TaxTMI 
TaxTMI 
19 Oct 2026 
The circular dt. 04.06.2026. is reproduced below with highlights added for an easy analysis:
F.No.225/56/2026/ITA-II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
10018, Kartavya Bhawan 1, New Delhi,
The 4th June, 2026
To
All Pr. Chief Commissioners of Income-tax/ Chief Commissioners of Income-tax
All Pr. Director Generals of Income-tax/ Director Generals of Income-tax.
Madam/Sir,
Subject: Guidelines for Compulsory Selection of returns for Complete Scrutiny during the Financial Year 2026-27 - procedure for compulsory selection in such cases - reg.
Kindly refer to the above.
2. The Guidelines for Compulsory Selection of returns filed during the financial year 2025-26 under the Income-tax, Act 1961 are hereby issued in pursuance of Section 536(2)(c) of the Income-tax Act, 2025. The parameters for compulsory selection of returns for complete scrutiny during Financial Year 2026-27 and procedure for compulsory selection in such cases are prescribed as under:
| Systems Scenario code | Parameters | Procedures |
| CS 01 | Cases pertaining to survey u/s 133A of the Income-tax Act,1961 - 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. | Cases shall be selected for compulsory scrutiny under this parameter by Directorate of Income-tax (Systems) with the approval of the DGIT(Systems), Delhi on the basis of information of survey cases provided by Commissioner (OSD) (Investigation), CBDT. Notice u/s 143(2) of the Income-tax Act, 1961 shall be served on the assessee through the Prescribed Income-tax Authority or the Assessing Officer concerned. The Pr. CCSIT/ Pr. DGSIT/ DGsIT(Inv.)/ CCsIT(Central) shall provide consolidated list of cases in respect of their jurisdiction to be selected under this parameter to the Commissioner (OSD) (Investigation), CBDT, in the format prescribed by the Commissioner (OSD) (Investigation), CBDT. If any case is lying outside Central Charges, the Pr. CIT/ Pr. DIT/ CIT/ DIT concerned shall ensure that such case is transferred to the Central Charge within 15 days of service of notice under section 143(2) of the Income-tax Act, 1961. (For Assessing Officers in International Taxation and Central Charges refer para 3 at page no.5) |
| CS 02 | Cases pertaining to Search initiated or Requisition made Case(s) of the assessee(s), in whose case Search u/s 132 of the Income-tax Act, 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 provisions of section 158BA (6) of the said Act. | Cases shall be selected for compulsory scrutiny by the Assessing Officer concerned, with prior administrative approval of Pr. CIT/ Pr. DIT/ CIT/ DIT concerned. If any case is lying outside Central Charges, the Pr. CIT/ Pr. DIT/ CIT/ DIT concerned shall ensure that such case is transferred to Central Charge within 15 days of service of notice under section 143(2) of the Income-tax Act, 1961. (For Assessing Officers in International Taxation and Central Charges refer para 3 at page no.5) |
| CS 03 | Cases where notice u/s 148 of the Income-tax Act, 1961 has been issued | |
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| (i) Cases wherein search & seizure action has been initiated on or after the 01.04.2021 but before 01.09.2024 or survey action conducted on or after the 01.04.2021: | The Jurisdictional Assessing Officer (JAO) concerned shall serve the notice u/s 143(2) of the Income-tax Act, 1961 wherein return has been furnished. If any case is lying outside central charges after the issue of such notice, Pr.CIT/Pr.DIT/CIT/DIT concerned shall ensure that such cases are transferred to central charges u/s 127 of the said Act, only if covered by the Board's guidelines under F. No. 299/107/2013-IT (Inv.III)/1568 dated 25.04.2014. Jurisdictional Assessing Officers (JAOs) shall upload the underlying documents on the basis of which notice u/s 148 of the said Act was issued, wherein return has been furnished or has not been furnished. |
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| (ii) Cases, other than search & seizure/survey, wherein notice u/s 148 of the said Act has been issued and which are to be completed on or before 31.03.2027: | The Directorate of Income-tax (Systems) shall forward these cases to National Faceless Assessment Centre (NaFAC), which will take further necessary action. Notice u/s 143(2) of the said Act shall be served on the assessee through NaFAC, where return has been furnished. Jurisdictional Assessing Officers (JAOs) shall upload the underlying documents on the basis of which notice u/s 148 of the said Act was issued, wherein return has been furnished or has not been furnished. (For Assessing Officers in International Taxation and Central Charges refer para 3 at page no.5) |
| CS 04 | Cases related to registration/ approval under various sections of the Income- tax Act, 1961, such as 12A, 12AB, 35(1)(ii)/ (iia)/ (iii), 10(23C)(iv)/(v)/(vi)/(via), etc. Cases where registration /approval under various sections of the said Act, such as section 12A, 12AB, 35(1)(ii)/(iia)/(iii), 10(23C)(iv)/(v)/ (vi)/(via) etc., (i) have not been granted or have been cancelled/withdrawn by the Competent Authority on or before 31.03.2025 and, (ii) the assessee has been found to be claiming tax-exemption/deduction in the return filed in ITR-7, However, where such orders of withdrawal of registration/approval have been reversed/set-aside in appellate proceedings, those cases will not be selected under this parameter. | Cases shall be selected for compulsory scrutiny using this parameter by Directorate of Income-tax (Systems) with the approval of DGIT(Systems), Delhi on the basis of returns filed by these entities in FY 2025-26. Notice u/s 143(2) of the Income-tax Act, 1961 shall be served on the assessee through NaFAC or the prescribed income-tax authority. The Jurisdictional Assessing Officers shall upload the underlying documents containing specific information regarding this parameter immediately. (For Assessing Officers in International Taxation and Central Charges refer para 3 at page no.5) |
| CS05 | Cases involving addition in an earlier assessment year(s) on a recurring issue of law or fact and/or law and fact: Where the addition in an earlier assessment year(s) on a recurring issue of law or fact and/or law and fact (including transfer pricing issue) is: a. exceeding Rs. 50 Lakh in eight metro charges at Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune; b. exceeding Rs. 20 lakh in charges other than the eight metro charges; and, where such an addition: (i) has become final, as no further appeal has been preferred against the assessment order; or (ii) has been upheld by the Appellate Authorities in favour of Revenue, even if further appeal of assessee is pending, against such order. | For Parameters CS 05 and CS 06: The Jurisdictional Assessing Officers (JAOs) shall prepare a list of cases falling under this parameter and the same may be submitted for the administrative approval of Pr.CIT/Pr.DIT/CIT/DIT concerned. The consolidated list of such cases shall be submitted by the Pr.CIT/Pr.DIT/CIT/DIT to the Pr.CCIT concerned. Pr. CCIT concerned shall forward this list of cases to the Directorate of Income-tax (Systems) latest by 15.06.2026. Notice u/s 143(2) of the Income-tax Act, 1961 shall be served on the assessee through NaFAC. The Jurisdictional Assessing Officers shall upload the underlying documents containing specific information regarding this parameter immediately. (For Assessing Officers in International Taxation and Central Charges refer para 3 at page no.5) |
| CS06 | Cases related to specific information regarding tax-evasion: Cases, in respect of which: (a) specific information pointing out tax- evasion for the relevant assessment year is provided by any law-enforcement agency, (Investigation Wing/ Intelligence/ Regulatory Authority/ Agency, etc.) and (b) the return for the relevant assessment year is furnished by the assessee. It is clarified that where return has been furnished in response to notice u/s 142(1) of the Income-tax Act, 1961 and such notice u/s 142(1) of the said Act was issued in connection with information contained in NMS Cycle/ AIS/ Statement of Financial Transactions (SFT)/ CPC- TDS information/ information received from Directorate of I&CI, such return will not be taken up for compulsory scrutiny unless falling under Parameter CS 06. |
3. For Assessing Officers in International Taxation and Central charges: Cases may be selected for compulsory scrutiny by the International Taxation and Central charges following the above prescribed parameters at Para 2 with prior administrative approval of Pr.CIT/Pr.DIT/CIT/DIT concerned and these selected cases shall continue to be handled by International Taxation and Central Circle charges respectively, as earlier. It is further clarified that communication to NaFAC for access and/or further action after selection for Compulsory Scrutiny will not apply to the International Taxation and Central charges.
4. Time limit: As per the proviso to section 143(2) of the Income-tax Act, 1961 and in terms of section 536(2)(c) of the Income-tax Act, 2025, the time limit for service of notice u/s 143(2) of the Income-tax Act, 1961 for the ITRs filed in the Financial Year (FY) 2025-26 is 30.06.2026.
5. These instructions may be brought to the notice of all concerned for necessary compliance.
(Dr. Indu Bala)
Deputy Secretary to Government of India
This circular is a bit different from other circulars issued in earlier periods. The circular is silent about informing assessee, through notice u.s. 143.2 the manner and scope of selection of return of income.
This above CBDT circular outlines the guidelines for the compulsory selection of income tax returns for complete scrutiny during the Financial Year (FY) 2026-27 in respect to return filed during FY 2025-26.
While the procedural actions are largely carried out under the provisions of the older Income-tax Act, 1961 (such as issuing notices under Section 143(2) or handling surveys under Section 133A), paragraph 2 explicitly states that these guidelines are issued in pursuance of Section 536(2)(c) of the Income-tax Act, 2025. This reflects a transitional phase and co-existence between the two acts during this period.
Analysis of the compulsory scrutiny parameters (CS 01 to CS 06), their thresholds, and their administrative workflows are provided below:
Summary Table of Scrutiny Parameters & Workflows
| Scenario Code | Core Trigger Parameter | Action Taken By | Administrative / Transfer Requirements |
| CS 01 | Surveys u/s 133A conducted on or after April 1, 2024. | Directorate of Income-tax (Systems) + DGIT (Systems), Delhi. | Must transfer to Central Charge within 15 days of the Section 143(2) notice if lying outside it. |
| CS 02 | Search u/s 132 or Requisition u/s 132A on or after April 1, 2024. (Special block assessment rules for searches post Sept 1, 2024). | Concerned Assessing Officer (AO). | Requires prior administrative approval of Pr. CIT / CIT. Must transfer to Central Charge within 15 days. |
| CS 03 (i) | Section 148 Notices for older search/seizure (Apr 1, 2021 - Aug 31, 2024) or surveys post Apr 1, 2021. | Jurisdictional Assessing Officer (JAO). | JAO must upload underlying documents. Transfer to Central Charge only if covered by 2014 Board guidelines. |
| CS 03 (ii) | Section 148 Notices for non-search/survey cases due for completion on or before March 31, 2027. | Forwarded to National Faceless Assessment Centre (NaFAC). | NaFAC serves the notice. JAO must upload all underlying evidentiary documents. |
| CS 04 | Exempt Entities (ITR-7) whose registration (u/s 12A, 10(23C), etc.) was cancelled/withdrawn on or before March 31, 2025, but who still claimed tax exemptions. | Directorate of Income-tax (Systems). | Notice served via NaFAC. Excludes cases where withdrawal orders were reversed in appeal. |
| CS 05 | Recurring Additions (including Transfer Pricing) from earlier years that are finalized or upheld in favor of the Revenue. | JAO identifies \(\rightarrow \) Pr. CIT approves \(\rightarrow \) Pr. CCIT forwards to Systems. | Thresholds: > Rs. 50 Lakh for 8 Metro charges; > Rs. 20 Lakh for non-metros. Notice via NaFAC. |
| CS 06 | Specific Tax Evasion Info received from law enforcement/intelligence agencies, where a return has been filed. | JAO processes following the same chain as CS 05. | Consolidated lists for CS 05 & CS 06 must have reached the Systems Directorate by June 15, 2026. |
Key Structural Insights:
1. Shift Toward Centralization and Faceless Assessment
The circular heavily emphasizes a split between centralized data processing and faceless execution. For data-driven or document-heavy parameters (CS 03(ii), CS 04, CS 05, CS 06), the National Faceless Assessment Centre (NaFAC) is designated to serve notices and likely handle the assessments. This minimizes physical interaction and local bias.
2. Jurisdictional Accountability & Evidentiary Strictness
For cases handled under CS 03 (reassessment notices) and CS 04/05, the Jurisdictional Assessing Officers (JAOs) are strictly mandated to upload underlying documents immediately. This ensures that when a file is pushed to a faceless or electronic stream, the digital record contains the complete factual foundation or "reason to believe" documents.
3. Strict Territorial Boundaries for Search and Surveys
For parameters CS 01 and CS 02 (Surveys and Searches), the CBDT mandates a strict 15-day timeline from the service of the Section 143(2) notice to shift cases into Central Charges if they are currently sitting in ordinary territorial circles. This ensures that high-stakes tax evasion cases are pooled with specialized investigation units.
4. Metro vs. Non-Metro Stratification (CS 05)
The CBDT applies a risk-reward threshold for past recurring additions. Minor disputes are kept out of compulsory scrutiny by setting a high bar:
- Metro Charges (Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, Pune): Monitored only if the recurring disputed addition exceeds Rs. 50 Lakh.
- Other Charges: Monitored if it exceeds Rs. 20 Lakh.
| Core Focus | Key Mandates & Deadlines |
| Para 3 | International Taxation & Central Charges | Excluded from the NaFAC/Faceless stream. Retained entirely by specialized local charges with Pr. CIT/CIT approval. |
| Para 4 | Statutory Cut-off Date |
Notices under Section 143(2) for returns filed in FY 2025-26 must be served by June 30, 2026. |
Other observations:
The circular is silent about information to be furnished to assessee:
Manner of intimation to assessee about selection of case for scrutiny - manner and scope of scrutiny. Like manual or faceless, limited or complete.
Whether case is selected by CASS or otherwise.
List of items for scrutiny to be provided to assessee and when or with which notice.
Old legacy cases where survey or search took place long ago but file of assessee has not been re transferred to regular charge of JAO, although it should have been.
And also files within International Taxation charge due to earlier years transactions but having no such transactions during last several year, but file is not transferred to regular charge of JAO.