Avoiding queries from the Income Tax Department will attract full scrutiny of the income tax return (ITRs) filed, the Central Board of Direct Taxes (CBDT) has said in new guidelines for the financial year 2023-24.
The income tax department will examine tax returns based on where the survey was undertaken or where the income tax notices were served under sections 142 (1) and 148 in cases of tax evasion, search and seizure. The guidelines also stipulate the procedures to be followed by the tax department for scrutiny.
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Pankaj Bagri, partner at Deloitte India, says, “Over past few years, there have been developments in tax and other regulations concerning charitable organisations. With an intention of digitisation and periodic evaluation of the activities, the provisional /regular registrations were introduced by the government, and the timeline for complying with the same is again extended till September 30, 2023, considering the difficulties faced by organisations in filing the application.”
Likewise, he says, the “clarifications on non-applicability of exit tax in genuine cases as well as extension of various compliances timeline, such as, providing donation certificate, statement of accumulation of income, etc., have been provided by the CBDT. These relaxations will provide much-needed relief to this sector.”
Here is how the income tax department will look at the parameters as per the Central Board of Direct Taxes’ (CBDT) guidelines in the scrutiny cases.
In tax evasion cases, the income tax department will take up cases based on the specific information provided by a law agency for a relevant assessment year. Hence, the taxpayer must file the tax returns for the relevant assessment year. It will also pick up cases if a notice has been served under section 148, irrespective of whether the tax return has been filed in response to the notice.
If the taxpayer doesn’t file tax return in response to the notice under section 142 (1), such cases will come under its scrutiny. The section 142(1) notice is issued by the department for more clarification regarding the return filed.
In addition, it will warrant a scrutiny if the income tax authorities have conducted a search & seizure prior to April 1, 2021, or after that. It will also invite ITR scrutiny if the department has not granted or cancelled registration under section 12A, 12AB, 35(1)(ii)/(iia)/(iii), 1023(C), etc., but the taxpayer is found to be claiming tax exemption/deduction. But cases where the order of withdrawal/approval has been reversed or set aside in appellate proceedings would be excluded.
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