Scrutiny Assessment U/s 143(2)

1 Scrutiny Assessment is the examination of ITR by giving the opportunity to the assessee to provide the evidence regarding the income declared and the expenses, deduction, losses, exemptions etc. shown in the ITR.

2. The AO is having opportunity to conduct enquiry as he deemed fit from the assessee and from the third parties during the course of scrutiny.

3. The object of scrutiny assessment is to ascertain that whether the income is correctly shown by the assessee and whether the claims for deductions, exemptions, etc. Are factually and legally correct.

4. During the course of scrutiny the AO finds any omission, discrepancies, inaccuracies etc. than he makes his own assessment of the taxable income after taking into consideration all the relevant facts. These assessment are made U/s 143(3) of the Income Tax Act,1961.

5. The case selected for scrutiny assessment can be two types :

A. Manual Scrutiny Cases :

Following can be reason of manual scrutiny cases :

  1. Not Filing ITR
  2. Declaring lesser income compared to earlier year
  3. Declaring more loss compared to earlier years.
  4. Mismatch in TDS credit between claim and 26AS.
  5. Non declaration of exempt income.
  6. Claiming large refund of income .
  7. Taking double benefit due to change in job.
  8. High value transaction as reflected in AIR.

B. Compulsory Scrutiny Cases :

Following can be reason of Compulsory scrutiny cases :

  1. Cases involving addition in the earlier assessment in excess of Rs.10.00 Lacs on a substantial and recurring question of law or fact which is confirmed in appeal or pending before an appellate authority.
  2. Cases involving addition in an earlier year on the issue of transfer pricing in excess of Rs.10.00 crore or more on a substantial and recurring question of law or fact which is confirmed in appeal or pending before an appellate authority.
  3. Cases selected under CASS (Computer Added Scrutiny Selection)
  4. Cases in respect of which specific and verifiable information pointing out tax evasion is given by Govt. Department /Authorities. The AO shall record reasons and take prior approval from Pr. CCIT/CCIT/ Pr. DGIT/DGIT concern.
  5. Cases where order denying the approval u/s 10(23C) of the Act or withdrawing the approval already granted has been passed by the competent authority, yet the assessee found claiming tax exemption under the aforesaid provision of the Act.  

6. Scrutiny Assessment is having two types :

A. Limited Scrutiny Assessment

When case is selected for Limited Scrutiny Assessment, the AO can ask only the details regarding the reason behind the selection of any specific matter.

B. Complete Scrutiny Assessment

In this case the AO can ask complete details of transaction reflecting in the return of the Income.

SECTION 143(2)

“Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:”

Section 143(3)

  1. [On the day specified in the notice issued under] sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:

Leave a Reply