A Step-by-step guide to Scrutiny Assessment

After the completion of a financial year, eligible individuals and entities file their income tax returns (ITR) and pay the tax based on their net taxable earning during the year. Subsequently, the income tax department assesses and verifies the submitted returns. The purpose of assessment is to determine the correctness concerning the amount of taxable income declared and tax paid. There are various types of income tax assessment. 

Income Tax Assessment

Under this process, the Income Tax department officials evaluate a taxpayer’s return of income. The assessment is comprised of regular assessment which examines the details mentioned in the taxpayer’s return of accuracy and reassessment in specific cases.

When your ITR is selected for a detailed check, the IT department will issue a Notice Under Section 143(2). Under Section 143(3), the scrutiny assessment thoroughly reviews your Income Tax Return. 

What is a Scrutiny Assessment?

Scrutiny Assessment is defined by Section 143(2) as an assessment which involves a detailed examination of the income tax return. The IT officials will thoroughly verify the authenticity and accuracy of various claims, deductions and other details mentioned in your return. 

The Scrutiny Assessment is initiated only when you file an ITR as per Section 139 or respond to a notice under Section 142. Also, if the Assessing Officer or Income Tax Authority feels the need to audit your return. 

Criteria for Selecting Cases for Scrutiny Assessment 

The Income Tax Department selects a case for scrutiny assessment if: 

• The eligible assessee does not file the tax return
• The submitted ITR lacks necessary information or contains errors

Following are the reasons for Scrutiny Assessment : 

1. Individuals with gross income above the exempted limit (e.g., Rs 2,50,000 for individuals below 60 years) are required to file an ITR
2. Filing of an ITR is mandatory even if the employer has deducted TDS
3. Discrepancies between TDS amounts reported in the ITR and those recorded on the Traces website can trigger scrutiny
4. If the taxpayer fails to declare all incomes including interest from saving account and fixed and recurring deposits 
5. When the TDS deduction is lower than the assessee’s tax slab
6. If there are errors in the ITR like omitting mandatory information or wrong ITR form was used