Most of the cases selected for Scrutiny are through Computer Aided Scrutiny Selection (CASS). Only a particular class of cases such as those involving Search, Survey and Reopening of Assessment etc. come under Compulsory Scrutiny. A small Number of cases are manually selected by the Assessing Officers where they consider the Income of a particular assessee has been concealed or which require scrutiny for some specific reason. The reasons attributable to selection of cases under CASS are spelt out differently each year. Some of the common reasons are information on the basis of AIR Data, some CIB Information or non reconciliation of 26AS Data.
The CBDT had issued an important Guidelines for selection of returns for Complete Scrutiny during the financial-year 2019-20 vide Guidelines No F.No.225/169/2019/ITA-11.
The parameters for selection of returns for Complete Scrutiny during financial year 2019- 20 are as under.-
(i) Cases involving addition in an earlier assessment year(s) on a recurring issue of law or fact:-
(a) exceeding Rs. 25 lakhs in eight metro charges at Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune while at other charges, quantum of addition should exceed Rs. 10 lakhs;
(b) exceeding Rs. 10 crore in transfer pricing cases.
and where such an addition:-
(ii) Cases pertaining to Survey under section 133A of the Income-tax Act, 1961 (‘Act’) excluding those cases where books of accounts, documents, etc. were not impounded and returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year. However, where assessee has retracted from disclosure made during the Survey, such cases will be considered for scrutiny.
(iii) Assessments in search and seizure cases to be made under section(s) 153A, 153C, 158BA, 158BC & 158BD read with section 143(3) of the Act and also for return filed for assessment year relevant to previous year in which authorization for search and seizure was executed under section 132 or 132A of the Act.
(iv) Cases where registration/approval under various sections of the Act such as 12A, 35(1)(ii)/(iia)/(iii), 10(23C), etc. have not been granted or have been cancelled/withdrawn by the Competent Authority, yet the assessee has been found to be claiming tax-exemption/deduction in the return. However, where such orders of withdrawal of registration/approval have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.
(v) Cases in respect of which specific information pointing out tax-evasion for the relevant year is given by any law-enforcement/intelligence/regulatory authority or agency. However, before selecting a return for scrutiny under this criterion, Assessing Officer shall take prior administrative approval from jurisdictional Pr. CIT/Pr.DIT/CIT/DIT concerned.
Through Computer Aided Scrutiny Selection (CASS), cases are being selected in two categories viz. Limited Scrutiny & Complete Scrutiny in a centralized manner under CASS-2019. CASS is a system-based method for scrutiny selection which identifies the cases through data-analytics and three-hundred sixty-degree data profiling of taxpayers and in a non-discretionary manner. The list of these cases is being/has been separately intimated by the Principal DGIT(Systems) to the Jurisdictional authorities concerned for further necessary action. In respect of cases selected under CASS cycle 2019, the following guidelines are specified.
(i) Cases where returns are selected for scrutiny through CASS but are not verified by the assessee within the specified period of e-filing and such returns remain unverified before the due date for issue of notice u/s 143(2), should be reopened by issue of notice under section 148 of the Act.
(ii) Cases selected for ‘Limited Scrutiny’ but credible specific information has been/is received from any law-enforcement/intelligence/regulatory authority or agency regarding tax-evasion in such cases, then only issue(s) arising from such information can be examined during the course of conduct of assessment proceedings in such ‘Limited Scrutiny’ cases, with prior administrative approval of the Pr. C!T/CIT concerned as per the procedure laid down in Board’s letter dated 28.11.2018 issued vide No.225/402/2018/ITA.II. In such ‘limited Scrutiny’ cases, Assessing Officer shall not expand the scope of enquiry/investigation beyond the issue(s) on which the case was flagged for ‘Limited Scrutiny’ and the issue(s) arising from the information received from the above referred agency or authority.
The Instructions are a welcome step to curb unnecessary Harassment of the assessees under the garb of a complete & exhaustive enquiry and widest possible verifications. These Instructions are expected to put an end to lengthy routine questionnaires of the Assessing Officers without application of mind to the specific issues on the basis of which the case had been selected for scrutiny. This will mitigate the Hardship faced by the assessees during the Assessment Proceedings. These Instructions also makes it mandatory for the Assessing Officers to mention the reasons for selection of that case for Scrutiny so that the assessee can meet out the same. The same was also incumbent upon the Assessing Officer in order to abide the Principles of Natural Justice.
Now, many users ask question whether these Instructions have A Retrospective operation? If we analyze the said Instructions, it is crystal clear that these are ‘BENEVOLENT’ and ‘CLARIFICATORY’ in nature. There has been no statutory amendment so that it needs to be interpreted as to whether these Instructions are Retrospective or not. There can be no iota of doubt that these instructions being benevolent & clarificatory are applicable with full force in the pending assessment proceedings for FY 2019-20 selected under CASS. No new rights have accrued to the assessees nor have any rights of the Department been pruned. The Instructions are clearly ‘PROCEDURAL’ and only spell out the procedure to be followed by the Assessing Officers during Assessment Proceedings. Had these Instructions been offensive to the assessees, the same could not have been retrospective. It is pertinent that these instructions do not impair or curtail the existing rights of the Assessing Officers.
The Courts had on several occasions laid down the Law on ‘Retrospectivity’. The Apex Court in Hitendra Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602 held that a law which affects the substantive rights of any of the parties, the law cannot be retrospective. Every party has a vested right in substantative law but no such right exists in procedural law. In the case of Mithilesh Kumar & another v. Prem Bahadur Khare AIR 1989 SC 1247, The Apex Court in para 21 of the judgment held as under:-
“A retrospective operation is not given to a statute so as to impair existing right or obligation otherwise than as a matter of procedure….. But laws made justly for the benefit of individuals and the community as a whole may relate to a time antecedent to their commencement.”
Lord Denning had aptly remarked on the law of retrospectivity:-
“The rule that an act of Parliament is not to be given retrospective effect applies only to statutes which affect vested rights. It does not apply to statutes which only alter the form of procedure or the admissibility of evidence or the effect which the courts give to evidence.”
In Govt. of India & others v. Indian tobacco Association (2005) 7 SCC 396, the Doctrine of fairness was held a relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness was applied to hold that a statute was retrospective in nature in the case of Vijay v. State of Maharashtra & others (2006) 6 SCC 286. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held as retrospective in nature.
In a judgment of the Constitution Bench of the Apex Court in CIT v. Vatica Township Pvt. Ltd., Civil Appeal no. 8750 of 2014 decided on 15-09-2014, the Court reiterated that if a proviso is clarificatory and curative in nature, it should be given a retrospective operation. The Court in para 33 held as under:-
“If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective.”
This Instruction being clarificatory, beneficial, procedural, purposive and designed for the benefit of Assessee community as a whole is undoubtedly retrospective and a clarification by the CBDT in this regard would usher in a new environment of mutual trust as envisaged by the new Government.
(Author- Inder Chand Jain, Agra, Mobile: 9319215672, Email: [email protected])
(Republished with Amendments by Team Taxguru)