Income tax scrutiny in FY 2026-27: CBDT identifies 6 cases that could lead to ITR scrutiny

In an official circular (F.No.225/56/2026/ITA-II), the CBDT has laid down six specific "Scenario Codes" (CS 01 to CS 06) that will trigger a mandatory tax scrutiny.

What triggers a mandatory tax scrutiny?

CBDT has identified six categories of cases that will be compulsorily selected for complete scrutiny during FY 2026-27.

Taxpayers whose business premises were subject to a survey under Section 133A on or after April 1, 2024, will be compulsorily scrutinized, the CBDT said.

"Case(s) of the assessee(s), in whose case survey u/s 133A of the said Act [ other than survey u/s 133A(2A) of the said Act] has been conducted on or after 01.04.2024," the circular stated.

Returns of taxpayers involved in search or requisition proceedings under Sections 132 or 132A will also be automatically flagged, the CBDT said.

"Case(s) of the assessee(s), in whose case Search u/s 132 of the Income-tax Act, concerned. 1961 has been initiated or Requisition u/s 132A of the said Act has been made, on or after 01.04.2024. For Searches initiated or Requisition made on or after 01.09.2024, the return shall be selected for the assessment year, which is covered by the prov1s1ons of section 158BA (6) of the said Act," the circular noted.

The CBDT confirmed that returns linked to reassessment notices under Section 148 will continue to receive close attention.

"Cases where notice u/s 148 of the Income-tax Act, 1961 has been issued," the circular said.

Taxpayers claiming exemptions despite cancelled or withdrawn approvals under Sections 12A, 12AB, 10(23C), or Section 35 will also face automatic scrutiny, the CBDT noted.

"...have not been granted or have been cancelled/withdrawn by the Competent Authority" and "the assessee has been found to be claiming tax-exemption/deduction in the return filed in ITR-7," the circular stated.

Taxpayers with significant additions in earlier assessments may also be selected if the issue continues to recur.

The threshold is:

• More than ₹50 lakh in metro jurisdictions (Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune)

• More than ₹20 lakh in non-metro jurisdictions

The scrutiny trigger applies when the addition has either become final or has been upheld in favour of the tax department by appellate authorities.

Taxpayers with recurring disputes resulting in significant additions in earlier assessments will be selected for scrutiny, said the CBDT.

Even taxpayers with no prior compliance issues can be scrutinised if law enforcement or intelligence agencies provide specific information suggesting evasion, the CBDT said.

"Specific information pointing out tax-evasion for the relevant assessment year is provided by any law-enforcement agency," the circular stated.

What taxpayers should focus on

• Accurate reporting of income from all sources.

• Consistency between ITR disclosures and financial records.

• Proper documentation for deductions and exemptions.

• Correct reporting of high-value transactions.

As a result, maintaining accurate records, reporting income correctly, and ensuring consistency across financial disclosures have become more important than ever.