CBDT warns taxman against roving, fishing scrutiny inquiries

The Central Board of Direct Taxes (CBDT) has warned the taxman against undertaking “roving or fishing” inquiries in the name of scrutiny assessments and asked them to scrupulously adhere to its guidelines.

The policy-making body of the department, in a stern two-page communication to the taxman, has asked assessing officers to not “travel beyond the issue” and not to randomly or unauthorisedly expand the scope of a limited scrutiny procedure.

The I-T department, in cases of suspicion of tax evasion and under-reporting of income, is empowered to open a scrutiny assessment of the assessee under the law and the procedure entails submission of a number of documents and hearing between the two sides.

Taxpayers have complained about this action in the past, saying complying with this procedure has been very cumbersome and harassing for them at times.

The CBDT has maintained that it only brings less than one per cent of Income Tax Returns (ITRs) or cases under the rigorous scrutiny procedure in a given assessment year, either full or limited.

The letter, issued to all the I-T ranges in the country, has said that such acts give a bad name to the tax department and complaints in this regard are being viewed “very seriously” by the CBDT.

“Instances have come to notice of the CBDT where some assessing officers (AOs) are travelling beyond their jurisdiction while making assessments in limited scrutiny cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT instructions.

“These instances have been viewed very seriously by the CBDT...,” the letter, accessed by PTI, said.

In view of this, it said, it is “once again reiterated that the AO should abide by the instructions of the CBDT while completing scrutiny assessments and should be scrupulous about maintenance of note sheets in assessment folders”.

The letter states that recently a team of CBDT inspectors, on receipt of a complaint, found that in one such case there were glaring irregularities on the part of the AO as he had not record the reasons to expand the scope of the scrutiny against the taxpayer and no approval was taken from the supervisory officer for doing so.

“..      .the order sheet was maintained very perfunctorily.  This gave rise to a very strong suspicion of mala fide intentions,” the letter said adding the CBDT has placed the officer concerned under suspension.

The CBDT said the guidelines are framed by it so that the AO “cannot travel beyond” the issues for which the case was selected.

“The idea behind such stipulations was to enforce checks and balances upon the powers of an AO to do fishing and roving inquiries in cases selected for limited scrutiny,” the CBDT said.

The CBDT guidelines vis-a-vis conduct of limited scrutiny procedure clearly states that the minutes of the hearing must be entered with date in the order sheet; proper entries should be made for each posting, hearing, seeking and granting of adjournments; and if nobody attends a hearing or the request for adjournment comes after the hearing date, the AO should enter the facts in the order sheet.

“Maintenance of a cursory and cryptic order sheet shows irresponsible, ad hoc and undisciplined working of any officer,” it said.