Every year around this time, I get the same worried message from a handful of clients. “Shashank, can the department just pick my return for scrutiny? Out of nowhere?”
The honest answer is yes, but not out of nowhere. There is a system to it, and a good part of that system is written down in black and white. On 4 June 2026, the CBDT issued its guidelines for compulsory selection of returns for complete scrutiny during the financial year 2026-27. These cover returns you filed during FY 2025-26, mostly for income earned in the year ended 31 March 2025.
If you run a business, this is worth understanding properly, not because it should scare you, but because the opposite is true. Once you know the six situations that trigger mandatory scrutiny, you can look at your own position honestly and stop worrying about the dozens of scenarios that don’t apply.
Here is what you will take away:
- The difference between compulsory scrutiny and the everyday “mismatch” notices that cause far more panic than they should
- The six exact categories CBDT has laid down, in plain language, with the thresholds that matter
- Worked examples so you can place your own business on the map
- The one deadline that controls all of this, and why it works in your favour
- A short checklist if you think you might be in scope
First, what “compulsory scrutiny” actually means
There are two broad ways a return gets selected for detailed examination.
The first is risk-based selection, handled by the computer-assisted system (CASS). The system runs your return through risk parameters and data-matching, and flags some for a closer look. This is algorithmic, and most routine scrutiny happens this way.
The second is compulsory selection. Here, CBDT itself lays down specific categories every year. If your case falls into one of them, the return is picked. There is no algorithm and no discretion at the selection stage. The category itself is the trigger.
This post is about the second kind. The guidelines I am discussing are the compulsory list for FY 2026-27, and they cover six parameters, labelled CS-01 to CS-06 in the circular.
One clarification up front, because it removes a lot of needless anxiety. A notice asking you to file a return or explain something, issued only because of an AIS entry, an SFT report, a TDS mismatch, or a CPC data point, does not by itself land you in compulsory scrutiny. The circular says this explicitly. Those routine information-driven notices are a different, lighter-touch process. You only land in the compulsory net if your case independently fits one of the six categories below.
Hold on to that distinction. Most of the “is this scrutiny?” messages I receive are actually about routine AIS or 26AS queries, which are nowhere near as serious as a full compulsory selection.
The six categories, in plain language
Let me walk through each one the way I would explain it across my desk, and then ground the more common ones in an example.
CS-01: You had a survey under Section 133A
A survey under Section 133A is when the department visits your business premises during working hours to inspect books, stock, and cash. It is not a search (no sealing, no seizure of your home), but it is a formal action.
If a survey was conducted on your business on or after 1 April 2024, the relevant return is compulsorily selected for scrutiny. This one is automatic. The selection is made centrally by the Directorate of Systems, and the case is typically moved to a Central Charge within 15 days of the scrutiny notice being served.
There is one carve-out worth noting: a survey purely to verify TDS compliance, under Section 133A(2A), does not trigger this category. It is the general survey that counts.
Example. Suppose the department surveyed a steel and cement trading firm in October 2024, checked physical stock against the books, and recorded a few statements. Even if nothing major was found that day and the firm filed its return normally, that return is now in the compulsory scrutiny list. The survey itself is the trigger, regardless of what it did or did not turn up.
CS-02: You had a search or requisition under Section 132 or 132A
This is the serious one. A search under Section 132 is the full action, what people loosely call a “raid”, with authority to enter, search, and seize. A requisition under Section 132A is where the department calls for assets or books already taken by another agency.
If a search was initiated or a requisition made on or after 1 April 2024, the case is compulsorily selected. For searches on or after 1 September 2024, the selection follows the special block-assessment scheme that now applies to search cases.
If you have been through a search, you already know it, and you are almost certainly already working with a professional. So I will not dwell here, except to say the scrutiny that follows is a certainty, not a risk, and the preparation needs to start immediately.
CS-03: A reopening notice under Section 148 has been issued
Section 148 is the reassessment provision. It is used when the department believes income has escaped assessment in an earlier year and wants to reopen it.
The circular splits this into two situations. The first covers cases tied to an older search or survey (broadly, search action on or after 1 April 2021 but before 1 September 2024, or survey on or after 1 April 2021). The second covers other reopening cases that are due to be completed by 31 March 2027, which are routed through the faceless assessment system.
In both situations, the department is required to share the underlying material on which the reopening is based. That is an important right for you. If your return is being reopened, you are entitled to see the basis.
Example. Say a distributor received a Section 148 notice reopening an earlier year because of information suggesting under-reported turnover. That reopened return now sits in the compulsory scrutiny framework, and the assessing officer is expected to upload the documents that justified the reopening. The first thing I would do is study that material closely, because the validity of the reopening itself is often contestable.
CS-04: Trusts and institutions with a registration problem
This category is narrow and applies mainly to charitable trusts, institutions, and similar entities that file in ITR-7.
In simple terms: if your registration or approval under the relevant exemption provisions (such as 12A, 12AB, or the various 10(23C) approvals) was refused, cancelled, or withdrawn on or before 31 March 2025, and you still claimed exemption or deduction in your return, the case is compulsorily selected.
There is a fairness safeguard built in. If the cancellation was later reversed or set aside on appeal, the case is not picked under this parameter.
Example. A local educational trust whose 12AB registration was cancelled in 2024 but which still filed claiming full exemption would fall squarely here. If you run or advise any trust or NGO, check the registration status against what was actually claimed in the return. This is the category most likely to catch a well-meaning institution that did not realise the cancellation had consequences for the very next return.
CS-05: A recurring addition from an earlier year, above the threshold
This is the one most relevant to established businesses, and the one worth reading twice.
If, in an earlier assessment year, an addition was made to your income on a recurring issue of law or fact, and that addition has either become final or was upheld in favour of the Revenue on appeal, and the amount crosses the threshold, then your current return is compulsorily selected.
The thresholds are:
- More than Rs. 50 lakh in the eight metro charges (Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune)
- More than Rs. 20 lakh everywhere else, which includes Goa
The logic is straightforward. If a particular issue went against you once and the same issue runs through your accounts year after year, the department wants to keep watching it until it is settled. “Recurring” is the key word. A one-time, settled, non-repeating addition is not the target. An issue that recurs in your books is.
Example. Imagine a manufacturing firm outside the metros where, in an earlier year, the department disallowed roughly Rs. 30 lakh of a particular expense claim, and that disallowance was upheld on appeal. If the firm keeps claiming the same kind of expense in the same way, the current return is liable to be picked up under CS-05, because the amount is above the Rs. 20 lakh non-metro threshold and the issue recurs. For a Goa business, that Rs. 20 lakh line is the one to keep in mind, not the Rs. 50 lakh metro figure.
CS-06: Specific tax-evasion information from an enforcement agency
This category covers cases where a law-enforcement or intelligence body, a regulator, or the investigation wing has passed on specific information pointing to tax evasion for a particular year, and you have filed a return for that year.
The important word here is “specific”. This is not a routine data mismatch. It is targeted information from an agency. And the circular is careful to repeat that ordinary AIS, SFT, or TDS-driven notices do not fall here unless they amount to specific tax-evasion information of this kind.
For the large majority of honest businesses, this category simply will not arise. I mention it mainly so the picture is complete.
So how worried should you actually be?
For most of my clients, the honest answer is: not very, and here is why.
Look back at the six categories. Five of them require something specific and identifiable to have already happened to you: a survey, a search, a reopening notice, a registration cancellation, or an addition that was upheld on appeal. You would know if any of these had occurred. They are not silent.
The sixth, specific evasion information, is targeted and rare for compliant taxpayers.
What this means is that compulsory scrutiny is not random. If none of these six things has happened in your world, you are not in the compulsory net this year. That does not make you immune to risk-based (CASS) selection, which is a separate track, but it does mean you can stop losing sleep over the compulsory list specifically.
The people who genuinely need to act are a smaller, identifiable group: those who have had a survey or search since April 2024, those carrying a reopening notice, trusts with a registration issue, and businesses sitting on a recurring addition above the threshold. If that is you, the next two sections matter.
The deadline that controls everything
Here is the part that actually works in your favour.
A compulsory scrutiny cannot proceed unless the department serves you a notice under Section 143(2) within the prescribed time. For returns filed during FY 2025-26, that last date is 30 June 2026.
Read that plainly. If the department intends to take up your return under these guidelines, the 143(2) notice has to reach you on or before 30 June 2026. The circular directs officers to ensure strict compliance with this limit.
What this gives you is certainty on timing. If you are in one of the at-risk categories, watch your registered email and the income tax portal closely through the rest of June. And if 30 June passes with no Section 143(2) notice for a given year, that route of compulsory scrutiny for that year has closed.
A word of caution so I am not misread. This deadline is about the 143(2) notice for compulsory scrutiny. It does not shut down every other kind of proceeding. Reassessment under Section 148, for instance, runs on its own separate timeline. So “30 June passed, I am completely safe forever” is the wrong takeaway. The correct one is narrower: for compulsory scrutiny of a return filed in FY 2025-26, the 143(2) notice must come by 30 June 2026.
If you think you are in scope: a short checklist
If one of the six categories fits your situation, do these things now rather than after a notice lands.
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Confirm which category applies. Be precise. A TDS-verification survey under 133A(2A) is not the same as a general survey. A routine AIS query is not CS-06. Getting the category right tells you exactly what the department is entitled to examine.
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Pull the relevant year’s records together. Books, bank statements, invoices, the return and its computation, and the tax audit report where applicable. If the trigger is an earlier survey or addition, gather everything connected to that specific issue.
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For a CS-05 recurring addition, study the earlier order. The whole basis of selection is that a particular issue recurs. Understand precisely what was added, on what reasoning, and how your current year’s treatment compares. This is where the case is won or lost.
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For a CS-03 reopening, demand and read the underlying material. You are entitled to the documents on which the reopening rests. The reopening’s own validity is often the strongest line of defence, separate from the merits.
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For a CS-04 trust case, reconcile registration status with what was claimed. If a cancellation was reversed on appeal, that fact takes you out of this parameter, so have the appellate order ready.
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Watch the portal and your email through June. The 143(2) notice is served electronically. Do not let it sit unread. The clock on your response starts when it is served, not when you happen to notice it.
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Engage a professional early if a notice arrives. I will say what I always say: in these matters, the quality of the first response shapes most of what follows. A faceless assessment is built almost entirely on written submissions, so the written record you create at the start carries enormous weight.
A note on the faceless system
Most of these scrutinies, other than search and certain international cases, are conducted through the faceless assessment system. You will not meet an officer across a table. Everything happens through the portal: the notice, your reply, the documents, the questions, the order.
This changes how you should prepare. There is no scope to explain things verbally or read the room. Your submission has to be self-contained, well-organised, and supported by documents that speak for themselves. A reply that would have worked in a face-to-face hearing, where you could fill gaps by talking, can fall flat in a faceless one. Treat every written submission as the whole of your case, because that is exactly what it is.
Key takeaways
- Compulsory scrutiny for FY 2026-27 is governed by six specific categories (CS-01 to CS-06). It is rule-based, not random, and five of the six require an identifiable event you would already know about.
- The categories most relevant to ordinary businesses are CS-01 (survey since April 2024) and CS-05 (a recurring addition above Rs. 20 lakh outside the metros, or Rs. 50 lakh within them, upheld on appeal). For Goa businesses, the Rs. 20 lakh line is the one that matters.
- Routine AIS, SFT, or TDS mismatch notices do not amount to compulsory scrutiny by themselves. Do not confuse the two.
- The controlling deadline is 30 June 2026. A Section 143(2) notice for compulsory scrutiny of a return filed in FY 2025-26 must reach you by then. Watch the portal closely through June.
- If you are in scope, the work starts before the notice: identify the category, assemble the records, and treat your first written submission in a faceless assessment as the whole of your defence.
This post is written for general awareness and shouldn’t be read as legal or tax advice on any specific case. The categories, thresholds, and deadlines referenced here are based on the CBDT guidelines dated 4 June 2026 (F.No. 225/56/2026/ITA-II) as I understand them at the time of writing. Section references span both the Income-tax Act, 1961 and the Income-tax Act, 2025, and readers should verify the current position and their own facts before acting.