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Incometax Scrutiny Procedure and Criteria for Computerised (CASS) or Manual Selections

08-10-2013 | CA Ashutosh Lohani |

By enhancing and improving its selection process for scrutiny assessments, the focus of Income Tax Department (ITD) is to attend to the risk of non-compliance.

The shape of the world is fast changing from “O” to “e” and so do the Income Tax Department. Technology is no more an alien phrase in Income Tax Department which is rapidly moving to IT enabled regime. Recently, CBDT has released Digital Evidence Investigation Manual 2014 for Proper gathering, handling, utilization of digital data in Income Tax Survey, Search and Seizures. Click Here to Read More >> Information Technology has played a major role helping ITD develop a 360 degree profiling of persons and devising an effective and meaningful selection process for scrutiny.

Developing 360 degree profiling using ITDMS
ITD is assisted by an Integrated Tax Payer Data Management System (ITDMS) in generating a 360 degree profile of a person. It compiles data and information from all available data sources like, PAN, e-TDS, OLTAS, AIR, CIB etc. These information are then linked and extensively mined to generate a complete profile of the person concerned. In case of an individual, the family tree can be created with links to all related entities.
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Broad Criteria for Selection of Cases for Scrutiny
Basically scrutiny is based on risk-analysis conducted through computer- assisted programme and also manually with reference to broad parameters decided every year for the entire tax-payer population, inter-alia, considering factors like gross income, deductions and exemptions claimed, legal issues involved inlitigation, quantum and nature of specific transactions, status of assessees,etc.

Type of Selection for Scrutiny
There are two types of selections:
- Computer Assisted Selection of cases for Scrutiny (CASS) 
- Manual Selection of cases for Scrutiny

Compulsory Computer Assisted Selection of cases for Scrutiny (CASS)
CASS based on risk based intelligent criteria was first introduced and first cycle was run in November 2004 in 60 cities.(Source: AST Instruction No. 35)
Presently selection of casesunder CASS are generally made under two categories:
(a) Compulsory, and
(b) Score based selection

CASS-The CompulsorySelection 
Under the compulsory selection,cases fulfilling certain pre-defined criteria are selected. These predefined criteria are generally derived from Central Action Plan of Income Tax Department for the year concerned. The CASS system focuses on quality selection of cases with revenue potential rather than selecting large quantity of cases,

CASS-Score based selection
Under the score based selection the inherent risk potential of a case is assessed on the basis of certain pre-defined parameters and cases with highest risk potential get selected. 
These pre-defined parameters are fed into the system by the CASS Administrator.The system then automatically assigns a score to every return entered in the system that fulfil the parameter.  Based on the number of cases to be selected in a particular scope i.e. selection basket, the system will generatea list of cases with the computed score arranged in a descending order. Thus,cases with the higher score (representing higher risk) will get selected for scrutiny. total number of cases selected through CASS in each selection basket are number of cases per Assessing Officer and this number can be more or less for Metros and Non-metro cities.

A few illustrative sample parameters that can be used for scoring are as under: 
Total Income/Loss
Short Term Capital Gains
Deductions claimed under Chapter VIA
Amount of income claimed exempt
Advance Tax paid and TDS
Refund claimed issued

Manual Selection of cases for Scrutiny
Similar to computerised selection, manual scrutiny is also done on two basis:
- Compulsory selection 
- Other than compulsoryselection

Cases for scrutiny are selected manually based on directions/parameters finalised by CBDT every year.

Apart from compulsory manualselection of cases for scrutiny as above, Assessing officer may select any case after recording reasons and obtaining approval of the CCIT/DGIT. Cases under this categories are selected if there are compelling reasons and case is not selected under CASS. Such cases are watched by CCIT/DGIT in respect of the quality of the assessment.

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