CBDT’s Scrutiny Guidelines for FY 2026-27: The 6 Compulsory-Selection Categories, the CASS Layer Behind Them, and What to Prepare Before the Notice Arrives
The CBDT instruction on compulsory scrutiny has been one of the most-read tax updates of the season — and, like most viral notifications, one of the most misread. Before the playbook, three corrections that change how you should advise clients filing right now.
It is dated 4 June 2026, not 7 June — issued vide F.No. 225/56/2026/ITA-II.
There are six categories, not nine — CS-01 to CS-06.
And this guideline is not “CASS.” This is the single most important distinction for a practitioner, and the one the headlines miss. The 4 June instruction governs compulsory (manual) selection — six defined situations where an Assessing Officer must pick a return for complete scrutiny. It is a closed list. Separately, the CBDT clarified — in its own words within the guideline — that returns filed in response to a Section 142(1) notice driven merely by NMS, AIS, SFT, CPC-TDS or I&CI information will not be taken up for compulsory scrutiny unless they independently fall under CS-06. Those data-mismatch cases flow through CASS (Computer-Assisted Scrutiny Selection) — a separate, risk-parameter-based track whose criteria are not published.
So there are two doors into scrutiny, and they need different preparation:
- The compulsory door (this guideline):six structural triggers — survey, search, reassessment, lapsed exemption, recurring additions, tax-evasion intelligence. If your client is behind one of these doors, selection is near-certain and the work is evidentiary.
- The CASS door (risk-based):AIS/SFT/26AS mismatches, unusual ratios, high-value transactions inconsistent with declared income. This is where high-value cash depositors, foreign-asset holders, and presumptive-income outliers actually get picked — and it is preventable at the filing stage.
One date binds both: for returns filed during FY 2025-26, the Section 143(2) notice must be served on or before 30 June 2026 (the proviso to Section 143(2) of the Income-tax Act, 1961, read with Section 536(2)(c) of the Income-tax Act, 2025). A notice served after that is open to challenge on limitation.
A note that runs through everything below: although the Income-tax Act, 2025 commenced on 1 April 2026, the returns being filed this season (AY 2026-27, for income of FY 2025-26) are governed by the 1961 Act — because they relate to income earned up to 31 March 2026. The 2025 Act’s renumbered provisions apply from Tax Year 2026-27. That is why each category below carries an Income-tax Act 2025 Transition Consideration — the same provision, what it will be called next year, and what actually changes.
Part A — The Six Compulsory-Selection Categories
CS-01 — Survey cases under Section 133A
Who is picked. Any assessee on whom a survey under Section 133A — other than a TDS-verification survey under Section 133A(2A) — was conducted on or after 1 April 2024. Selection is centralised by the Directorate of Income-tax (Systems) on inputs from the Investigation Wing; the Section 143(2) notice issues through the prescribed authority/AO, and non-Central-Charge cases move to the Central Charge within 15 days of service.
Documents to pre-assemble. The survey statement recorded under Section 133A and any retraction; the stock, cash and document inventory taken during the survey; reconciliation of surveyed stock/cash with books on the survey date; and evidence supporting any income offered (or the basis for not offering it). Surrender letters and the treatment of surrendered income in the return are the first things the officer reads.
Red flags to address now. Income impounded or admitted during survey but not carried into the return; stock differences left unexplained; cash found and not reconciled. If a survey happened in the year, assume the return will be examined in full — file it as if the assessment has already begun.
Income-tax Act 2025 Transition Consideration. The survey power continues without substantive change; the FY 2025-26 return is assessed under the 1961 Act. From Tax Year 2026-27, the survey and assessment machinery is recast under the 2025 Act, but the 1 April 2024 cut-off in this guideline is a fixed date, not a moving one.
CS-02 — Search and requisition cases under Sections 132 / 132A
Who is picked. Assessees subjected to a search under Section 132 or a requisition under Section 132A initiated on or after 1 April 2024, selected by the AO with prior approval of the Pr.CIT/Pr.DIT/CIT/DIT. For searches initiated on or after 1 September 2024, the return is selected for the assessment year covered by the block-assessment regime under Section 158BA(6). Non-Central-Charge cases transfer within 15 days of the 143(2) notice.
Documents to pre-assemble. The panchnama and seized-material inventory; the Section 132(4) statements; valuation reports for jewellery/stock/property; the source-of-acquisition trail for every seized asset; and, for block cases, the undisclosed-income working for the block period in Form ITR-B.
Red flags to address now. Seized assets whose source isn’t documented; discrepancies between the 132(4) statement and the return; group/related entities not aligned on the same facts. In search cases the burden sits squarely on the assessee — gaps are read against you.
Income-tax Act 2025 Transition Consideration. Block assessment for searches continues, but from Tax Year 2026-27 the completion window widens from 12 to 18 months and limitation runs from the date of search — so group cases get longer, more synchronised timelines. The substantive FY 2025-26 assessment remains under the 1961 Act.
CS-03 — Reassessment cases where a Section 148 notice has been issued
Who is picked. This category has two limbs. (i) Cases where search/seizure was initiated on or after 1 April 2021 but before 1 September 2024, or a survey was conducted on or after 1 April 2021 — here the jurisdictional AO serves the 143(2) notice and uploads the material underlying the Section 148 notice. (ii) Other (non-search/survey) cases where a Section 148 notice has been issued and which are to be completed on or before 31 March 2027 — these are routed by the Directorate (Systems) to NaFAC, which serves the 143(2) notice, with the JAO uploading the underlying material.
Documents to pre-assemble. The Section 148A material and your reply; the reasons recorded/order under Section 148A(3); and full documentary support for the specific escapement alleged — not a general defence, but evidence answering the exact item that reopened the year.
Red flags to address now. Treating a reassessment as routine. The notice already names the issue; your file should answer that issue completely before the 143(2) hearing.
Income-tax Act 2025 Transition Consideration. Reassessment is recast: Section 148 corresponds to Section 280 and Section 148A to Section 281 of the 2025 Act, and from Tax Year 2026-27 reassessment can be initiated only by the jurisdictional AO (not through faceless initiation). Pending reassessments under the 1961 Act continue under that Act per the saving provisions.
CS-04 — Lapsed or cancelled registration/approval, exemption still claimed (ITR-7 filers)
Who is picked. Trusts and institutions whose registration/approval under Sections 12A, 12AB, 35(1)(ii)/(iia)/(iii) or 10(23C)(iv)/(v)/(vi)/(via) was not granted, or was cancelled/withdrawn on or before 31 March 2025, yet which claimed exemption/deduction in the return filed in ITR-7. Cases where the withdrawal was reversed or set aside in appeal are excluded. Selection is centralised; notice issues through NaFAC or the prescribed authority.
Documents to pre-assemble. The registration/approval order and any cancellation order; the appellate status of that cancellation (this is the exclusion that saves the case); the activity report and application-of-income working; and Form 10B/10BB audit reports.
Red flags to address now. Claiming exemption on a registration that lapsed before 31 March 2025 without an appellate stay — that is the precise trigger. If the cancellation is under challenge and stayed/reversed, document it on file before filing.
Income-tax Act 2025 Transition Consideration. The charitable/exemption architecture (12A/12AB/10(23C)) is reorganised under the 2025 Act and its Schedules from Tax Year 2026-27; ITR-7 claims for FY 2025-26 are tested under the 1961 provisions. The registration status as on the cut-off date is what governs, regardless of the renumbering.
CS-05 — Recurring additions in an earlier year (including transfer pricing)
Who is picked. Cases where an addition on a recurring issue of law or fact (including transfer pricing) in an earlier assessment year exceeds ₹50 lakh in the eight metro charges (Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, Pune) or ₹20 lakh in other charges, and where that addition has become final or been upheld in favour of the Revenue. Jurisdictional AOs prepare the lists, consolidated and forwarded to the Directorate (Systems) by 15 June 2026.
Documents to pre-assemble. The earlier-year assessment and appellate orders on the recurring issue; the current-year position on the same issue with the distinguishing facts (if any); and, for TP, the contemporaneous documentation, the TPO order history, and the current-year benchmarking.
Red flags to address now. Repeating in this year exactly the position that was added and upheld against you earlier, without either conceding or distinguishing it. The thresholds were revised on 13 June 2025 (up from ₹25 lakh/₹10 lakh), so the net is set at ₹50 lakh/₹20 lakh.
Income-tax Act 2025 Transition Consideration. Assessment-completion limitation under Sections 153/153B corresponds to Section 286 of the 2025 Act, and the dispute-resolution-panel route (Section 144C) for transfer-pricing cases is likewise recast under the new Act. The recurring-issue test itself is administrative and unchanged.
CS-06 — Specific tax-evasion information from an enforcement/regulatory agency
Who is picked. Cases where (a) specific information pointing to tax evasion for the relevant AY is provided by a law-enforcement agency, the Investigation Wing, Intelligence, or a Regulatory Authority/Agency, and (b) the return has been furnished. Notice issues through NaFAC.
This is also the category that carries the crucial carve-out: a return filed in response to a Section 142(1) notice based merely on NMS/AIS/SFT/CPC-TDS/I&CI information is not compulsory-scrutiny material unless it independently meets CS-06. Routine data mismatches do not, by themselves, force compulsory selection — they feed the CASS track instead.
Documents to pre-assemble. Hard to pre-empt specifically (you may not know what was shared), so the defence is general completeness: full support for the income and deductions claimed, and a clean reconciliation of AIS/26AS to the return.
Red flags to address now. Any matter already known to be under an agency’s lens — ED, GST intelligence, SEBI, FIU — where a return has been filed. Align the income-tax position with what those agencies already hold.
Income-tax Act 2025 Transition Consideration. The SFT/AIR reporting backbone — Section 285BA read with Rule 114E — continues under the 2025 Act (with the rules recast for Tax Year 2026-27). The information pipeline that powers CS-06 and CASS is being widened, not narrowed.
Part B — The CASS Layer: Where Most Returns Actually Get Picked
The six categories above are structural. The volume game is CASS — algorithmic, risk-parameter selection that keys off the gap between what third parties reported about your client and what the return declares. The parameters are not public, but the inputs are, and a CA can review them before filing rather than after the notice.
The inputs are three overlapping datasets the department reconciles against the ITR:
- Form 26AS— TDS/TCS, advance/self-assessment tax, and certain high-value entries.
- AIS (Annual Information Statement)— the wide-angle view: SFT data, interest, dividend, securities and mutual-fund transactions, foreign remittances, GST turnover, and more, with a TIS (Taxpayer Information Summary) that aggregates it.
- SFT (Statement of Financial Transactions)— filed by banks, registrars, MF/RTAs, companies and others under Section 285BA/Rule 114E, feeding straight into AIS.
The SFT codes to reconcile before filing
The brief many practitioners carry is “review the AIS.” The sharper version is: reconcile each SFT code that appears in the client’s AIS against a specific line of the return. The principal codes under Rule 114E are:
- SFT-001— purchase of bank drafts/pay orders/banker’s cheques in cash (₹10 lakh+)
- SFT-002— purchase of pre-paid instruments in cash (₹10 lakh+)
- SFT-003— cash deposits or withdrawals in current accounts (₹50 lakh+)
- SFT-004— cash deposits in non-current accounts (₹10 lakh+)
- SFT-005— time deposits (₹10 lakh+)
- SFT-006— credit-card payments (₹1 lakh+ in cash / ₹10 lakh+ any mode)
- SFT-007— purchase of debentures/bonds (₹10 lakh+)
- SFT-008— purchase of shares, including share application (₹10 lakh+)
- SFT-009— buy-back of shares (₹10 lakh+)
- SFT-010— purchase of mutual-fund units (₹10 lakh+)
- SFT-011— purchase of foreign currency (₹10 lakh+)
- SFT-012— purchase or sale of immovable property (₹30 lakh+)
- SFT-013— cash receipt for goods/services (above ₹2 lakh)
- SFT-014— cash deposits in a specified period (a historical, period-specific code)
Post-2021 amendments extended reporting to dividend income, interest income, and transactions in listed securities and mutual-fund units (the capital-gains pre-fill), reported half-yearly for securities/MF and with no threshold for dividend/interest. Treat that expanded set as part of the same review even though the numbering convention varies across utilities — what matters is that every reported figure ties to a return line.
The practitioner move is the reconciliation, not the recital: each SFT/AIS entry should map to an ITR field, and every mismatch should be resolved before filing — by correcting the return, or by filing feedback on the AIS where the entry is wrong (wrong PAN on a joint account, NAV reported instead of investment, duplicate reporting by two entities). An unexplained AIS-to-ITR gap is precisely what risk-based selection and post-filing 142(1) activity key on.
The profiles that draw CASS attention
- High-value cash depositors(SFT-003/004/013): cash deposits inconsistent with declared turnover or income. Pre-assemble the cash-book and source narrative.
- Property transactors(SFT-012): purchase/sale value versus declared capital gains and source of funds; stamp-duty value versus consideration (Section 50C/56(2)(x) territory).
- Securities/MF investors(SFT-008/010 and the capital-gains pre-fill): broker statements and the capital-gains computation reconciled to AIS; this is the single most common AIS mismatch.
- Foreign-asset holders and remitters: AIS foreign-remittance data and Schedule FAcompleteness — non-disclosure here invites the Black Money Act, a far heavier consequence than ordinary scrutiny. Foreign-asset holders cannot use ITR-1 in any case.
- Presumptive-income filers under Section 44AD/44ADA: declared presumptive income versus AIS turnover/receipts (GST turnover, SFT receipts). A 44AD turnover that is visibly below the GST/AIS receipts, or a 44ADA professional whose AIS receipts exceed the presumptive base, is a classic risk flag.
Income-tax Act 2025 Transition Consideration (for Part B). Presumptive taxation under Sections 44AD/44ADA/44AE is unified under Section 58 of the 2025 Act; the return itself moves from Section 139 to Section 263, and the tax audit from Section 44AB to Section 63, with the late-filing-fee provision (Section 234F) similarly renumbered — all from Tax Year 2026-27. For the AY 2026-27 return you are filing now, the 1961 section numbers still apply. Note also that from 1 April 2026 the SFT net widens (crypto-asset statements, stamp-paper purchases, lower insurance thresholds, a new reporting form) — but that expanded reporting populates next year’s AIS, not the FY 2025-26 data you are reconciling today.
A word on “angel tax” scrutiny
A lingering misconception worth correcting: angel-tax scrutiny under Section 56(2)(viib) is legacy-only. The provision was abolished for all investors from 1 April 2025, so it cannot apply to FY 2025-26 income or to any AY 2026-27 return. It remains live only for pre-1-April-2025 assessments still open. Do not prepare current returns as if angel tax were a present risk — it is not.
Part C — The 30-Day Pre-Filing (and Pre-Notice) Checklist
If a client sits behind a compulsory door (CS-01 to CS-06), or shows CASS-risk profiles, run this before filing — and certainly before any 143(2) notice lands by 30 June.
Days 1–5 — Map the exposure. Identify which door applies. Pull the AIS, TIS and 26AS. List every SFT code present and the return line each must reconcile to.
Days 6–12 — Reconcile and correct. Tie AIS/26AS to the draft return line by line. File AIS feedback for every wrong entry. Resolve capital-gains, interest and dividend mismatches. For 44AD/44ADA clients, reconcile presumptive income to GST and AIS receipts.
Days 13–20 — Build the evidence file. For compulsory-category clients, assemble the category-specific documents listed in Part A. For everyone, retain Chapter VI-A deduction proofs — in scrutiny the burden of proof is on the taxpayer.
Days 21–27 — Cross-system alignment. Reconcile income-tax turnover with GST turnover and with anything already held by other agencies. Confirm Schedule FA for any foreign assets. Confirm the correct ITR form (foreign assets/business income rule out ITR-1).
Days 28–30 — File clean, then watch the clock. File the return with reconciliations documented. Track the e-filing portal and registered email/SMS for any 143(2) notice up to 30 June. If a notice arrives, read it for the exact information sought and respond completely and on time through the portal — non-response invites an ex-parte best-judgment assessment.
And mind the staggered due dates for AY 2026-27: 31 July 2026 for ITR-1/ITR-2, 31 August 2026 for non-audit ITR-3/ITR-4 (including presumptive filers), 31 October 2026 for audit cases, and 30 November 2026 for transfer-pricing cases — with the tax-audit report due 30 September 2026.
Frequently asked questions
1. Is the 4 June 2026 guideline “CASS”? No. It governs compulsory(manual) selection in six categories. CASS is a separate, risk-parameter-based track for AIS/SFT/26AS-driven cases, and its parameters are not published.
2. How many categories are there — six or nine? Six: CS-01 (survey), CS-02 (search/requisition), CS-03 (Section 148 reassessment), CS-04 (lapsed exemption in ITR-7), CS-05 (recurring additions/TP), CS-06 (tax-evasion information).
3. My client got a 142(1) notice because of an AIS mismatch. Is that compulsory scrutiny? No. The guideline expressly says NMS/AIS/SFT/CPC-TDS/I&CI-driven 142(1) cases are not compulsory unless they meet CS-06. They are handled through CASS.
4. What’s the deadline for the scrutiny notice? For returns filed in FY 2025-26, the Section 143(2) notice must be served by 30 June 2026. A later notice is open to challenge on limitation.
5. Does the Income-tax Act 2025 apply to the return I’m filing now? No. AY 2026-27 returns (FY 2025-26 income) are filed under the 1961 Act. The 2025 Act’s numbering applies from Tax Year 2026-27 — which is why this article pairs each provision with its successor section.
6. Is angel tax still a scrutiny risk? Only for legacy (pre-1-April-2025) assessments. Section 56(2)(viib) was abolished from 1 April 2025 and does not touch FY 2025-26 returns.
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This article is general information as on 25 June 2026 and is not advice on any specific case. Scrutiny guidelines, due dates and the 1961-to-2025 transition are evolving through 2026; verify the current instruction text and deadlines on incometax.gov.in before acting.
The author, CA Sundram Gupta, is the founder of Patron Accounting LLP, a CA & CS firm headquartered in Pune with offices in Mumbai, Delhi and Gurugram, advising HNIs, companies and startups on ITR filing, AIS/SFT reconciliation and scrutiny assessments.
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