PROCEDURE FOR SELECTION OF CASES DURING 'SCRUTINY' FOR FINANCIAL YEAR 2006-07.

In super cession of earlier Instructions on this subject, the CBDT hereby lays down the following procedure for selection of returns/cases for Scrutiny during the current financial year i.e. 2006-07.

• All assessments pertaining to Survey, Search and Seizure cases.
• All returns where deduction claimed under Chapter VIA of the I.T. Act is Rs. 10 lakh (Rs. 5 lakhs for non corporate) or above in stations other than 60 cities on computer network.
• All returns where refund claimed is Rs. 5 lakh or above in stations other than 60 cities on computer network.
• All cases in which the CIT (Appeals) or ITAT has confirmed an addition dis allowance of Rs. 5 lakh or above in any preceding Assessment Year and identical issue is arising in the current year.
• All Banks and Public Sector Undertakings
• All NSE-500 companies & BSE-A companies listed on Bombay Stock Exchange as on 31-3-06.
• All cases of companies liable to pay tax under section 115JB with book profit exceeding Rs. 50 lakh in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 25 lakh in other places.
• All cases of deduction under sections 10A and / or 10B of the I.T. Act with export turnover exceeding Rs. 10 crore for corporates and Rs. 5 crores for non corporates.
• All Non-Banking Financial Corporations (NBFCs) / Investment Companies having paid-up capital of more than Rs. 10 crore
• All cases of stockbrokers (including sub-brokers) where brokerage received is disclosed at Rs. 1 crore (Rs. 50 lakhs for non corporate) or above and total income declared is less than 10% of such brokerage or in which bad debts of Rs. 10 lakh (Rs. 5 lakhs for non corporates) or more have been claimed.
• All cases of contractors whose gross contractual receipts exceeds Rs. 2 crore (Rs. 1 crore for non corporate) in places other than 60 cities on computer network if total income declared is less than 5% of gross contractual receipts.
• All cases of builders following Project Completion Method.
• All cases in which fresh capital introduced during the year exceeds Rs. 1 crore in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 50 lakh (Rs. 10 lakh for non corporate) in other cities.
• All cases in which new loans introduced during the year exceed Rs. 1 crore in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 50 lakh (Rs. 10 lakh for non corporate) in other cities.
• All cases in which deduction u/s 80IA(4), 80IAB, 80IC, 80JJA, 80JJAA, 80LA, 10(21), 10(22B), 10(23A) 10(23B), 10(23C), 10(23D)l, 10(23EA, 10(23FB), 10(23G), 10A, 10AA, 10B or 10BA of the I.T. Act is claimed for the first time.
• If a case has been assessed earlier u/s. 143(3) of IT Act for at least 2 assessment years and in each of the immediately preceding two years, total additions or dis allowances made or sustained in appeal are less than Rs. 10 lakh in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and less than Rs. 2 lakh in other places, then such a case should be excluded from compulsory scrutiny except in cases involving substantial question of law.
• Cases where the CCIT / DGIT (International Taxation) / DGIT (Exemptions), on a matter having been brought to his notice by an authority below, is satisfied that the case needs to be taken up for scrutiny, then the said officer,) for reasons to be recorded in writing, may approve the selection of the case for scrutiny. However, selection of cases under this provision should be made keeping in view the following :
• Total number of cases selected for scrutiny during the year does not ordinarily exceed 2% of total number of returns filed / pending during the year; and
• At least 80% of all the cases picked up for scrutiny are assessed by 28.02.2007.
• In addition to above, selection of cases out of returns processed on AST  will be made through a Computer Assisted Scrutiny System (CASS). Separate instructions in this regard will be issued by the DIT (Systems).