Under I-T Lens: 1.6 Lakh Tax Returns Set For Scrutiny; M&A Discrepancies Among Red Flags — Profit Exclusive

In a major compliance drive, the Income Tax Department has selected around 1.65 lakh cases for scrutiny for assessment year 2025, ahead of the June 30 deadline — the last date to issue notices for ITRs filed in FY 2024–25.

This marks a sharp surge, with the case volume three to four times higher than in previous years.

According to official sources, over one lakh notices have already been issued to individuals and companies, under Section 143(2) of the Income Tax Act, 1961. These notices initiate the process of detailed assessment and verification of the income tax returns filed.

Key parameters that prompted the selection of cases this year include: Unusual cash deposits, unexplained substantial bank credits, capital introduced without disclosed sources, turnover mismatches when compared to GST data, and merger and acquisition-related discrepancies.

CASS (Computer Assisted Scrutiny Selection) is a data-driven, risk-based system used by the Income Tax Department to flag returns for scrutiny. It selects cases based on predefined risk parameters and inconsistencies in reported income, expenditure, or transactions.

Additionally, cases involving high-risk non-filers have also been flagged under the Risk Management Strategy (RMS) framework, bringing the total number of flagged cases to between 2.5 and 3 lakh nationwide.

In FY22, FY23, and FY24, the average number of scrutiny cases hovered around 50,000 to 60,000 annually. In comparison, AY 2025 has seen a sharp spike, driven by enhanced data analytics, tighter compliance filters, and integration of financial databases.