CBDT Guidelines for Compulsory Scrutiny of ITRs – FY 2025-26   

The Central Board of Direct Taxes (CBDT) has released guidelines for compulsory selection of income-tax returns (ITRs) for complete scrutiny for the financial year 2025–26. The guidelines, applicable to returns filed in FY 2024–25 (AY 2025–26), cover specific categories that have historically seen tax evasion risks, such as search and survey cases, exemption claims under ITR-7, and repeated contentious issues. These returns will automatically be selected for complete scrutiny, meaning a thorough review will be conducted by the Income Tax Department, even in the absence of standard risk-based triggers.

In this article, we explore:

• The six key categories under compulsory scrutiny
•  The legal framework backing these rules
•  Implications for taxpayers
•  Deadlines and procedures involved

What is ‘Compulsory Scrutiny’ in Income Tax?

Compulsory Scrutiny refers to income tax returns that are automatically selected for detailed examination under Section 143(2) of the Income-tax Act, 1961, based on specific circumstances or legal triggers, not risk profiling.

Unlike Computer-Assisted Scrutiny Selection (CASS)—which uses AI to randomly pick suspicious returns—compulsory scrutiny follows rules-based selection for returns falling under predefined cases.

Once selected:

• The taxpayer receives a notice under Section 143(2)
• They must submit documents, records, and clarifications online
• The case is handled under the Faceless Assessment Scheme, reducing the human interface
• Final assessment orders are passed based on evidence and representations 

Legal Provisions Behind Scrutiny

Several provisions empower the CBDT to mandate scrutiny. Key among them:

• Section 143(2) – Notice issued for a scrutiny assessment
• Section 132 – Search and seizure
• Section 132A – Requisition of books/documents
• Section 133A – Survey operations
• Sections 12A, 12AB, 10(23C) – Exemptions for charitable/religious institutions
• Section 92CA – Transfer pricing and international transactions scrutiny

Categories of Compulsory Scrutiny – FY 2025–26

Here are the six cases that will be compulsorily selected for scrutiny during FY 2025–26, based on guidelines released by the CBDT:

1. Survey-Based Cases (Section 133A)

If a survey was conducted on the taxpayer on or after April 1, 2023, the return for the corresponding financial year will be mandatorily scrutinised.

Implication: Even if there are no obvious irregularities in the return, the department is obligated to examine it in full.

2. Search and Requisition Cases (Sections 132 & 132A)

Wherever a search (u/s 132) or a requisition (u/s 132A) has occurred between April 1, 2023 and March 31, 2025, the ITRs linked to such persons will face automatic scrutiny.

Special Note: 

• The scrutiny covers all linked entities and persons (not just the one searched).
• For searches after Sep 1, 2024, the scrutiny is limited to AY 2025–26.

3. ITR-7 Filers Claiming Exemptions Without Valid Registration

Returns filed in Form ITR-7, where taxpayers claim exemptions under Sections 12A, 12AB, or 10(23C) will be scrutinised if:

• The relevant registration was not granted, or
• It was cancelled or withdrawn by March 31, 2024,

The claim is still made in the return, unless an appellate body reverses the cancellation.

Implication: This provision primarily affects charitable trusts, NGOs, and institutions claiming tax-exempt income.

4. Recurring Additions in Previous Years (Confirmed by Appeal)

Where an assessee has faced recurring additions in past assessments—due to a consistent issue of law or fact—and:

• The addition was upheld on appeal, and
• The amount is ₹50 lakh or more in metro cities, or
• ₹20 lakh or more elsewhere, then the current return will be scrutinised if the same issue arises again.
• This includes Transfer Pricing (TP) matters and other recurring disputes.

Example: If a company’s claim for a particular expense was disallowed in 3 successive years and confirmed by ITAT/High Court, then claiming it again in the current return will trigger scrutiny.

5. Tax Evasion Alerts by Intelligence Agencies

Returns will be compulsorily scrutinised where there are credible alerts or reports of tax evasion from:

• Law enforcement agencies
• Regulatory bodies
• Intelligence departments

Such scrutiny is independent of the risk profile, and the selection is driven by external intelligence.

Implication: This includes tip-offs about undisclosed foreign income, benami transactions, bogus donations, or GST mismatches flagged by other departments.

6. Scrutiny Timeline: Notices Must Be Issued by June 30, 2025

For ITRs filed during FY 2024–25 (AY 2025–26), the Income Tax Department must issue notices under Section 143(2) by June 30, 2025. Failure to issue the notice within this time makes the scrutiny legally invalid.

Procedure for Scrutiny

Notice Issued (Section 143(2)) – The Income Tax Department issues a notice to the assessee for submission of supporting documents.

• Notice Issued (Section 143(2)) – The Income Tax Department issues a notice to the assessee for submission of supporting documents.
• Online Submission – The taxpayer responds through the e-filing portal.
• Faceless Evaluation – The case is handled without physical interaction, maintaining transparency and uniformity.
• Assessment Order Issued – Based on the evidence, the final order is passed.

 For quick reference, here’s a tabular summary of the six compulsory scrutiny categories along with the applicable notice types:  

Time Limit for Notice under Section 143(2)

For ITRs filed in FY 2024-25, scrutiny notices must be issued on or before June 30, 2025.

What the New Scrutiny Guidelines Mean for ITR Filing in FY 2025–26

The CBDT’s new guidelines mark a clear shift from routine ITR submission to rigorous, evidence-driven compliance.

For Individual Taxpayers:

• Cross-verify all data with Form 26AS, AIS (Annual Information Statement), and TIS (Taxpayer Information Summary) before filing.
• Avoid assumptions—report only what can be fully substantiated with documents.
• Maintain supporting evidence for all income and deductions, even if the total income is under ₹10 lakh.
• Stay audit-ready, as scrutiny may arise from intelligence alerts or past compliance history.

For Businesses & Corporates:

• Prepare for documentation-heavy filing—maintain records for every major transaction.
• Ensure alignment across departments (Accounts, Finance, Compliance) to avoid mismatches.
• Address recurring issues from previous assessments that were upheld on appeal.
• Engage tax advisors early to frame responses for possible scrutiny notices.

Treat ITR filing as a risk area—accuracy and defensibility are now critical under the revised scrutiny regime.

Action Checklist for Assessees

We’ve attached the official CBDT Guidelines for Compulsory Scrutiny – FY 2025–26 for easy reference:

Conclusion

The CBDT’s scrutiny guidelines for FY 2025–26 mark a focused shift towards data-driven and intelligence-backed compliance enforcement. Rather than casting a wide net, the department is targeting specific, high-risk categories that have either had past compliance issues or are under surveillance.

For taxpayers, this is a wake-up call to ensure transparent reporting, accurate claims, and timely compliance, especially in sensitive categories like exemption claims, survey/search-linked returns, and recurring disputes.

If your return falls under any of these cases, consult a tax expert without delay.

Need Help Navigating the New Scrutiny Rules?

With CBDT’s compulsory scrutiny guidelines now in effect for FY 2025–26, it’s critical to ensure your ITR is accurate, well-documented, and fully compliant. Whether you're an individual taxpayer, a business, or a trust filing ITR-7, IndiaFilings can help you avoid scrutiny triggers and respond effectively if selected. Get expert tax filing support today — don’t wait for a notice.

Get Started!

Frequent asked Questions

1. What is 'Compulsory Scrutiny' in income tax?

Compulsory scrutiny is a rules-based selection of income tax returns for complete assessment under Section 143(2). These cases are not selected randomly, but based on specific legal criteria like survey, search, recurring tax disputes, or intelligence alerts.

2. Are these guidelines applicable to all ITRs?

No. The guidelines are applicable only to ITRs filed during FY 2024–25 (AY 2025–26) that fall into specific high-risk categories listed by the CBDT.

3. What types of returns are compulsorily selected for scrutiny?

As per the CBDT, the following six categories trigger automatic scrutiny:

• Cases where a survey under Section 133A was conducted on or after April 1, 2023
• Search and requisition cases under Sections 132 or 132A (April 1, 2023 – March 31, 2025)
• ITR-7 filers claiming exemptions without valid registrations under 12A, 12AB, or 10(23C)
• Recurring additions confirmed in prior years where the amount exceeds ₹50 lakh (metros) / ₹20 lakh (others)
• Cases flagged for tax evasion by intelligence or regulatory bodies
• Any scrutiny for ITRs filed in FY 2024–25 must be initiated by June 30, 2025

4. What is the deadline for the Income Tax Department to issue a scrutiny notice?

The notice under Section 143(2) must be issued on or before June 30, 2025, for returns filed in FY 2024–25.

5. Will I get a physical notice or an email for scrutiny?

Scrutiny notices are now served digitally through the income tax e-filing portal and are also notified via email and SMS. Ensure your contact details are updated on the portal.

6. What if I miss responding to the scrutiny notice?

Failure to respond can lead to:

• Ex-parte assessments (without your input)
• Penalties and interest
• Possible reopening of past years’ assessments

Always respond within the timelines mentioned in the notice.

7. What does ‘Faceless Scrutiny’ mean?

Faceless scrutiny means the entire assessment process is conducted digitally via the National Faceless Assessment Centre (NaFAC)—with no physical meetings or office visits. All communication happens through the income tax portal.

8. How do I know if I fall under recurring additions scrutiny?

You fall under this category if:

• The same issue (e.g., disallowance of expenses or TP adjustment) has been added back in multiple years.
• The additions were upheld on appeal
• The total addition is over ₹50 lakh in metros or ₹20 lakh elsewhere

9. I filed ITR-7, but my exemption registration is pending. Will I be selected for scrutiny?

Yes. If your registration under Section 12A, 12AB, or 10(23C) was not granted, cancelled, or withdrawn by March 31, 2024, and you still claimed exemption in your return, it triggers compulsory scrutiny, unless a favourable appellate order exists.

10. Are search or survey cases from previous years still scrutinised?

Yes. If a survey was conducted on or after April 1, 2023, or a search/requisition happened between April 1, 2023 and March 31, 2025, the associated ITR will be compulsorily scrutinised.