Compulsory Income Tax Scrutiny Selection for FY 2026-27
CBDT Releases Guidelines for Compulsory Income Tax Scrutiny Selection for FY 2026-27
The Central Board of Direct Taxes (CBDT) has issued fresh guidelines identifying the categories of income tax returns that will be mandatorily selected for Complete Scrutiny during Financial Year (FY) 2026-27.
These guidelines are applicable to returns filed during FY 2025-26 and aim to ensure detailed examination of cases involving higher tax risks, search and survey actions, reassessment proceedings, recurring disputes, and specific tax-evasion information.
What is Complete Scrutiny?
Under complete scrutiny, the Income Tax Department conducts a detailed examination of a taxpayer’s return, supporting documents, financial transactions, and tax claims. Unlike limited scrutiny, the department can examine all relevant issues affecting the assessment.
Categories of Returns Selected for Compulsory Scrutiny
1. Cases Covered by Tax Surveys
A return will be selected for compulsory scrutiny where a survey action was conducted under the Income Tax Act on or after 1 April 2024.
This category excludes certain administrative surveys carried out under specific provisions that are not intended for detailed tax verification.
2. Search and Seizure Cases
Returns will be compulsorily scrutinized where:
- A search operation was initiated on or after 1 April 2024; or
- Assets, books of account, or documents were requisitioned by the Income Tax Department on or after the same date.
For searches initiated from 1 September 2024 onwards, scrutiny will generally cover the assessment year falling under the special block assessment framework.
3. Reassessment Cases
Returns connected with reassessment proceedings may also be selected for complete scrutiny.
This includes cases where the department has issued a notice for reopening an assessment and the taxpayer has filed a return in response.
Certain search-related and survey-related reassessment cases, as well as other reassessment proceedings scheduled for completion by 31 March 2027, are covered under this category.
4. Trusts and Institutions Claiming Exemptions After Cancellation of Registration
Compulsory scrutiny may apply where:
- Registration, approval, or exemption granted to a trust, educational institution, research organization, or charitable entity was cancelled, withdrawn, or denied on or before 31 March 2025; and
- The entity continues to claim tax exemption or deduction benefits in its return.
However, if the cancellation or withdrawal order has subsequently been reversed by an appellate authority, the case will generally not be selected under this parameter.
5. Recurring Issues Already Decided Against the Taxpayer
Returns may be selected where a significant addition was made in an earlier assessment year on a recurring issue of law or fact and:
- The taxpayer has accepted the addition and no further appeal has been filed; or
- Appellate authorities have upheld the addition in favour of the Income Tax Department.
This category also covers recurring transfer pricing disputes.
The monetary thresholds are:
| Jurisdiction | Threshold |
|---|---|
| Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune | More than ₹50 lakh |
| Other jurisdictions | More than ₹20 lakh |
6. Cases Based on Specific Tax-Evasion Information
Returns may be selected where credible information suggesting possible tax evasion has been received from:
- Investigation agencies,
- Intelligence agencies,
- Regulatory authorities, or
- Other law-enforcement organizations.
The information must specifically relate to the relevant assessment year and the taxpayer must have filed a return for that year.
CBDT has clarified that returns filed in response to notices based solely on data from systems such as AIS, SFT, TDS information, or other automated data-matching exercises will not automatically fall under compulsory scrutiny unless supported by specific tax-evasion information.
Summary of Compulsory Scrutiny Parameters
| Code | Category | Key Trigger |
|---|---|---|
| CS-01 | Survey Cases | Survey conducted on or after 1 April 2024 |
| CS-02 | Search & Requisition Cases | Search or requisition initiated on or after 1 April 2024 |
| CS-03 | Reassessment Cases | Return filed in response to reassessment proceedings |
| CS-04 | Cancelled Registration Cases | Exemption claimed despite cancellation or denial of registration/approval |
| CS-05 | Recurring Addition Cases | High-value recurring issues already decided against taxpayer |
| CS-06 | Tax-Evasion Information Cases | Specific information indicating possible tax evasion |
Important Deadline
For returns filed during FY 2025-26, the Income Tax Department must serve a scrutiny notice under Section 143(2) on or before 30 June 2026.
Failure to issue the notice within the prescribed period generally prevents the department from initiating regular scrutiny proceedings for that return.
Key Takeaway
The compulsory scrutiny framework for FY 2026-27 is focused primarily on higher-risk cases rather than routine taxpayers. Search and survey actions, reassessment proceedings, cancelled exemption registrations, recurring high-value disputes, and credible tax-evasion intelligence remain the major triggers for mandatory scrutiny.
Taxpayers falling within these categories should ensure that their books of account, supporting documents, tax positions, and compliance records are properly maintained and readily available for verification by the Income Tax Department.
Also Read: “CBDT Notifies New Forms PAN CR-01 & PAN CR-02 for PAN Correction from 1 April 2026”
Also Read: FAQs and Guidance notes on Forms under Income-tax Rules, 2026
Read More: Union Budget 2026 – CA Cult
