Saturday, 6 September 2014

CBDT rationalises norms of scrutiny of tax returns

The Income Tax Department has rationalised the norms for manual selection for scrutiny of tax returns to bring it in line with global best practices. 

As per the norms released by the Central Board of Direct Taxes (CBDT), all cases where income exceeds Rs 10 lakh over the previous year will continue to be selected, as well as cases relating to survey, search and seizure and reassessment. 

However, the previous requirement of selection of all cases where value of international transactions exceeds Rs 15 crore has been dropped. 

"This should reduce compliance requirements," said Sunil Shah, Partner, Deloitte Haskins & Sells LLP. 

Amit Maheshwari, Partner, Ashok Maheshwary & Associates said omission of a threshold for scrutinising transfer pricing assessments "may indicate a move towards risk based selection of cases for compulsory scrutiny". 

Risk based assessment approach is considered a international best practice, he added. 

Shah further said the guidelines for 2014-15 fiscal "are broadly in line with the earlier year, but have been rationalised with some additions and deletions". 

Charitable trusts which have lost approval will be selected if they have still claimed exemption for their income, the guidelines said. 

Also, the provision for selection of cases where information of tax evasion has been given by government authorities has now been tightened up and will cover only cases where such information of tax evasion is specific and verifiable, Shah added. 

"Mere suspicion will not trigger scrutiny assessment," he said. 

The CBDT norms said cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs 10 crore "on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before an appellate authority" will be selected for scrutiny. 

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