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Today we are discussing on the Income tax scrutiny, we are trying to solve the doubts on the matter of income tax scrutiny like Income tax scrutiny meaning, how it come and what are the documentation required, how to handled scrutiny etc.

What is meaning of income tax Scrutiny?

Scrutiny is a notice issued by the income tax departments under various sections under income tax Act, 1961 to asked question to the assessee on the basis of income tax return filed by the assessee.

What is the basis of selection of cases in scrutiny by income tax department ?

Every year department has certain criteria for selection of the cases on scrutiny, like loan and advances taken or given, cash deposit and withdrawal with a certain limit.

Compulsory income tax scrutiny of certain cases

All cases of builders following project completion methods
All cases of professional where gross receipt exceeds Rs 20 lakhs and income declared is less than 20% of the gross receipts.

All cases of Contractor where gross receipt exceeds Rs1 crore  and income declared is less than 5% of the gross receipts

All cases of in which unsecured loan introduced excess Rs 25 lakhs.

All cases in which fresh capital introduced is more than Rs 50lakhs in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore, Ahemdabad and 10 lakhs in other city.

If Loss from house property is shown more than 2, 50,000

Investment in property is more than 5 times of the gross receipts.

Short term and long term capital gain is more than 25 lakhs.

Commission paid is more than 25 lakhs.

You can check the detailed list at –

How to avoid Income tax scrutiny?

There are different criteria for selection of the cases in scrutiny, but the major factors are major cash deposit in bank accounts, major cash withdrawal from bank accounts, huge loan and advances taken or given, changes in gross profit and net profit ration.

Also before filing of return of income check the compulsory selection of scrutiny to avoid it.

What are the documents required in the Income tax Scrutiny?

There is not any specified list of documents required for scrutiny it will depend on case to case basis, but we are providing list they generally asked at the time of scrutiny.  Keep that documents in file will help to solve the scrutiny.

1 Financial and Income tax return copy

2 Audit report if applicable

3 Confirmation from debtors and creditors

4 Confirmation, Income tax return and balance sheet of Loans and advances taken party

5 Explanation of cash deposited in a bank as shown in AIR

6 Interest certificate from bank in case of home loan taken

7 Explanation on expenditure

8 Invoices of Fixed assets

9 TDS certificate received on Income

10 sample of sale and purchase bills

11 Nature of business

12 Ledger of major expenditure (Interest, brokerage computer expenses etc)

13 In case of sale and purchase of property (Agreement copy of the same)

14 Credit card statements details

15 Proof of Deduction claimed in return of income

How to Handle Income Tax Scrutiny?

Read the Notice carefully received from the income tax department

Check the validity of notice by checking the date of receiving the notice with the time limit of section defined in income tax act, 1961.

Prepare all the documents required by the departments

Attend and submit all the documents to the department on the date and time given in the notice.

At the time of hearing department may ask for further documents, kindly note down the documents and submit it in the next date.


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One comment

  1. Thanks Good coverage on Income Tax scrutiny.

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