been wrongly claimed;
• transactions require verification;
• information available with the Department requires detailed examination.

The Supreme Court in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) held that notice under section 143(2) is mandatory for scrutiny assessment. Further, in CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC), the Supreme Court held that complete absence of notice under section 143(2) cannot be cured by section 292BB.

Therefore, in every compulsory scrutiny case, the issue of notice under section 143(2) is not a mere formality. It goes to the root of jurisdiction.

5. Broad Summary of CBDT Compulsory Scrutiny Categories

Code	Category	Main Trigger
CS 01	Survey cases	Survey under section 133A conducted on or after 01.04.2024
CS 02	Search or requisition cases	Search under section 132 or requisition under section 132A on or after 01.04.2024
CS 03	Section 148 cases	Reassessment notice issued under section 148
CS 04	Registration/approval cases	Registration/approval under sections 12A, 12AB, 35, 10(23C), etc. not granted/cancelled/withdrawn and exemption claimed in ITR-7
CS 05	Recurring addition cases	Earlier year addition on recurring issue exceeding prescribed monetary limit
CS 06	Specific tax-evasion information	Specific information from law-enforcement/investigation/intelligence/regulatory agency and return filed

6. CS 01: Cases Pertaining to Survey under Section 133A

What the CBDT Guideline Says

CS 01 covers cases where survey under section 133A of the Income-tax Act, 1961 has been conducted in the case of the assessee on or after 01.04.2024.

The guideline specifically excludes survey under section 133A(2A). Therefore, not every survey-type action is automatically covered. The nature of survey must be examined.

The case will be selected for compulsory scrutiny by the Directorate of Income-tax (Systems), with approval of DGIT (Systems), Delhi, based on information of survey cases provided by Commissioner (OSD) (Investigation), CBDT.

Notice under section 143(2) shall be served through the prescribed income-tax authority or the Assessing Officer concerned. If the case is outside Central Charges, it is to be transferred to Central Charge within 15 days of service of notice under section 143(2).

What the Relevant Section Says

Section 133A empowers the income-tax authority to conduct survey proceedings at the business premises or professional premises of an assessee for collecting information useful for proceedings under the Income-tax Act. During survey, the authority may inspect books of account, verify cash, stock or other valuable articles, place identification marks on books or documents, make inventories and record statements. Survey is not the same as search; survey powers are more limited than search powers under section 132.

Main Issues Covered

• difference in physical stock and book stock
• excess or shortage of cash
• unrecorded sales or purchases
• loose papers found during survey
• admission of undisclosed income during survey
• mismatch between GST turnover and income-tax turnover
• suppression of receipts
• unexplained investment in stock or assets

Legal Meaning

A survey may be a trigger for compulsory scrutiny, but addition cannot be made merely because survey was conducted.

The Assessing Officer must prove the exact discrepancy and its tax effect.

If income was surrendered during survey, the nature of surrender must be examined to see whether it is supported by actual material or merely based on misunderstanding, pressure or incomplete reconciliation.

7. CS 02: Cases Pertaining to Search under Section 132 or Requisition under Section 132A

What the CBDT Guideline Says

CS 02 covers cases where search under section 132 has been initiated or requisition under section 132A has been made on or after 01.04.2024.

For searches initiated or requisitions made on or after 01.09.2024, the return shall be selected for the assessment year covered by section 158BA(6).

The case shall be selected for compulsory scrutiny by the Assessing Officer concerned with prior administrative approval of the Pr. CIT/Pr. DIT/CIT/DIT concerned.

If the case is lying outside Central Charges, it must be transferred to Central Charge within 15 days of service of notice under section 143(2).

What the Relevant Section Says

Section 132 deals with search and seizure. It empowers authorised income-tax authorities to enter and search premises and seize books, documents, money, bullion, jewellery or other valuable articles where statutory conditions are satisfied. Section 132A deals with requisition of books, documents or assets from another authority where such material represents income or property which has not been, or would not be, disclosed.

Main Issues Covered

• undisclosed cash or jewellery
• unexplained investment
• unaccounted property transactions
• seized loose papers and digital data
• accommodation entries
• bogus purchases or bogus sales
• on-money transactions
• benami or proxy transactions
• foreign assets or foreign income

Legal Meaning

Search or requisition is only the starting point. Addition must be based on material found, legally admissible evidence and proper reasoning.

Every seized document does not automatically represent undisclosed income. The ownership, relevance, assessment year and corroborative evidence must be examined.

If third-party material or statements are relied upon, the assessee should be given proper opportunity to rebut the same.

8. CS 03: Cases Where Notice under Section 148 Has Been Issued

What the CBDT Guideline Says

CS 03 deals with reassessment cases where notice under section 148 of the Income-tax Act, 1961 has been issued.

The guideline divides CS 03 into search/survey-related section 148 cases and other section 148 cases to be completed on or before 31.03.2027.

What the Relevant Section Says

Section 148 deals with issue of notice where income has escaped assessment. A valid reassessment proceeding requires compliance with jurisdictional conditions such as information suggesting escapement, approval of specified authority, limitation and compliance with section 148A wherever applicable.

Main Issues Covered

• search or survey material relating to the assessee
• high-value property transaction
• high-value cash deposit
• non-disclosure of capital gains
• share trading or derivative transactions
• bogus donation claims
• unexplained bank credits
• AIS/SFT/TDS mismatch where supported by relevant information

Legal Meaning

The most important issue is the connection between the information and the assessee for the relevant assessment year.

The Department must show that the material relied upon is specific, relevant and capable of indicating escapement of income.

The JAO is required to upload underlying documents on the basis of which notice under section 148 was issued. Without access to relied-upon material, effective defence cannot be made.

8.1 CS 03(i): Section 148 Cases Connected with Search or Survey

What the CBDT Guideline Says

This category covers cases where search and seizure action has been initiated on or after 01.04.2021 but before 01.09.2024, or survey action has been conducted on or after 01.04.2021.

In such cases, the Jurisdictional Assessing Officer shall serve notice under section 143(2) where the return has been furnished.

If the case is outside Central Charges after issue of such notice, it shall be transferred to Central Charges under section 127 only if covered by CBDT guidelines under F. No. 299/107/2013-IT(Inv.III)/1568 dated 25.04.2014.

The JAO must upload the underlying documents on the basis of which notice under section 148 was issued, whether the return has been furnished or not.

What the Relevant Section Says

Section 127 empowers transfer of cases from one Assessing Officer to another. In search or centralisation cases, transfer to Central Circle may be made, but it must be in accordance with law and applicable CBDT instructions.

Main Issues Covered

• information found during search of another person
• seized documents allegedly relating to the assessee
• survey material indicating escaped income
• entries in diaries, loose papers or digital records
• unexplained property transactions
• accommodation entry allegations
• on-money information
• third-party statements

Legal Meaning

A reassessment cannot be sustained merely on vague information or general allegations.

The material must have a live nexus with the assessee and the relevant assessment year.

Where third-party statements are relied upon, principles of natural justice require proper confrontation and, where applicable, cross-examination.

8.2 CS 03(ii): Other Section 148 Cases

What the CBDT Guideline Says

This category covers cases other than search, seizure or survey cases where notice under section 148 has been issued and the assessment is to be completed on or before 31.03.2027.

The Directorate of Income-tax (Systems) shall forward these cases to NaFAC, which will take further action.

Notice under section 143(2) shall be served through NaFAC where return has been furnished.

The JAO shall upload the underlying documents on the basis of which notice under section 148 was issued, whether the return has been furnished or not.

What the Relevant Section Says

This category continues to operate within the framework of sections 147, 148 and 148A. The reassessment must be based on legally sustainable information and must satisfy limitation and approval requirements prescribed under the Act.

Main Issues Covered

• AIS mismatch
• SFT information
• property transaction information
• capital gains information
• bank deposit information
• TDS or interest income mismatch
• foreign remittance information
• information from other Government agencies

Legal Meaning

A data mismatch by itself does not always mean income has escaped assessment.

The assessee may show that the transaction is already disclosed, exempt, jointly held, explained through business records, or not taxable in the manner alleged.

Therefore, these cases require issue-wise examination of the information forming the basis of section 148 notice.

9. CS 04: Cases Related to Registration or Approval under Sections 12A, 12AB, 35 and 10(23C)

What the CBDT Guideline Says

CS 04 applies to cases related to registration or approval under sections 12A, 12AB, 35(1)(ii), 35(1)(iia), 35(1)(iii), 10(23C)(iv), 10(23C)(v), 10(23C)(vi), 10(23C)(via), etc.

This category applies where registration or approval has not been granted, or has been cancelled or withdrawn by the competent authority on or before 31.03.2025, and the assessee has claimed tax exemption or deduction in ITR-7.

Where the order of withdrawal of registration or approval has been reversed or set aside in appellate proceedings, such cases will not be selected under this parameter.

Cases shall be selected by the Directorate of Income-tax (Systems) with approval of DGIT (Systems), Delhi, based on returns filed by these entities in FY 2025-26. Notice under section 143(2) shall be served through NaFAC or the prescribed income-tax authority.

What the Relevant Section Says

Sections 12A and 12AB deal with registration of charitable or religious trusts and institutions and are generally necessary for claiming exemption under sections 11 and 12. Section 10(23C) provides exemption to specified funds, institutions, universities, educational institutions, hospitals and other entities, subject to prescribed conditions and approval. Section 35 relates to deduction for scientific research and payments to approved research associations, universities, colleges or institutions.

Main Issues Covered

• whether registration or approval existed for the relevant year
• whether exemption was claimed despite cancellation or withdrawal
• whether appellate authority has restored registration or approval
• whether activities are charitable or religious in nature
• whether income has been applied for objects of the trust
• whether there is violation of section 13
• whether commercial receipts violate proviso to section 2(15)
• whether ITR-7 claim is consistent with registration status

Legal Meaning

CS 04 is mainly targeted at entities claiming exemption despite registration or approval issues.

The most important factor is the legal status of registration or approval as on the relevant date.

If cancellation or withdrawal has been stayed, reversed or set aside in appeal, the case should not be selected under this parameter as per the guideline.

10. CS 05: Cases Involving Recurring Additions in Earlier Assessment Years

What the CBDT Guideline Says

CS 05 covers cases where addition was made in an earlier assessment year on a recurring issue of law, fact, or both. Transfer pricing issues are also included.

The earlier addition must either have become final because no further appeal was filed, or have been upheld by appellate authorities in favour of Revenue, even if further appeal of the assessee is pending.

For CS 05 and CS 06, the JAO shall prepare a list of cases and submit the same for administrative approval of Pr. CIT/Pr. DIT/CIT/DIT concerned. Notice under section 143(2) shall be served through NaFAC.

What the Relevant Section Says

CS 05 is an administrative selection parameter and does not create a charging provision. The actual addition, if any, must still be made under the relevant substantive provision of the Income-tax Act, such as section 68, section 14A, section 40(a)(ia), transfer pricing provisions or other applicable provisions depending on the issue.

Main Issues Covered

• disallowance of expenses
• bogus purchase addition
• transfer pricing adjustment
• disallowance under section 14A
• addition under section 68
• disallowance under section 40(a)(ia)
• revenue versus capital expenditure dispute
• depreciation dispute
• profit estimation
• related-party payment issue

The monetary thresholds prescribed in the guideline are:

Charge	Monetary Limit
Eight metro charges: Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune	Addition exceeding Rs. 50 lakh
Other charges	Addition exceeding Rs. 20 lakh

Legal Meaning

The Department cannot make addition in the current year merely because addition was made in an earlier year. Each assessment year is separate.

However, if the same issue continues and the earlier addition has become final or has been upheld in favour of Revenue, the Department may select the current year for compulsory scrutiny.

The assessee can still distinguish the current year on facts or law. CS 05 is a selection parameter, not a conclusive finding against the assessee.

11. CS 06: Cases Related to Specific Information Regarding Tax Evasion

What the CBDT Guideline Says

CS 06 applies where specific information pointing out tax evasion for the relevant assessment year is provided by any law-enforcement agency, Investigation Wing, Intelligence, Regulatory Authority, Agency, etc., and the return for the relevant assessment year has been furnished by the assessee.

The guideline clarifies that if a return has been furnished in response to notice under section 142(1), and such notice was issued in connection with information contained in NMS Cycle, AIS, SFT, CPC-TDS information or information received from Directorate of I&CI, such return will not be taken up for compulsory scrutiny unless it falls under CS 06.

Therefore, every data mismatch or information-based notice under section 142(1) does not automatically become compulsory scrutiny. There must be specific information pointing out tax evasion.

What the Relevant Section Says

Section 142(1) empowers the Assessing Officer to issue notice requiring the assessee to furnish return, produce accounts, documents or information required for assessment. Many notices under section 142(1) may be issued due to AIS, SFT, TDS or other reporting mismatches. However, the CBDT guideline clarifies that such cases will not automatically be selected unless the case satisfies CS 06.

Main Issues Covered

• accommodation entry allegations
• bogus purchase or bogus sale
• unexplained cash deposits
• undisclosed investment
• shell company transactions
• suspicious banking transactions
• fake donation or exemption claims
• regulatory information regarding share transactions
• information from GST or enforcement authorities
• mismatch supported by specific tax-evasion material

Legal Meaning

Specific information must be more than a general suspicion.

It should identify the assessee, relevant assessment year, nature of alleged tax evasion, transaction or material involved, source of information and basis for alleging evasion.

The Department must establish the link between the information and the alleged income. The assessee must be given reasonable opportunity to rebut the allegation.

12. Special Position for International Taxation and Central Charges

The guideline provides a separate clarification for Assessing Officers in International Taxation and Central Charges.

Cases may be selected for compulsory scrutiny by International Taxation and Central Charges by following the same parameters prescribed in Para 2 of the guideline. However, prior administrative approval of Pr. CIT/Pr. DIT/CIT/DIT concerned is required.

Such cases shall continue to be handled by International Taxation and Central Circle Charges respectively.

The guideline further clarifies that communication to NaFAC for access or further action after selection for compulsory scrutiny will not apply to International Taxation and Central Charges.

This is relevant in cases involving non-residents, foreign companies, international transactions, transfer pricing, search cases handled by Central Circle, foreign assets, foreign remittances and cross-border tax issues.

13. Time Limit for Notice under Section 143(2)

The guideline specifically states that as per the proviso to section 143(2) of the Income-tax Act, 1961 and in terms of section 536(2)(c) of the Income-tax Act, 2025, the time limit for service of notice under section 143(2) for ITRs filed in Financial Year 2025-26 is 30.06.2026.

This is one of the most important legal points in the guideline. If notice under section 143(2) is not served within the prescribed time, the validity of scrutiny assessment may be challenged.

The legal position is supported by the Supreme Court decisions in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) and CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC). Therefore, timely service of notice under section 143(2) is a jurisdictional requirement.

14. Conclusion

The CBDT compulsory scrutiny guidelines for FY 2026-27 identify six specific situations where returns filed during FY 2025-26 may be selected for complete scrutiny.

The focus of the Department is clearly on cases involving survey, search, reassessment, charitable registration or approval issues, recurring additions and specific information regarding tax evasion.

At the same time, the guideline also protects taxpayers from automatic scrutiny in certain mismatch-based cases. It clarifies that returns filed in response to section 142(1) notices based on NMS, AIS, SFT, CPC-TDS or I&CI information will not automatically be selected for compulsory scrutiny unless the case falls under CS 06.

The most important legal requirement remains service of notice under section 143(2) within the prescribed time. For ITRs filed in FY 2025-26, the guideline states that the time limit for service of notice under section 143(2) is 30.06.2026.

Therefore, compulsory scrutiny selection is only the beginning of detailed examination. It does not mean that any addition is final or automatic. Each case must be examined on the basis of the relevant section, facts of the assessee, material relied upon by the Department and the legal safeguards available under the Income-tax Act.

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