What You Need to Know About CBDT’s 2025 ITR Scrutiny Norms? Udaipur CA explains

Udaipur CA explains CBDT Instruction No. 02/2025 detailing mandatory ITR scrutiny criteria for FY 2025-26 (AY 2026-27), aimed at boosting tax compliance and transparency under the Income Tax Act, 1961.

In a significant step toward enhancing transparency and ensuring tax compliance, the Central Board of Direct Taxes (CBDT) has released new guidelines for the Financial Year (FY) 2025-26 (Assessment Year 2026-27) through CBDT Instruction No. 02/2025, issued under F.No. 225/75/2023/ITA-II dated 14.06.2025. These guidelines outline specific scenarios under which Income Tax Returns (ITRs) will be subject to mandatory scrutiny.

The objective is to ensure strict adherence to the provisions of the Income Tax Act, 1961, and to proactively address any discrepancies or indications of tax evasion. Taxpayers are advised to consult a qualified Udaipur CA to understand the implications of these new guidelines and to ensure full compliance with regulatory requirements. Scenarios Leading to Mandatory Scrutiny

The CBDT has specified the following cases where ITRs will be mandatorily selected for complete scrutiny:

1. Survey Cases (Section 133A)

If a survey has been conducted under Section 133A (excluding Section 133A(2A)) at a taxpayer’s premises after April 1, 2023, and specific information or material indicating tax evasion is detected, the case will be selected for scrutiny. The selection requires prior administrative approval from the Principal Commissioner of Income Tax (Pr. CIT) or the concerned authority.

2. Search and Seizure Cases (Sections 132 and 132A)

Cases where a search or seizure has been conducted under Sections 132 or 132A between April 1, 2023, and March 31, 2025, will be subject to mandatory scrutiny. The assessment in such cases will be made under Section 153C, read with Section 143(3).

3. Claim of Exemption Despite Cancellation of Registration (Sections 12A, 12AB, 10(23C), 35)

If a trust or institution whose registration under Sections 12A, 12AB, 10(23C), or 35(1)(ii)/(iii) has been cancelled up to March 31, 2024, continues to claim exemptions, such cases will be selected for scrutiny. However, if the order of cancellation has been reversed or set aside in appellate proceedings, these cases will not be selected.

4. Recurring Additions in Previous Assessments

If additions exceeding ₹50 lakh (in metro cities) or ₹20 lakh (in other areas) have been made in the first assessment and have either not been appealed or have been upheld in appeal, such cases will be subject to mandatory scrutiny.

5. Information from Law Enforcement Agencies

If concrete information regarding tax evasion is received from agencies like the Central Bureau of Investigation (CBI), Enforcement Directorate (ED), or other law enforcement agencies, and the taxpayer has filed an ITR, the case will be selected for scrutiny.

Exemptions from Mandatory Scrutiny

Certain cases are exempt from mandatory scrutiny:

• ITR Filed in Response to Section 142(1) Notice: If an ITR is filed in response to a notice under Section 142(1) and the information has been sourced from the Annual Information Statement (AIS), Statement of Financial Transactions (SFT), or Tax Deducted at Source (TDS) Centralized Processing Centre (CPC), such cases will not be subject to mandatory scrutiny.
• Limited Third-Party Information: If limited third-party information is found during a search, it will not be mandatory to send it to the central circle unless directed by a senior officer of the department.

Expert Recommendations

Taxpayers falling under any of the specified categories should:

• Maintain Comprehensive Records: Keep all financial documents—such as income statements, deduction proofs, and investment details—accurate and well-organized. A qualified Udaipur CA can assist in maintaining these records to ensure they meet regulatory standards.
• Respond Promptly to Notices: In the event of receiving a scrutiny notice, respond within the stipulated time frame along with all necessary information. Timely consultation with an experienced Udaipur CA can help avoid penalties or unnecessary complications.
• Seek Professional Assistance: Engage a trusted Udaipur CA to guide you through the scrutiny process, ensure legal compliance, and handle communications with the tax department efficiently.

By following these recommendations as stated by Udaipur CA and maintaining full transparency in financial matters, taxpayers can reduce the risk of mandatory scrutiny and facilitate the smooth processing of their Income Tax Returns (ITRs). For tailored advice, taxpayers are strongly advised to consult a qualified Chartered Accountant in Udaipur or their respective location to avoid penalties and ensure full compliance.