The Central Board of Direct Taxes (CBDT) has issued comprehensive guidelines outlining the parameters and procedures for the compulsory selection of income tax returns for complete scrutiny during the Financial Year 2026-27. These guidelines, issued under the Income-tax Act, 2025, standardize the tax department’s selection process, focusing on specific high-risk scenarios.
Here is a breakdown of the six key parameters under which a taxpayer’s return will be compulsorily selected for complete scrutiny this financial year:
1. Survey Cases (CS 01)
Returns will be selected for compulsory scrutiny if a survey under Section 133A of the Income-tax Act, 1961 (excluding Section 133A(2A)) was conducted in the assessee’s case on or after April 1, 2024. These cases will be selected by the Directorate of Income-tax (Systems) based on information provided by the Commissioner (OSD)(Investigation), CBDT.
2. Search and Seizure Cases (CS 02)
Cases where a search or requisition was initiated under Section 132 or 132A of the Act on or after April 1, 2024, will face compulsory scrutiny. For searches or requisitions initiated on or after September 1, 2024, the return selected will be specifically for the assessment year covered by the provisions of section 158BA(6). Assessing Officers will select these cases with prior administrative approval.
3. Issuance of Notice u/s 148 (CS 03)
This parameter targets cases where a reassessment notice under Section 148 has been issued, divided into two categories:
- Search/Survey related: Cases where search and seizure action was initiated on or after April 1, 2021, but before September 1, 2024, or where a survey action was conducted on or after April 1, 2021.
- Other cases: Cases unrelated to search or survey where a notice under Section 148 has been issued and the assessment is to be completed on or before March 31, 2027. These cases will be forwarded to the National Faceless Assessment Centre (NaFAC) for further action.
4. Cancelled or Denied Registrations (CS 04)
Entities claiming tax exemptions or deductions in ITR-7 despite having their registration or approval (under sections such as 12A, 12AB, 35(1), and 10(23C)) cancelled, withdrawn, or denied by the Competent Authority on or before March 31, 2025, will be scrutinized. However, if an appellate authority has reversed or set aside the cancellation/withdrawal orders, the case will not be selected under this parameter.
5. Recurring Additions in Earlier Years (CS 05)
Taxpayers who have faced additions in an earlier assessment year based on a recurring issue of law or fact (including transfer pricing issues) are liable for scrutiny if the additions cross specific monetary thresholds:
- The addition must exceed Rs. 50 Lakh in eight specific metro charges: Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune.
- For all other charges, the addition must exceed Rs. 20 Lakh.
For this parameter to apply, the previous addition must have either become final (with no further appeal filed) or been upheld by Appellate Authorities in favor of the Revenue.
6. Specific Information Regarding Tax Evasion (CS 06)
Returns will be scrutinized if law-enforcement agencies, intelligence wings, or regulatory authorities provide specific information pointing to tax evasion for the relevant assessment year, provided the assessee has actually furnished a return. Notably, returns furnished solely in response to a notice under Section 142(1) linked to Non-Filers Monitoring System (NMS), Annual Information Statement (AIS), or Statement of Financial Transactions (SFT) information will not be taken up for compulsory scrutiny unless they also specifically fall under this tax evasion parameter.
Important Deadlines and Jurisdictional Exceptions
The CBDT has set strict timelines for tax officers handling these parameters. Jurisdictional Assessing Officers must prepare and submit consolidated lists of cases falling under parameters CS 05 and CS 06 to the Pr. CCIT concerned, who will then forward them to the Directorate of Income-tax (Systems) latest by June 15, 2026. The ultimate time limit for serving the notice for complete scrutiny under Section 143(2) for ITRs filed in FY 2025-26 is June 30, 2026.
Furthermore, the guidelines clarify that cases belonging to International Taxation and Central charges will be processed by their respective officers rather than being transferred to NaFAC for access or further action.