Compulsory Income Tax Scrutiny for FY 2025-26: New CBDT Guidelines Explained

A clear look at the new CBDT rules, so you know exactly when a return is selected for scrutiny this year.

Every year, the tax department updates its rules on how returns are picked for deeper checks. For FY 2025-26, the Central Board of Direct Taxes has issued fresh instructions on when a return must go through compulsory income tax scrutiny. These guidelines matter because they decide who will receive a question, notice, or a detailed income tax assessment.

This year, the rules cover searches, surveys, exemption withdrawals, repeated additions, and cases based on specific information. Many taxpayers are trying to understand what has changed and how these rules apply to them. This blog breaks everything down in simple terms. By the end, you will know who gets selected, how the income tax notice assessment works, and what steps you can take to stay prepared.

What Changed This Year

CBDT has issued a clear framework for compulsory selection of returns for FY 2025-26. The new instruction highlights:

• The six categories automatically fall under complete scrutiny.
• Who selects these cases and which unit issues the notices.
• How search and survey cases move between jurisdictional officers and Central Circles.
• Monetary limits for recurring additions that now bring a case into scrutiny.
• Cases that must be excluded from compulsory selection and instead go through CASS.

The idea behind these rules is simple. The department wants uniformity. It also wants quick and consistent assessments across different taxpayer groups.

Who Comes Under Compulsory Scrutiny (CS01 to CS06)

CBDT has listed six categories. If a case falls into any one of these, it is selected for complete income tax scrutiny. Here is the simple version of how each category works.

CS01: Survey Cases

If a survey under section 133A was carried out on or after 1 April 2023, that return goes into compulsory scrutiny. The selection is done through the system, and notices are issued accordingly. This includes any survey where books, stock, or other records were verified.

CS02 and CS03: Search or Requisition Cases

If a search under section 132 or requisition under section 132A took place between 1 April 2023 and 1 April 2025, the return falls under compulsory scrutiny.
The only difference between CS02 and CS03 is based on the date of the search, and which officer is responsible for issuing the notice. In simple terms, all recent search cases are included.

CS04: Exemption Withdrawn but Still Claimed

This applies mainly to trusts, NGOs, and similar institutions. If their exemption or registration was cancelled or not granted by 31 March 2024 but they still claimed the exemption in ITR 7, the case is selected.

If the cancellation was later reversed in appeal, then the case does not fall under this category.

CS05: Recurring Additions

If the department made additions in past years and those additions were either upheld or not appealed, and if the amount is above the set limits, the case is selected again.
The limits are:

• ₹50 lakh or more in metro cities.
• ₹20 lakh or more in other places.

This also includes transfer pricing issues.

CS06: Specific Information Cases

If the department receives strong information about possible tax evasion from any enforcement or regulatory body, the case is selected. The officer must upload all related documents right away so that scrutiny can begin.

Important Timelines and Notice Rules

For any return filed in FY 2024-25, the income tax notice of assessment under section 143(2) must be issued by 30 June 2025. If the notice is not issued by this date, scrutiny cannot be started for that year.

Search and survey cases follow their own timelines, which decide whether the case stays with the current officer or moves to a Central Circle. These timelines are important because they fix who has the authority to carry out the income tax assessment.

What Is Not Covered Under Compulsory Scrutiny

Some returns are clearly excluded from this selection list. If a return was filed only because the taxpayer received a notice under section 142(1) due to an AIS, SFT, TDS, NMS, or CPC mismatch, then it does not come under compulsory scrutiny.
These cases go through CASS instead, which is the risk-based system used by the department.

This separation helps ensure that only high-risk cases fall under compulsory selection.

How the Selection and Assessment Process Works

Once a case falls under any of the compulsory categories, the system flags it and the process begins. The Directorate of Income Tax Systems identifies these cases. After that, the notices are issued through the National Faceless Assessment Centre or the jurisdictional officer, depending on the category.

Search and requisition cases may move to Central Circles. International taxation cases stay with their own units. For CS06, the officer must upload all supporting documents right away so the assessment can start without delay.

During the income tax assessment, the officer checks the return, the records, and any linked information. You may be asked for statements, invoices, bank details, or clarifications. The entire process is structured and follows fixed steps.

What These Rules Mean for Different Taxpayers

Trusts and NGOs

If the registration under sections like 12A, 12AB, 10(23C), or 35 was cancelled or not granted, and exemption was still claimed, scrutiny is almost certain under CS04. These organizations must keep all letters, orders, and fund flow proof ready.

Businesses and Corporates

Recurring additions from past years can pull a case into scrutiny, especially if the same issue continues. The limits of ₹50 lakh in metros and ₹20 lakh in other cities apply here. This is common in transferring pricing matters, disallowances, or disputes that are repeated over time.

Individuals and HNIs

A survey, a search, or any strong information received from another agency may result in compulsory income tax scrutiny. Even if the return looks fine, the information itself can trigger selection. It is important to maintain proper records and match your income details with AIS and other reports.

Documents You Should Keep Ready

Here are the documents commonly needed during scrutiny:

For search or survey cases

• Panchnamas
• Statements recorded
• Inventory lists
• Books and ledgers
• Reconciliation of material seized or impounded

For exemption related cases

• Old and new registration orders
• Rejection or cancellation letters
• Appeal orders
• Governing documents
• Schedules showing application of income
• Bank statements and fund flow records

For recurring additions

• Past assessment orders
• Appeal orders
• Working papers
• Proof supporting your position for the current year
• Transfer pricing documents if applicable

Keeping these ready helps the income tax assessment run smoothly and reduces back and forth on the portal.

What to Do If You Receive a Notice

If you receive an income tax notice of assessment or even a 142(1)-notice asking for details, take these steps:

1. Read the notice carefully. Check the section and the issue raised.
2. Respond within time. The portal timeline is strict, so do not wait until the last day.
3. Match your data. Check out your ITR, AIS, GST data, TDS statements, and books to avoid mismatching queries.
4. Share complete documents. Upload clear, readable files with proper naming.
5. Get expert help. A consultant can help present your facts correctly and avoid mistakes that might lead to more questions.

A clean and timely response makes the process easier. It also shows the department that you are cooperating with and provides full details.

Need Help with Scrutiny or a Notice

Handling scrutiny on your own can feel confusing, especially when you have to respond within tight timelines. This is where Shah & Doshi can make the process much easier. Our team works with all kinds of cases, including surveys, searches, exemption withdrawal matters, recurring additions, and detailed income tax assessment reviews. We help you understand what the notice means, what documents you must gather, and how to present your information in a clear and complete manner.

If you receive a question, a scrutiny notice, or an income tax notice of assessment, our consultants can step in right from the first stage. We prepare your responses, check your disclosures across ITR, AIS, GST, and books, and guide you through each step until the case is closed. You can focus on your work or business while we handle communication and representation for you.

Talk to Shah & Doshi today for a smooth and well-prepared scrutiny handling process.