Income Tax Department nowadays selects almost all cases for scrutiny assessment under section 143(2) of Income Tax Act 1961 based upon AIR(Annual Information Return) transactions or through CASS. It is sometimes seen that when a case is selected for scrutiny assessment on the basis of AIR transactions, assessing officer also sometime tend to make additions on grounds other than AIR transactions like on the basis of inadequate withdrawals etc or on the basis of estimated additions.
Where a case is selected for scrutiny assessment on the basis of AIR transaction then the notice u/s 143(2) should be stamped with “the words AIR case” and the scope of enquiry of scrutiny assessment in such case should be only limited to such AIR transactions and no addition should be made on the basis of any other grounds as it has been clarified in Board’s letter dated 28.11.2018 issued vide No.225/402/2018/ITA.II
Some important points to be kept in mind regarding at the time of dealing with AIR based scrutiny cases:
1. It has been decided that the scrutiny of such cases would be limited only to the aspects of information received through AIR.
2. It has also been decided that in all the cases which are picked for scrutiny only on the basis of AIR information, the notice u/s 143(2) of Income Tax Act 1961 should clearly be stamped with “AIR Case”.
3. In 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. CIT/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.
4. 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.
5. 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.
6. Hence, while attending the hearing for such scrutiny cases, above points has to be taken care of.
Relevant Department Instructions-
Some relevant Case Laws-
(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: firstname.lastname@example.org, M +919815243335)
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(Republished with Amendments by Team Taxguru)