Income Tax Scrutiny

Received mail from the Income tax office? The sure thing which nobody likes to receive.

This article is all about the reasons or cases in which the income tax department may issue scrutiny notices to the assessee but before proceeding with the reasons of it let’s understand what scrutiny assessment means.

Scrutiny Assessment is a detailed assessment of the filed Income tax return in which a proper officer would confirm the correctness of various claims, deductions, losses, etc made by the taxpayer. This is done to ensure that the taxpayer has not understated the income or has not underpaid the taxes.

Now let’s understand the reasons for Income tax scrutiny:

  1. Income tax return not filed:

Every individual is required to file an income tax return if their income exceeds the basic exemption limit (Rs. 2,50,000 in case of individuals below the age of 60 years). This is the major reason for the notice issued by the income tax department so if you have not filed your income tax return due to laziness, health reasons, being out of the station, ignorance of the law, etc. then you are likely to get a notice from the Income tax department.

  1. Decrease in Income or Increase in losses:

There are instances where there is a sudden decrease in Income or increase in losses as compared to last year which causes suspicion and chances of Income tax scrutiny increase. This happens mostly in the case of an assessee running a business and the department may demand documentary evidence, books of accounts, and other relevant financial details to examine it.

  1. High-Value Transactions:

Scrutiny notice may be received in case of High-value transactions done by an individual in a financial year. For eg. Your income is Rs. 5,00,000 but if you have credit card expenses of Rs. 10 lacs or above then it may raise an alarm in the minds of IT Officers who may then issue a notice of scrutiny.

  1. Mismatch in TDS credit and Form 26AS:

In case there is a mismatch between the TDS credit claimed in the filed return and what is actually shown in Traces, there are high chances of getting noticed. Taxpayers should ensure whether the employer/ /deductor has paid TDS to the government account and should check with banks whether they have paid TDS on the interest and then only claim the TDS amount if everything is fine.

  1. Non-disclosure of Other income:

Every taxpayer needs to disclose every income earned during the financial year but some people by mistakenly or intentionally do not disclose every income like Income from interest, Capital gain/loss, or any gifts received. In such cases also, the department may issue notice for non-disclosure of complete information or an attempt at tax evasion.

  1. Defective Income tax return:

Sometimes, due to a lack of knowledge or ignorance, people file the wrong ITR Form, file ITR with an error, file without paying the taxes, or skip some important and mandatory information. The department may issue a notice in case the return is not filed accurately or direct to file a revised return after correcting the error mentioned by the department.

Therefore, it is always advisable for taxpayers to not panic in case they receive a notice from the department. Now, everything has become online and the department has introduced a new e-proceeding facility to submit the response. Make sure to take experts’ advice in case you are not able to understand it before submitting the response.


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