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Cases for tax scrutiny will be selected by machines
November, 30th 2016

The public need not worry about harassment from Income Tax officials as their discretionary powers in the scrutiny of cases are limited, according to a senior finance ministry official.

“The cases for scrutiny will be chosen by machines and all the procedures surrounding the income xax notices will be done through machines,” a senior Revenue Department official told The Hindu. “There will be no scope for individual discretion of the income tax officers. People need not worry about harassment from the officers.”

However, this does not take into account the procedures that must be followed after a case comes up for scrutiny.

At the moment, cases are selected for scrutiny based on two methods: computer selection and manual selection. The majority of cases are chosen by the computer, according to experts, with only a few being chosen manually, based on certain parameters.

“Only 2-3 per cent of all cases are picked up for scrutiny,” Surendra Prakash Singh, Senior Director at Deloitte India said. “The bulk of this, about 70 per cent, is computer selection. If search or survey has been conducted, or if red flags have been raised in the past or if transfer pricing adjustments have been made above the permissible limit, then that will attract manual scrutiny.”

The government is working towards tightening the parameters under which manual scrutiny is allowed, thereby reducing the discretion of the assessing officer, Mr. Singh added.

However, according to experts, the discretionary powers of the income tax officials remain the same as before.

“After the scrutiny case comes up, the next step is for the assessee to send the evidence to prove that the cash deposited is a reasonable amount in keeping with the declared income information, and deciding that is down to an individual officer,” Kuldip Kumar, Partner & Leader, Personal Tax, at PwC India said.

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