Assignment of law of business and

taxation
Submitted to: Sir Hassan Solangi
Submitted by: Komal Zour
Roll no: 2k19/TBBA/24

 What are various cases of Scrutiny Assessment?

Most of the cases selected for Scrutiny are through Computer Aided Scrutiny Selection (CASS). Only a
particular class of cases such as those involving Search, Survey and Reopening of Assessment etc. come
under Compulsory Scrutiny. A small Number of cases are manually selected by the Assessing Officers
where they consider the Income of a particular assesse has been concealed or which require scrutiny for
some specific reason. The reasons attributable to selection of cases under CASS are spelt out differently
each year. Some of the common reasons are information on the basis of AIR Data, some CIB Information
or non-reconciliation of 26AS Data.
The CBDT had issued an important Guidelines for selection of returns for Complete Scrutiny during the
financial-year 2019-20.
The process of examination of ITR by the Income Tax Department is called “Assessment”. The
assessment also includes re-assessment and best judgment assessment under section 147 and 144
respectively and the different type of income tax assessment.

Type of cases

 Manual scrutiny cases.

 Compulsory Scrutiny cases.

Manual scrutiny cases as follows:

 Not filing Income Tax Return

Each person is required to file ITR online on time by ensuring that the all the details match
correctly. If the income of persons is more than the Basic Tax Exemption Limit, they are required
to file the tax returns. Tax Return has to be filed even if the tax has already been deducted. If a
person does not pay his/her taxes on time, he/she will get a notice from the Income Tax
Department.

 Declaring less Income/More Loss as compared to previous years

If a person, knowingly or unknowingly shows less income or more loss which is less as compared
to previous years, then the IT department may get suspicious about it. In such cases, the
department can think of scrutinizing the person’s income.

 Difference in TDS tax credit Claim and 26AS

26AS is the tax credit statement and gives the details of TDS deposited on the behalf of a person.
One should check the details of all TDS payments and match the details correctly since the TDS
details can be viewed from the IT department’s website or from bank’s online portal. There should
not be any difference in the amount of TDS that is being claimed in the Income Tax Return and the
TDS that is actually viewed in the form 26AS. If there is a mismatch in the amount, then the
person may not get the refund claimed.

 Non-Declaration of Exempted Tax

 There are some incomes that are exempted from tax payment but one should not hide it from the
Income Tax Department. Even though they are exempt, they should be shown on the income tax
return because the tax department needs to verify all the income of the person.

 Interest from Fixed Deposits or Savings Account

Banks usually deduct 10% of the deposits’ interest by default, but one is supposed to pay any
additional tax which is applicable, depending on the tax bracket in which the person falls.

 Claiming large refunds in return of income

One can get scrutinized for claiming higher tax refunds. The Income Tax Department may want to
know the reasons for claiming the higher tax refunds. People usually file Forms 15G/15H in order
to escape the TDS but one should be careful enough to not that the Income Tax Department gets all
the details from the banks. If anyone is caught by the department stating mismatch, the person may
be scrutinized.

 Availing double benefits due to change in Job

It happens sometimes that a person who has changed job recently gets Form 16 and fails to declare
the employer and pay the due taxes. This may be due to the benefits are given twice. People often
forget to calculate their earlier tax liability; this may lead to lower deduction of taxes. Thus, one
must be careful and should not forget to calculate taxes on the previous income after changing the
job to avoid later implications due to less tax payments.

 High-Value Transactions

The Income Tax Department gets all the information of the high-value transactions and this can
increase the chances of being scrutinized by the Income Tax Department. Hence, it is imperative to
involve in less big transactions and avoid problems later on.

Compulsory Scrutiny cases as follows:

 Case 1: relating addition in the earlier assessment year of Rs. 10 lakhs/Rs. 10 crore excess on a
substantial and recurring question of law or fact which is confirmed in appeal or is pending
before an appellate authority may come under compulsory scrutiny.
 Case 2: CASS (Computer Added Scrutiny Selection) cases are also selected under compulsory
cases. All such cases are separately intimated by DGIT (system) to the jurisdictional concerned.
 Case 3: Where specific and verifiable information pointing on tax evasion is given to
Government Department/ Authorities.
 Case 4: Rejection of the approval u/s 10 (23C) of the Act or withdrawing the approval already is
passed by the authority, yet the assessee found claiming tax exemption under the aforesaid
provision of the Act.

The following cases are compulsorily taken for scrutiny and are unavoidable, however, some
prevention can be taken avoid scrutiny by being careful and following the rules. The following
cases state when the scrutiny is compulsory:
  If the addition in earlier assessment year is more than Rs. 10 Lacs on a substantial and repeating
question of law or fact which is confirmed in appeal or is pending before an appellate authority
 If the addition in earlier assessment year on transfer pricing in excess of Rs. 10 crores or more on
a substantial and repeating question of law or fact which is confirmed in appeal or is pending
before an appellate authority
 Assessments relating to Survey under Section 133A of the Income Tax Act excluding the cases
where there are no impounded books of accounts and the income returned is not less than the
income return of the previous assessment year. The scrutiny can be done in the cases where there
is concealment of income which may be based on survey report or any other report.
 Assessments of search and seizures are to be done under the Sections 158B, 158BC, 158BD,
153A, and 153C. The Assessment for the returns filed for the assessment year related to the
previous year in which the search was conducted is done under Sections 132/132A of the Income
Tax Act.
 Returns filed in response to Section 148 of the Income Tax Act. If any income assessment has
been missed out, the cases u/s 148 can be reopened. Any case can be reopened within six months
from the end of the assessment year.
 If the cases where the registration u/s 12AA of the Income Tax Act has been canceled by the
concerned CIT/DIT, yet the assessee is claiming tax exemption under Section 11 of the Income
Tax Act. But the cases where the order of the CIT/DIT has been reversed in appellate proceedings
are not selected for scrutiny.
 Cases where the order denying the approval u/s 10 (23C) of the Income Tax Act or withdrawing
the approval granted which has been passed by the Competent Authority yet the assessee is found
to have claimed the tax exemption under the Act.
 If the specific and verified information regarding tax evasion is released by the department’s
authorities.
 Computer Aided Scrutiny Selection (CASS): CASS helps in selection of the cases for scrutiny.
Such cases are separately intimidated in due course by DGIT jurisdictional authorities concerned.

2. Explain modes of payment under Self-Assessment.

Self-assessment:

self-Assessment tax means any balance tax paid by the assessee on the assessed income after taking TDS
and Advance tax into account before filing the Return of income. Self-assessment tax is paid for a
particular financial year end. Challan No/ ITNS 280 is required to be used for the payment of Self-
assessment tax. Many people associate self-assessment tax with self-employed workers, but there are
many people who must submit a tax return each year. They include those who earn more than £100,000
as an employee or a pensioner, anyone who owes capital gains tax from selling assets, those who receive
taxable income from abroad and anyone who’s earned £2,500 or more in untaxed income. Depending on
your circumstances, this may be due in a lump sum on 31 January, or your payments may be broken up
throughout the year.

 Modes of payment:

a) Pay tax each month via PAYE:

‘Pay as you earn’, aka PAYE, refers to income tax that’s deducted from your salary and pension income
before you receive it. But if you have additional tax to pay via self-assessment, you may be able to add it
to your PAYE payments. What you pay is calculated depending on what you earn and whether you’re
eligible for the personal allowance (this was £11,850 in 2018-19, and rose to £12,500 in 2019-20).
However, you can only pay self-assessment tax through PAYE in quite specific circumstances: your self-
assessment tax bill must be less than £3,000 you must already pay tax through PAYE, for example if
you’re an employee or you get a company pension you must have submitted your paper tax return by 31
October, or complete your online tax return by midnight 30 December. All of these must apply. If they
do, HMRC will normally collect what you owe through PAYE automatically. So if you don’t want to pay
your tax this way you’ll have to ask them not to on your tax return.

b) Pay a lump sum by 31 January:

There are lots of options for paying your tax bill, but some take longer than others. As HMRC must have
received the money by midnight on 31 January, you’ll need to factor in this transaction time when
choosing your payment method.

Same day or next day:

 Online or telephone banking

 Chaps

 Debit card

 online At your bank or building society.

Three working days:

 Bacs

 Direct debit (if you’ve already set one up with HMRC)

 Cheque through the post

Five working days:

 Direct debit (if you haven’t set one up with HMRC before)

Note that you can no longer pay HMRC via credit card or at the Post Office.

c) Payment on account:
 If you’re self-employed, you may have to pay your self-assessment tax bill in two advance chunks,
known as payment on account. These payments are due on 31 January and 31 July. What you pay is an
estimate based on the tax you had to pay in the previous year. Of course, once you submit your tax return
it may turn out that you paid too much or too little tax, you’ll either get a tax refund or you’ll have to
make an additional ‘balancing payment’, which will be due on 31 January the following year. This can be
quite difficult to budget for the first time you start paying tax in this way, as not only will you have to pay
the previous year’s tax by 31 January, but you’ll also have to pay half of your estimated tax for the
following year on the same date.