Tax scrutiny isn’t random, it’s strategic! The Central Board of Direct Taxes (CBDT) has developed an advanced system that helps the Income Tax Department to identify the returns that. Tax scrutiny isn’t random—it’s strategic! The CBDT has developed an advanced system that helps the Income Tax Department pinpoint returns that demand a closer look.
On February 27, 2025, CBDT released an Office Memorandum (OM) clarifying the implementation of the Risk Management Strategy (RMS) under the Income-tax Act, 1961. Following amendments introduced by the Finance (No. 2) Act, 2024, particularly in Sections 148, 149, 151 and 152, field formations sought clarity on the applicability of the earlier OM dated January 12, 2024.
The memorandum underscores the need for ongoing monitoring and evaluation of RMS implementation, aiming to enhance tax assessments and investigations, with a particular focus on income escapement cases under Section 147.
Important Clarifications:
- Exemption from RMS for Search and Survey Cases: Information obtained from search and survey actions is not required to be uploaded on CRIU/VRU functionalities, as these cases do not warrant RMS execution. Instead, such information must be directly forwarded to the Jurisdictional Assessing Officer (JAO) for appropriate action under Section 147 of the Act.
- Applicability of Pre-Amended Sections 147-151: For searches or surveys conducted between April 1, 2021, and September 1, 2024, the provisions of Sections 147 to 151, as they existed before the amendment, will remain applicable. In such cases, the Assessing Officer already possesses sufficient information indicating income escapement, making RMS execution unnecessary.
Accordingly, the Assessing Officer is deemed to have credible information suggesting tax evasion. Therefore, such information does not require uploading on the CRIU/VRU functionalities, as RMS execution is not mandated. - Compliance Deadline: Field officers must diligently identify and forward information requiring action under Section 147. All relevant details should be sent directly to the Jurisdictional Assessing Officer (JAO) in a timely manner to ensure smooth assessments. Supervisory authorities are responsible for ensuring strict compliance with this directive.
Impact on Tax Administration:
- Boosting Efficiency: These clarifications are expected to streamline income tax assessments and risk management, ensuring accurate investigations by jurisdictional officers. By refining information processing criteria, CBDT enhances risk assessment accuracy, minimizing income escapement.
- Seamless Compliance: The memorandum establishes clear procedures to eliminate bottlenecks in tax administration, ensuring smoother and more efficient processing of assessments.
Key Recommendations for Tax Professionals and Businesses:
- Follow the Directives: Compliance with these guidelines is essential to prevent procedural delays and ensure smooth tax assessments.
- Stay Updated: Regularly review CBDT’s official communications for the latest clarifications and procedural updates, ensuring smoother assessments and timely resolution of tax-related issues.
The OM reinforces CBDT’s commitment to efficient tax assessments by refining the Risk Management Strategy. Clear directives aim to streamline compliance, reduce delays, and enhance accuracy. Taxpayers and professionals must stay updated to ensure smooth assessments and timely resolutions.