The Income Tax Department in India uses a system called Computer-Assisted Scrutiny Selection (CASS) to identify tax returns for potential scrutiny. Here’s a breakdown of the CASS cycle:
Purpose:
- CASS is a mechanism to automate the selection of high-risk ITRs for further scrutiny.
- It helps the department efficiently identify potential tax evasion cases and optimize resource allocation.
Selection Process:
- The Income Tax Department sets specific risk parameters based on various factors.
- These factors might include income declared, mismatch with third-party information, claimed deductions and expenses, and past filing history.
- The CASS system analyzes all filed ITRs against these predefined parameters.
- ITRs exceeding certain risk thresholds or triggering red flags get flagged for potential scrutiny.
Selection Timeline:
- The Income Tax Department doesn’t publicly announce a fixed schedule for running the CASS cycle.
- It can be conducted periodically throughout the year, but typically happens after the ITR filing deadline for a specific Assessment Year (AY).
- For example, the CASS cycle for ITRs filed for AY 2023-24 (income earned in FY 2022-23) might occur sometime after the July 31st, 2024 filing deadline (or a later extended deadline if applicable).
Scrutiny Process:
- Once an ITR is flagged by CASS, the taxpayer receives a scrutiny notice under Section 143(2) of the Income Tax Act.
- This notice specifies the reasons for scrutiny and the documents required for further assessment.
- The taxpayer has an opportunity to present their case and clarify any discrepancies identified during CASS analysis.
Benefits of CASS:
- CASS streamlines the scrutiny selection process and reduces manual workload.
- It enables the department to focus on high-risk cases with a higher likelihood of tax evasion.
- This potentially improves tax collection efficiency.
Important Note:
- While CASS helps identify potential risks, it doesn’t guarantee scrutiny. The final decision rests with the Income Tax Department based on the overall assessment.
I hope this explanation clarifies the CASS cycle and its role in Income Tax Return Scrutiny in India.