CBDT Notifies Mandatory Scrutiny Cases for FY 2026-27: Key Categories Every Taxpayer and Professional Should Know

CBDT Notifies Mandatory Scrutiny Cases for FY 2026-27: Key Categories Every Taxpayer and Professional Should Know

The Central Board of Direct Taxes (CBDT), vide Circular No. F.No.225/56/2026/ITA-II, has prescribed the parameters for compulsory selection of cases for Complete Scrutiny during Financial Year 2026-27.

The circular identifies six specific scenario codes (CS01 to CS06) under which cases will be mandatorily selected for scrutiny assessment. The objective is to focus departmental resources on high-risk cases involving search and survey actions, reassessment proceedings, recurring tax disputes, exemption-related violations, and intelligence-based tax evasion inputs.

Categories of Mandatory Scrutiny Cases

Detailed Analysis of Each Category

CS01 – Survey Cases

Any taxpayer subjected to a survey under Section 133A (except Section 133A(2A)) on or after 1 April 2024 will automatically fall within the mandatory scrutiny framework.

Such cases generally involve verification of:

• Suppression of turnover
• Unaccounted income
• Discrepancies in books of account
• Stock variations
• TDS/TCS defaults

Taxpayers covered under survey proceedings should maintain complete documentation supporting disclosures made during the survey.

CS02 – Search and Seizure Cases

Where a search under Section 132 or requisition under Section 132A has been initiated on or after 1 April 2024, scrutiny becomes compulsory.

These cases usually involve examination of:

• Undisclosed assets
• Unaccounted investments
• Cash transactions
• Benami arrangements
• Foreign assets and income
• Digital evidence seized during search

Such cases remain one of the highest priorities for the Income Tax Department.

CS03 – Reassessment Cases

Cases where notice under Section 148 has been issued for income escaping assessment shall also be selected for complete scrutiny.

The Department will verify:

• Reasons recorded for reopening
• Source of information leading to reassessment
• Adequacy of disclosures
• Explanation regarding escaped income

Taxpayers receiving reassessment notices should carefully evaluate both procedural and substantive validity of the proceedings.

CS04 – Exemption Claims Despite Cancellation or Rejection

This category targets trusts, charitable institutions, educational institutions, hospitals, research associations, and other entities claiming exemption in ITR-7 despite:

• Cancellation of registration under Sections 12A or 12AB
• Withdrawal of approval under Section 10(23C)
• Rejection or cancellation of approval under Section 35
• Non-grant of registration or approval

The Department intends to ensure that exemption benefits are claimed only by duly approved entities.

CS05 – Recurring High-Value Additions

A particularly important category introduced by CBDT covers recurring issues where substantial additions were made in earlier years and such additions have either:

• Attained finality; or
• Been upheld in favour of the Department.

The monetary thresholds are:

Metro Charges

• Mumbai
• Delhi
• Bengaluru
• Chennai
• Hyderabad
• Kolkata
• Pune
• Ahmedabad

Threshold: ₹50 lakh or more

Non-Metro Charges

Threshold: ₹20 lakh or more

If the same disputed issue reappears in the current assessment year, the case may be mandatorily selected for scrutiny.

Examples may include:

• Bogus purchases
• Disallowance of expenditure
• Unexplained cash credits
• Transfer pricing issues
• Incorrect exemption claims
• Capital gains disputes

CS06 – Tax Evasion Intelligence Cases

Cases will also be compulsorily scrutinized where specific information indicating possible tax evasion is received from:

• Enforcement agencies
• Financial Intelligence Units
• Regulatory authorities
• Investigation wings
• Other government departments
• Intelligence agencies

Such information may relate to:

• Hawala transactions
• Shell companies
• Accommodation entries
• Money laundering concerns
• Undisclosed foreign assets
• Suspicious financial transactions

Implications for Taxpayers and Professionals

The circular demonstrates the Department's continued emphasis on:

• Search and survey-related enforcement
• Reassessment proceedings
• Data-driven compliance monitoring
• Intelligence-based investigations
• Recurring litigation issues
• Prevention of wrongful exemption claims

Taxpayers falling within any of the prescribed categories should ensure:

• Proper maintenance of books of account
• Robust supporting documentation
• Reconciliation of financial and tax records
• Timely response to departmental notices
• Professional review of past litigation issues

Professional Takeaway

The FY 2026-27 scrutiny guidelines indicate a clear shift towards risk-based tax administration. While routine taxpayers may face reduced scrutiny, taxpayers involved in search, survey, reassessment, exemption disputes, recurring additions, or intelligence-based investigations remain under focused departmental monitoring.

Chartered Accountants, Cost Accountants, Company Secretaries, Tax Consultants, Advocates, CFOs, and Finance Professionals should proactively review clients falling under these six categories and strengthen documentation, litigation management, and tax compliance processes well before scrutiny proceedings commence.

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