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Tax assessment, representation and litigations
Examination of tax returns by a tax department, if it has any reason to believe that the information furnished by the assessee is incomplete or incorrect is considered for scrutiny assessment. A notice is issued in this respect in the name of assessee and is expected to take action as per the directions by the tax department.
Reasons why scrutiny assessment is made
Scrutiny is aimed at assessing whether the income displayed in the return is true and fair as shown by the assessee after taking into account all the exemptions, deductions, etc., also, whether such deductions or exemptions claimed are correct, both factually and legally.
Selection of scrutiny cases
Two major types of scrutiny assessments
- Manual scrutiny cases
- Compulsory scrutiny cases
Manual cases can be avoided by taking appropriate action in time by the assessee, however, compulsory cases cannot be prevented at all
Reasons for selection of case for scrutiny
- Non-filing of income tax returns (ITR)
- Error regarding withholding taxes
- Non-disclosure of certain types of incomes
- Unnatural or erratic transactions
- Defect in ITR
- Non-declaration of exempted income
- Interest from fixed deposit’s or savings account
- Claiming huge refunds in return of income
