New Income Tax Rules 2025: These 5 Cases Will Trigger Automatic ITR Scrutiny—Are You at Risk?
The Central Board of
Direct Taxes, in a step to strengthen tax compliance and fight tax evasion,
released guidelines on June 14, 2025,
indicating strict conditions that will result in "complete scrutiny" of income tax returns. These requirements
only apply to returns submitted for Assessment
Year 2026–27 (Financial Year 2025–26). The quoted circular indicates that
some red flags, such as searches, surveys, and wrongfully claimed exemptions,
will automatically bring a taxpayer to the scrutiny level.
The goal is to use manual intelligence and system-generated triggers to create a database of high-risk taxpayers and to address discrepancies through a monitoring and verification process.
✅ What is
"Complete Scrutiny" under Income Tax?
"Complete scrutiny" involves a deep and comprehensive examination of your filed income tax return. Unlike regular scrutiny that may be limited to specific issues, complete scrutiny reviews all aspects of the return—including income disclosures, deductions claimed under Chapter VI-A, exemptions under sections like 10, 54, 80C, capital gains, and large financial transactions. The Income Tax Officer (ITO) may also verify the authenticity of third-party information (like Form 26AS, AIS, TIS) against the declared figures.
🕵️♀️ Five High-Risk
Scenarios for Mandatory Scrutiny in 2025–26
1. Survey Operations Conducted After April 1, 2023 (Case Code: CS01)
If a survey under Section 133A has been conducted at your business
premises after April 1, 2023, your ITR for FY 2025–26 will be automatically
flagged for full scrutiny. This applies especially where survey officers
collected statements or impounded books of account. These cases, however, must
be routed through the Systems Directorate and approved by the Director
General of Income Tax (DGIT) to ensure procedural checks are maintained
before initiating scrutiny.
Surveys are generally used to uncover unaccounted cash, bogus billing, or discrepancies in stock and sales. If any such survey has taken place at your premises, prepare all supporting documents and explanations in advance.
2. Search and Seizure Actions Under Section 132 or 132A (CS02 & CS03)
Returns filed by individuals or entities that were subject to search
and seizure operations (raids) during the period April 1, 2023 to March
31, 2025, will face mandatory complete scrutiny. Even if the return is
filed under Section 153A or 153C (which are for post-search assessments), it
will now be scrutinized thoroughly.
These cases involve high suspicion of tax evasion, concealment of income, or possession of unaccounted assets. Even documents seized during the operation—if related to a third party—can bring the third party into scrutiny (under Section 153C). The new rules make it clear that leniency will not be granted in such cases, regardless of voluntary disclosures.
3. Unlawful Claims of Tax Exemptions by Trusts or Institutions (CS04)
Entities such as NGOs, charitable trusts, research bodies, or educational
institutions that lost their tax exemption status under Section 12A,
12AB, 10(23C), or 35(1)(ii)/(iii) (due to cancellation or expiry) but continued
to claim these benefits in their ITRs, will face compulsory scrutiny.
This measure is designed to crack down on misuse of charitable exemptions, where unqualified institutions attempt to reduce taxable income through outdated or invalid registrations. Institutions that are de-notified or whose renewals lapsed must remove such exemption claims immediately to avoid investigation and penalties.
4. Cases with Recurring Additions Over ₹20–₹50 Lakh (CS05)
If a taxpayer’s return had major additions (disallowed claims or unreported
income) in earlier scrutiny assessments, and those were:
- Over ₹50 lakh
in metro areas or over ₹20 lakh elsewhere
- Not appealed by
the taxpayer, or
- Confirmed in
appeal
—then the return for FY 2025–26 will again be automatically selected
for scrutiny.
This applies to businesses or individuals who have a pattern of non-compliance, and whose explanations have previously been rejected. It’s aimed at preventing repeat defaulters from slipping through the net by merely settling older cases and refiling similar data.
5. Cases Flagged by Enforcement or Law Enforcement Agencies (CS06)
If a taxpayer’s case has been flagged by intelligence agencies
like the CBI, ED, SFIO, or Financial Intelligence Unit (FIU), it will
attract compulsory scrutiny. This includes reports shared under the Exchange of
Information protocol with foreign governments or other regulatory bodies.
These tip-offs often relate to undisclosed foreign income, benami assets, or large suspicious transactions. Once flagged, the Assessing Officer must evaluate the evidence in full, even if the original tip came from outside the tax department.
🚫 Who is Excluded
from Compulsory Scrutiny?
The CBDT circular clarifies that routine return filers, who
respond to notices under Section 142(1) or have data inconsistencies arising
from Annual Information Statement (AIS), TDS-CPC, or SFT, will not
face automatic scrutiny. These cases will be selected using CASS
(Computer-Assisted Scrutiny Selection)—a system that uses algorithms to
flag high-risk returns.
Moreover, third-party documents obtained during searches, which do not directly implicate the taxpayer, will not lead to scrutiny unless specifically escalated by senior tax officers. This ensures genuine taxpayers are not unnecessarily harassed.
🧠 Expert View: “You Can’t Avoid This—Be Proactive”
According to tax professnals, these five triggers make it nearly
impossible for a taxpayer to avoid scrutiny once the threshold is crossed.
Once the system flags your case, the Assessing Officer is bound to act, and the
CBDT guidelines leave little room for discretion. He recommends:
- Keeping documentary evidence for all transactions
- Reviewing whether any past assessments meet the new criteria
- Updating registration and exemption statuses for institutions
- Proactively filing accurate returns with full disclosures
📅 Deadlines &
Execution
- The deadline for issuing scrutiny notices is June 30, 2025, for AY 2026–27.
- Scrutiny will be handled by jurisdictional AOs unless otherwise transferred to specialized wings.
- The National Faceless Assessment Centre (NaFAC) will not process search/survey-related scrutiny cases.
- PCIT approval is necessary to drop scrutiny or reduce its scope.
🧾 Final Thoughts
If your case falls under any of the 5 categories, start preparing now.
The government is clearly targeting tax transparency and high-value risk,
and these new rules aim to balance automation with targeted enforcement.
Keeping financial records clean and up-to-date is no longer optional—it’s your
strongest defense against tax scrutiny in 2025.
Read More: Common Myths About Income Tax in India