Intricate Areas In The Concept Of Limited Scrutiny In Income Tax Act, 1961

Nandini Ravishankar, School of Law, Dr. Vishwanath Karad MIT World Peace University, Pune

INTRODUCTION

The concept of limited scrutiny was introduced under Sec 143(2)(i) of the Income Tax Act with effect from 1st June, 2002. During this time, there was an ascertained protocol for issuing the notice if the Income Tax return filed by the assessee in the purview of the Assessing Officer has some minor discrepancies. The section specifically says ‘where the Assessing Officer has a reason to believe that any claim of loss, exemption, deduction, allowance or relief, require him on the date to be specified therein to produce, cause to be produced, any evidence or particulars specified on which the assessee may rely in support of such a claim’.1 It is important to note that this concept was done away with in the year 200. When the case is selected for scrutiny, it is generally through Computer Aided Scrutiny Assessment (hereinafter, CASS). Instances involving survey, reopening of assessment, or search and seizure come under the scope of complete scrutiny. It is a general trend in incumbent days to manually handpick the cases if the Assessing Officer feels that the fact attributable to the disclosure of income has been concealed under the circumstances of which selection of cases is possible. The criteria under which selection happen are spelt out each year. The instructions issued by the Central Board of Direct Taxes (hereinafter, CBDT) in the form of directives are seen as a step to catch hold of the harassment meted out due to widest possible verification and elaborate enquiry conducted by the tax authorities while assuming unfettered powers not conferred on them. Prior to issuance of guidelines, the exhaustive procedure included a lengthy questionnaire issued to the assessee apropos which the case was picked for limited scrutiny assessment. Since mentioning the valid reasons for the same has been enumerated as a mandate to be followed by the Assessing Officer, the instructions largely alleviate the difficulties faced by the assessee during the assessment proceedings.2