CBDT Issued Guidelines for Compulsory Selection of Return for Complete Scrutiny During FY 2025-26

On June 13, 2025, the Central Board of Direct Taxes (CBDT) issued detailed guidelines on the selection of income tax returns for compulsory scrutiny during the Financial Year 2025-26 vide document No. F.No.225/37/2025/ITA-II. The directions aim to ensure that tax returns are thoroughly examined in cases where there’s a higher risk of tax evasion or non-compliance. 

As per the directions, the returns under scrutiny s hall include those of cancelled NGOs, trusts, taxpayers with a history of large income addition, and cases where input is received from investigative agencies during the Financial year.

As per directions, the following shall be the parameters for compulsory selection of returns for Complete Scrutiny during Financial Year 2025-26, along with the procedure of selection:

1. Cases Involving Surveys under Section 133A of the Income Tax Act, 1961

1. Parameter:

• Where a survey under section 133A (other than u/s 133A(2)) of the Income Tax Act, 1961 is conducted on or after 1st April, 2023. 
• According to a survey, tax officials visit business premises to verify books of accounts, documents, and stock etc. Unlike “Search and Seizure”, the tax officials don’t have the authority to seize.

2. Procedure of Selection of Income Tax Return for Scrutiny:

• Such cases shall be selected for compulsory scrutiny by the Directorate of Income-tax (Systems) with the approval of DGIT(Systems), Delhi, based on information of survey cases provided by CIT(Inv)(OSD), Investigation Division, CBDT. 
• Notice u/s 143(2) of the Act shall be served on the assessee through the Jurisdictional Assessing Officer or the Prescribed authority. 
• If cases are lying outside Central charges, Pr. CIT/ Pr. DIT/ CIT/ DIT concerned shall ensure that such cases are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2) of the Act.

2. Search and Seizure/ Requisition under Section 132 or 132A of the Act

1. Parameter-1:

• Where a search/ Seizure was initiated against an assessee under Section 132 of the Act; or 
• Requisition is made under Section 132A of the Act.
• On or after 1st April, 2023 but before 1st September, 2024

2. Parameter-2:

• For A.Y. 2025-26 (FY 2024-25), where Search u/s 132 of the Act was initiated or Requisition u/s 132A of the Act was made, on or after 01.09.2024 but before 01.04.2025.

3. Procedure of Selection of Income Tax Return for Scrutiny:

• The cases shall be selected for compulsory scrutiny with prior administrative approval of the Pr. CIT/ Pr. DIT/ CIT/ DIT concerned.
• Such cases shall be transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)/142(1) of the Act by the Jurisdictional Assessing Officer (JAO) concerned. 

3. Cases related to registration/ approval of Trusts, NGOs, etc, under various sections such as 12A, 12AB, 35, 10(23C), etc.

1. Parameter:

• Cases where registration /approval under various sections of the Act, such as section 12A, 12AB, 35 (1)(ii)/(iia)/(iii),10(23C)(iv)/(v)/ (vi)/(via), etc. 
  
  • Has not been granted or has been cancelled/withdrawn on or before 31st March, 2024; and 
  • The assessee is claiming tax exemption or deduction in the return filed in ITR-7. 

• However, where such orders of withdrawal have been reversed or set aside in appellate proceedings, they shall not be selected under this clause

2. Procedure of Selection of Return:

• Cases shall be selected by the Directorate of Income-tax (Systems) with the approval of DGIT(Systems), Delhi, on the basis of returns filed by these entities in FY 2024-25. 
• Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC. 
• The Jurisdictional Assessing Officers shall upload the underlying documents containing specific information regarding this parameter immediately.

4. Where an Addition is made in earlier years on a Recurring Issue:

1. Parameter:

• Where addition is made in earlier years' assessments of the Assessee on a recurring issue of law or fact (Including transfer pricing issues) and such addition exceeds:
  
  • INR 50 Lakhs in eight metro cities*;
  • INR 20 Lakhs in other cities;

• Such an addition has become final as:
  
  • No further appeal has been preferred against the assessment order; or 
  • Such an addition has been upheld by the Appellate Authorities in favour of Revenue, even if a further appeal of the assessee is pending against such order.

*Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune

2. Procedure of the  selection of return:

• The Jurisdictional Assessing Officers (JAOs) shall prepare a list of cases falling under this parameter and shall submit the same to the concerned Pr.CIT/Pr.DIT/ CIT/DIT for approval. 
• The consolidated list of such cases shall be submitted by the Pr.CIT/Pr.DIT/CIT/DIT to the Pr.CCIT concerned. 
• Pr. CCIT concerned shall forward this list of cases to the Directorate of Income-tax (Systems) latest by 23.06.2025. 
• Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC.
• The Jurisdictional Assessing Officers shall upload the underlying documents containing specific information regarding this parameter immediately.

Read Also: CBDT Issued Guidance on the Application of the Principal Purpose Test (PPT) under India’s DTAA| Circular No. 01/2025 Dated 21st January 2025

5. Information is received related to Tax Evasion:

1. Parameter:

• 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 is furnished by the assessee.

2. Procedure for the selection of return:

• The Jurisdictional Assessing Officers (JAOs) shall prepare a list of cases falling under this parameter and shall submit the same to the concerned Pr.CIT/Pr.DIT/ CIT/DIT for approval. 
• The consolidated list of such cases shall be submitted by the Pr.CIT/Pr.DIT/CIT/DIT to the Pr.CCIT concerned. 
• Pr. CCIT concerned shall forward this list of cases to the Directorate of Income-tax (Systems) latest by 23.06.2025. 
• Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC.
• The Jurisdictional Assessing Officers shall upload the underlying documents containing specific information regarding this parameter immediately.

6. No compulsory Scrutiny:

• Where Notice is issued under Section 142(1) of the Act due to information contained in NMS Cycle/ AIS/ SFT/ CPC-TDS, etc., and the assessee furnishes a return in response to such notice, then such return will not be taken up for compulsory scrutiny. 
• Such a case shall be selected for scrutiny through the CASS cycle.

7. Notice u/s 143(2) in certain cases: 

• JAO shall upload the underlying documents for access by NaFAC, and Notice u/s 143(2)/142(1) of the Act (calling for information) shall be served on the assessee through NaFAC in these cases:
  
  • Cases (other than search & seizure/survey) where notices u/s 148 of the Act have been issued, and where return is either furnished or not furnished in response to notice u/s 148 of the Act;
  • Cases in which notices u/s 142(1) of the Act calling for return, have been issued & no returns have been furnished;

• Where notices u/s 148 of the Act have been issued according to search & seizure/survey actions conducted on or after 01.04.2021 but before 01.09.2024, if lying outside Central Charges:
  
  • Where a return is furnished, the JAO concerned shall serve the Notice u/s 143(2) of the Act and Pr.CIT/Pr.DIT/CIT/DIT concerned shall ensure that such cases are transferred to central charges u/s 127 of the Act.
  • Where a return is not furnished, these cases shall be transferred to central charges for further necessary action. 

• During a Search & Seizure action, information relating to some other persons may be found. Such persons are not integrally connected with the core business of the main assessee searched and do not belong to the same business group. Often, such persons are also not residing in the same city as of the main assessee. In such cases, the relevant information is generally passed on to the jurisdictional AO for assessing them u/s 148 (for searches conducted/requisition made after 01.04.2021) of the Income-tax Act, 1961. It is clarified that all such non-search cases selected  u/s 148 of the Act are not required to be transferred to the Central Charges unless covered by the  Board’s guidelines.

8. For Assessing Officers in International Taxation and Central Circle charges:

• The cases shall be selected for compulsory scrutiny by the International Taxation and Central Circle charges following the above prescribed parameters, with prior administrative approval of Pr.CIT/Pr.DIT/CIT/DIT concerned.
• Such cases shall continue to be handled by International Taxation and Central Circle charges respectively, as earlier. 
• Communication to NaFAC for access and/or further action after selection for Compulsory Scrutiny will not apply to the International taxation and Central charges. 

9. Time Limit:

• As per the proviso to section 143(2) of the Act, the time limit for service of notice u/s 143(2) of the Act for the ITRs filed in the Financial Year (FY) 2024-25, which are selected for Compulsory Scrutiny, is 06.2025.