New Delhi: The Income Tax Department is set to scrutinise approximately 1.65 lakh income tax returns filed for the Assessment Year 2025-26 (financial year 2024-25). This marks a significant threefold to fourfold increase in the number of cases being selected for detailed examination compared to previous years, signaling a major push towards enhanced tax compliance and enforcement.

The Central Board of Direct Taxes (CBDT) has already initiated the process of issuing notices under Section 143(2) of the Income Tax Act, with a deadline of June 30, 2025, for their dispatch. These notices formally inform taxpayers that their returns have been picked for scrutiny, a procedure that involves a thorough verification of income, deductions, and other claims made in the tax filing.

This substantial rise in scrutiny cases is largely attributed to the tax department’s increasing reliance on advanced data analytics and risk-based selection. The department is leveraging its sophisticated digital infrastructure, including the Computer Assisted Scrutiny Selection (CASS) system, to identify high-risk returns with a higher probability of tax evasion.

Key Parameters for Scrutiny Selection

According to sources, the selection of cases for AY 2025-26 has been primarily driven by a set of well-defined risk parameters. Taxpayers whose returns exhibit the following characteristics are more likely to have received a scrutiny notice:

  • Unusual Cash Deposits: Significant cash deposits that are inconsistent with the taxpayer’s known sources of income.
  • Unexplained Bank Credits: Large credits in bank accounts for which the source is not immediately apparent from the filed return.
  • Turnover Mismatch with GST Data: Discrepancies between the turnover reported in the income tax return and the data available from Goods and Services Tax (GST) returns.1
  • Merger and Acquisition Discrepancies: Inconsistencies or irregularities in financial reporting related to business restructuring, mergers, or acquisitions.

Fresh CBDT Guidelines for a Targeted Approach

The increased number of scrutiny cases aligns with the fresh guidelines issued by the CBDT for compulsory and complete scrutiny for the upcoming assessment cycle. These guidelines aim to make the process more transparent, objective, and targeted, focusing on high-risk areas while minimizing inconvenience to honest taxpayers.

In a move to curb undue harassment, the CBDT has also issued strict instructions to its assessing officers to be specific and justified in their queries.2 Officers are required to frame precise questions based on the identified risks, rather than making broad and sweeping inquiries.

Implications for Taxpayers

For taxpayers selected for scrutiny, this means a more detailed examination of their financial records. They will be required to provide supporting documents and explanations for the transactions and claims made in their income tax returns. The entire process is largely faceless, with communication and submissions handled through the income tax e-filing portal.

Tax experts advise assessees who receive a scrutiny notice to not panic but to meticulously prepare their responses with all necessary documentary evidence. Seeking the assistance of a tax professional is also recommended to navigate the process effectively.

This sharpened focus on data-driven scrutiny underscores the Income Tax Department’s commitment to plugging tax leakages and ensuring greater compliance. For taxpayers, the clear message is the increasing importance of accurate and transparent tax filing, backed by robust documentation.