Could your income tax return face complete scrutiny under CBDT's new rules?

The CBDT has identified six categories of taxpayers for mandatory complete scrutiny in FY27. Understanding the triggers can help taxpayers stay prepared

The Central Board of Direct Taxes (CBDT) has issued guidelines for the compulsory selection of income tax returns (ITRs) for complete scrutiny during financial year (FY) 2026–27, covering returns filed in FY 2025–26. The instructions identify six categories of taxpayers whose returns must undergo detailed examination by the Income Tax Department. The department must issue scrutiny notices in such cases by June 30, 2026.

 

Unlike risk-based scrutiny cases selected through data analytics, compulsory scrutiny applies to specific high-risk situations identified by the CBDT, including certain search, survey, reassessment and recurring-addition cases. The revised framework seeks to focus enforcement efforts on cases with higher tax-risk indicators while reducing scrutiny for routinely compliant taxpayers.

 

What complete scrutiny means?

 

Scrutiny assessments are broadly classified into two categories: complete scrutiny and limited scrutiny.

 

For instance, if the department detects a mismatch in a deduction claim under Section 80G, it may select the case for limited scrutiny only to verify that claim. It usually does not examine other aspects of the return. “In a complete scrutiny, however, the assessing officer (AO) may review all components of the return, including income, deductions, exemptions, capital gains, foreign assets, business transactions and other financial disclosures,” says Neeraj Agarwala, senior partner, Nangia & Co.

 

As a result, taxpayers undergoing complete scrutiny may need to submit a wider range of supporting documents, such as bank statements, books of account, investment proofs, invoices and transaction-related explanations.

 

What a survey case means?

 

A survey is a tax proceeding under Section 133A of the Income-tax Act, 1961, or Section 253 of the Income-tax Act, 2025, in which tax authorities may visit business premises to inspect books of account, verify cash and stock, and gather information relevant to tax compliance. Unlike a search operation, a survey generally does not involve the seizure of assets.

 

“Under CBDT guidelines, a return will be compulsorily selected for complete scrutiny if a survey under Section 133A, other than a TDS-related survey under Section 133A(2A), has been conducted on or after April 1, 2024, and the information gathered warrants further examination through a detailed assessment,” says Agarwala.

 

Search vs survey: Understand the difference?

 

A search under Section 132 is a powerful investigation tool used in cases involving suspected tax evasion, undisclosed income or unaccounted assets. During a search, authorised tax officers can enter and search premises, inspect electronic records, and seize books, documents, cash, jewellery and other valuables. A requisition under Section 132A allows the Income Tax Department to obtain assets or documents already seized by another government agency.

 

“Unlike a survey, which is limited to verifying business records and generally does not permit the seizure of assets, a search involves far wider powers. Under CBDT guidelines, cases where a search under Section 132 or a requisition under Section 132A has been initiated on or after April 1, 2024, may be selected for compulsory complete scrutiny, subject to administrative approval, as such actions often uncover information requiring detailed examination,” says Agarwala.

 

What a Section 148 notice means?

 

A notice under Section 148 is issued when the tax department believes income may have escaped assessment and seeks to reopen a completed assessment. Such cases may arise from information obtained through search and seizure operations, surveys, financial intelligence inputs, data analytics, foreign information exchange, or other government agencies.

 

“Under CBDT guidelines, certain Section 148 cases are compulsorily selected for scrutiny, including those linked to search actions initiated between April 1, 2021, and September 1, 2024, survey actions conducted on or after April 1, 2021, and other reassessment cases where proceedings are required to be completed by March 31, 2027,” says Agarwala.

 

When recurring additions can trigger scrutiny?

 

The CBDT's focus is on cases where the same tax dispute recurs across assessment years. “Recurring additions” refer to situations where the tax department made an addition to a taxpayer's income in an earlier year, but the taxpayer continues to adopt the same tax position in subsequent years.

 

However, not all such cases will be selected for complete scrutiny. The addition made in the earlier assessment year must exceed ₹50 lakh in specified metro charges: Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune. The limit is ₹20 lakh in non-metro charges. “In addition, the issue must have attained finality in favour of the tax department. This would include cases where the taxpayer did not contest the addition in appeal, or where appellate authorities upheld the department's view and no further appeal was filed,” says Vinay Deshmane, partner-corporate tax, tax & regulatory advisory, BDO India.

 

The objective is to identify taxpayers who continue to claim deductions, exemptions or other tax benefits on issues that have already been conclusively decided against them in earlier years.

 

Tax evasion information can trigger scrutiny?

 

The Income Tax Department receives information from its own investigation wing and agencies such as Customs, goods and services tax (GST) authorities, the Enforcement Directorate, Sebi and foreign tax authorities under information-sharing arrangements.

 

“If this information suggests possible tax evasion or undisclosed income, the return may be picked for compulsory scrutiny. Examples include unreported foreign assets, unexplained cash transactions, bogus purchases or mismatches between third-party data and the income tax return,” says Deshmane.

 

The department increasingly focuses on targeted scrutiny based on credible information rather than broad-based selection.

 

Who faces scrutiny risk and who does not?

 

Taxpayers who have faced search or survey actions, reassessment proceedings, significant unresolved issues from earlier years, or specific information with the department that indicates possible tax evasion are more likely to face compulsory scrutiny. “In contrast, compliant taxpayers who file accurate returns and do not fall into these risk categories are less likely to face compulsory scrutiny. Routine mismatches in the annual information statement (AIS), statement of financial transactions (SFT), or TDS data alone would generally not trigger such scrutiny,” says Deshmane.

 

The revised framework seeks to reduce scrutiny for compliant taxpayers while focusing departmental resources on high-risk and possible tax-evasion cases.

 

Key steps for taxpayers

 

The CBDT's FY 2026–27 scrutiny guidelines primarily target high-risk cases, including taxpayers covered by search, survey or reassessment proceedings, and those with significant additions in earlier assessments. As the ITR filing season approaches, taxpayers should ensure that their returns are accurate and consistent with AIS, Form 26AS and other records. They should properly disclose all income and assets, including foreign assets where applicable.

 

“It is also important to retain documents supporting income and deductions claimed under Chapter VI-A of the Income-tax Act, as the burden of proof lies with the taxpayer during scrutiny. Any notice from the Income Tax Department should be reviewed and responded to within the prescribed timeline,” says Rupali Singhania, founder, Areete Consultants.

 

How to respond to a scrutiny notice?

 

A taxpayer must respond to a scrutiny notice online through the Income Tax Department's e-filing portal. Taxpayers should carefully review the notice, understand the information sought, and submit a complete and accurate response with supporting documents within the prescribed deadline.

 

“Failure to respond on time may result in an ex parte assessment based solely on the information available with the department. Since scrutiny proceedings are conducted under the faceless assessment regime, all communications and document submissions must be made electronically through the portal,” says Singhania.

 

Taxpayers should, therefore, regularly monitor the portal and maintain proper records.

 

 Tax scrutiny triggers to watch

 

• Taxpayers who faced survey action by the Income Tax Department on or after April 1, 2024

 

• Taxpayers who faced search action by the department on or after April 1, 2024

 

• Cases where information about possible undisclosed income was requisitioned from any authority on or after April 1, 2024

 

• Reassessment cases linked to search, seizure or survey action initiated during the specified periods

 

• Other reassessment cases that are due for completion on or before March 31, 2027

 

• Cases involving recurring issues where earlier additions have become final or have been decided in favour of the tax department

 

• Current-year recurring-issue cases will be selected only if the tax effect exceeds ₹50 lakh in specified metro charges or ₹20 lakh in other charges

 

• Cases where a law-enforcement agency provides specific information on tax evasion and the taxpayer has filed the relevant return

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The writer is a Delhi-based independent journalist.