CBDT Issues Complete Scrutiny Selection Guidelines for FY 2026-27

The Central Board of Direct Taxes (CBDT) has issued fresh guidelines for the compulsory selection of Income Tax Returns (ITRs) for Complete Scrutiny during Financial Year (FY) 2026-27. The guidelines apply to returns filed during FY 2025-26 and outline the categories of cases that will be mandatorily examined by the Income Tax Department.

The objective is to identify cases with a higher risk of tax non-compliance and ensure proper verification of income, deductions, exemptions, and transactions.

Key Highlights of the CBDT Guidelines

CBDT has issued these guidelines vide F. No. 225/56/2026/ITA-II dated 04 June 2026 under Section 536(2)(c) of the Income-tax Act, 2025. The guidelines prescribe specific parameters for compulsory selection of returns for Complete Scrutiny during FY 2026-27.

Cases Liable for Compulsory Complete Scrutiny

The following categories of taxpayers may be selected for mandatory scrutiny:

1. Search and Seizure Cases

Returns of taxpayers where a search under Section 132 or requisition under Section 132A of the Income-tax Act, 1961 has been initiated on or after 1 April 2024 are liable for compulsory scrutiny.

1. Survey Cases

Cases where a survey under Section 133A (other than Section 133A(2A)) has been conducted on or after 1 April 2024 will be compulsorily selected for scrutiny.

1. Reassessment-Related Cases

Returns involving reassessment proceedings, including cases where notices have been issued under the reassessment provisions, may fall within the compulsory scrutiny framework as specified by CBDT.

1. Exemption and Registration-Related Cases

Entities claiming exemption, deduction, or tax benefits despite cancellation, withdrawal, or non-grant of registration/approval under specified provisions may be selected for detailed examination.

1. Recurring Additions in Earlier Years

Cases involving recurring issues where significant additions were made in earlier assessments may be picked up for scrutiny to verify continued compliance.

1. Specific Information Indicating Possible Tax Evasion

One of the most important categories covers cases where the Income Tax Department receives specific and credible information suggesting possible income escapement or tax evasion. Such information may originate from:

• Law enforcement agencies
• Intelligence or investigation wings
• Regulatory authorities
• Government departments
• Tax evasion petitions or other credible sources

Returns linked to such information may be compulsorily selected for Complete Scrutiny.

Time Limit for Issuing Scrutiny Notices

As per the CBDT guidelines, the time limit for service of notice under Section 143(2) of the Income-tax Act, 1961 for returns filed during FY 2025-26 is 30 June 2026.

What Taxpayers Should Do

To effectively handle scrutiny proceedings and reduce compliance risks, taxpayers should:

• Maintain proper books of account and supporting documents.
• Preserve records of major transactions, investments, and expenses.
• Ensure accurate reporting of income from all sources.
• Reconcile information reported in AIS, TIS, Form 26AS, and financial statements.
• Verify deductions, exemptions, and tax credits before filing returns.
• Respond promptly to any notices received from the Income Tax Department.

Conclusion

The CBDT's scrutiny selection guidelines for FY 2026-27 reinforce the government's focus on data-driven tax administration and targeted enforcement. Taxpayers whose cases involve search, survey, reassessment, exemption-related issues, recurring additions, or credible tax evasion information should be prepared for closer examination by the department.

Maintaining proper documentation and ensuring accurate tax reporting remain the best safeguards against prolonged scrutiny proceedings and unnecessary disputes.

For expert guidance on this topic, contact your tax professional today.