The income tax (I-T) department has served scrutiny notices to many taxpayers for income-tax return (ITR) filed for the financial year (FY) 2017-18. However, according to chartered accountants and audit firms, most people who had declared foreign assets and income in their ITR were on the forefront of receiving scrutiny notices.
“We are witnessing a jump of more than 30% in cases selected for scrutiny assessment this time around. Individuals earning foreign income seem to be a focus area for the tax department," said Shilpa Bhatia, director tax, Ashok Maheshwary and Associates Llp, a chartered accountancy firm.
Other industry participants echo the thought. “We are seeing a spike in number of scrutiny cases related to tax returns that declared foreign income and assets," said Archit Gupta, founder and chief executive officer, ClearTax, a tax filing and investing portal.
I-T department can pick up returns for scrutiny up to six months from the end of the financial year in which the return was filed. For instance, if the tax return for FY17-18 was submitted on or before July 31, 2018, scrutiny notice can be issued till September 30, 2019.
Typically, scrutiny notices are issued by the department for verification, regular assessment or reassessment or for limited scrutiny. Where department needs any information or clarification in relation to making assessment of income tax return filed by the assessee, notices under Sections 142(1) and 143(2) can be issued asking for information or details in relation to tax return. However, if the notice is about assessment or reassessment, you may have to undergo detailed scrutiny. Such notices come along with a questionnaire seeking information of a particular transaction, asset or income. If the notice is related to limited scrutiny, you have to provide details of particular assets mentioned in the notice such as when it was purchased, its cost, source of fund and so on.
While, earlier, taxpayer or his or her representative were required to physically visit tax department after receiving the scrutiny notices, there is ‘e-proceeding’ facility now. Under this, recourse is available to file electronic responses for all limited and complete scrutiny cases.