Each year the CBDT notifies categories of income tax returns selected for compulsory (mandatory) scrutiny – such as search or survey cases, specific information from other agencies, or recurring additions. This guide explains the compulsory scrutiny categories for FY 2026-27 and what taxpayers in those categories should expect.
What is Income Tax Scrutiny?
Scrutiny is a detailed examination carried out by the Income Tax Department to verify that the income, deductions, and exemptions a taxpayer has reported in their return are accurate and comply with the law. Once a return is filed, it doesn’t simply get accepted at face value — the department has mechanisms to flag returns for closer review, either at random, through risk-based algorithms, or because specific criteria are met.
It helps to understand that scrutiny comes in two broad flavours:
- Manual/CASS-based scrutiny: Returns are picked up through the Computer-Assisted Scrutiny Selection (CASS) system, which uses risk parameters like unusual deductions, mismatches between reported income and Form 26AS/AIS, or large refund claims. Careful, accurate filing can reduce the odds of being flagged here.
- Compulsory scrutiny: Certain categories of taxpayers are picked up automatically, regardless of how clean or careful their filing was. Being in one of these categories makes scrutiny mandatory — there’s no way to file your way out of it.
Being selected for scrutiny doesn’t, by itself, mean you’ve done something wrong. It simply triggers a more detailed examination, usually starting with a notice under Section 143(2), asking you to appear (often via the faceless e-assessment system) or submit documents supporting the entries in your return.
The Latest CBDT Guidelines for FY 2026-27
The Central Board of Direct Taxes (CBDT) issues fresh guidelines every year specifying which categories of taxpayers must be compulsorily selected for Complete Scrutiny. For FY 2026-27, the CBDT has laid out six categories, referred to as “Scenario Codes” CS01 to CS06, in a circular bearing reference F.No.225/56/2026/ITA-II. These build on similar frameworks from previous years but include some updated thresholds and refinements. Here’s a closer look at each one.
1. Survey Cases (CS01)
If a taxpayer’s business or professional premises were surveyed under Section 133A of the Income Tax Act on or after April 1, 2024, the return for the relevant financial year will be compulsorily picked up for scrutiny — irrespective of whether the return itself shows any red flags. A survey typically happens when the department wants to verify records, stock, or compliance on the spot, often without prior notice.
There’s an important carve-out here: surveys conducted specifically under Section 133A(2A) — which are narrowly focused on verifying TDS/TCS compliance — are excluded from this compulsory scrutiny trigger. This distinction matters because not every survey automatically escalates into a full-blown scrutiny assessment.
2. Search and Seizure Cases (CS02)
Where a search has been conducted under Section 132, or a requisition made under Section 132A, on or after April 1, 2024, the tax returns of the person searched — and potentially other related persons — are mandatorily selected for scrutiny. For searches conducted on or after September 1, 2024, the scope of scrutiny is tied to the assessment years specified under Section 158BA(6), which governs block assessments in search cases.
Search and seizure actions are generally reserved for cases involving suspected concealment of income, undisclosed assets, or serious non-compliance, so the resulting scrutiny tends to be far more intensive than a routine review.
3. Reassessment Cases (CS03)
Any taxpayer who has received a notice under Section 148 — which deals with reassessing income that the department believes has “escaped assessment” in an earlier year — will automatically have that year’s case brought under complete scrutiny. This ensures that once the department has reason to believe income was missed or under-reported, the reassessment process gets the same rigorous review as a fresh scrutiny case.
4. Trusts and Institutions with Cancelled Exemptions (CS04)
This category specifically targets charitable trusts, institutions, and similar entities that continue to claim tax exemptions in their returns (typically filed in Form ITR-7) even after their registrations or approvals have been cancelled or withdrawn. This includes registrations under Sections 12A, 12AB, and 10(23C), as well as approvals under Section 35 (relating to scientific research). The idea is to close a compliance gap where an entity keeps claiming benefits it’s no longer legally entitled to.
5. Recurring Additions in Earlier Assessments (CS05)
If a taxpayer has faced substantial additions to their income in a prior assessment — and those additions have become final, either because the taxpayer didn’t contest them or because they were upheld on appeal — and the same issue appears to recur in a later year’s return, that return is compulsorily selected for scrutiny. The monetary thresholds for this trigger were revised upward in mid-2025 and currently stand at:
- ₹50 lakh or more in metro cities — Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata, Pune, and Ahmedabad
- ₹20 lakh or more in all other (non-metro) jurisdictions
For context, these limits used to be ₹25 lakh for metro charges and ₹10 lakh elsewhere, so the revision effectively narrows the pool of taxpayers automatically caught by this trigger, focusing enforcement on higher-value recurring issues.
6. Specific Tax-Evasion Intelligence (CS06)
Even a taxpayer with an otherwise spotless compliance history can be pulled into compulsory scrutiny if a law enforcement or intelligence agency shares specific, credible information suggesting tax evasion for a particular assessment year. This category reflects the department’s increasing reliance on data-sharing between agencies — it isn’t about statistical risk models, but about direct intelligence inputs.
Why This Matters for Taxpayers
These six categories highlight a broader shift: the department is combining internal enforcement actions (surveys, searches, reassessments), compliance monitoring (exemption cancellations), historical patterns (recurring additions), and external intelligence into a single, structured scrutiny framework. If your case matches any of these scenario codes, scrutiny isn’t a possibility — it’s a near-certainty for that assessment year.
That said, being selected for scrutiny isn’t inherently alarming. It simply means your return will undergo a more detailed review, and you’ll need to substantiate what you’ve declared. A few practical steps can make the process smoother:
- Keep supporting documentation for every source of income, deduction, and exemption claimed — bank statements, invoices, TDS certificates, investment proofs, and loan agreements should all be traceable.
- Reconcile your return carefully against Form 26AS, the Annual Information Statement (AIS), and the Taxpayer Information Summary (TIS) before filing, since mismatches here are a common cause of both CASS-based and compulsory scrutiny.
- If you’ve had additions in earlier years that remain unresolved or under appeal, keep that documentation organized, since it’s directly relevant if CS05 applies to you in a future year.
- Respond to any scrutiny notice within the specified timelines non-compliance can lead to a best-judgment assessment under Section 144, which tends to be less favourable to the taxpayer.
Frequently Asked Questions
What is compulsory income tax scrutiny?
Cases mandatorily selected for detailed examination under CBDT’s annual guidelines, not through random selection.
Which cases fall under compulsory scrutiny?
Typically search/survey cases, cases with specific external information, exemption/registration issues, and certain recurring additions.
How am I informed of scrutiny?
Through a notice under Section 143(2) within the prescribed time after filing your return.
What should I do if selected?
Respond to the notice with the requested documents through the e-proceedings portal within the timeline.
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