'Trust restored': Officials to ask 'relevant' questions during tax scrutiny

Business Standard

4 hours ago

The CBDT has asked its officers to ask 'relevant' and 'specific' questions while scrutinising tax assessments: a decision that experts say will reduce arbitrariness and harassment.
Ravi Agrawal, chairman of Central Board of Direct Taxes, recently asked Principal Chief Commissioners of Income Tax (PCCITs) to supervise faceless assessing officers and ensure they avoid sending unjustified or vague queries to taxpayers, PTI reported. The directive applies to all scrutiny cases selected for review in FY26.
Suresh Surana, a chartered accountant, said tax notices often seek information on personal expenditure, all bank statements, or explanation for travel or business operations even when these weren't relevant to a case. 'Such queries increased the compliance burden unnecessarily and caused stress to taxpayers,' he said.
'Even salaried taxpayers were asked to justify income already reported in Form 16 and reconciled with TDS data. Business owners were served blanket queries like 'justify business expenses' without context,' said Niyati Shah, chartered accountant and vertical head of personal tax at 1 Finance.
Ashish Mehta, partner at Khaitan & Co, noted that even audited companies have often been asked to submit 'exhaustive details and past-year bank statements.'
How does the CBDT directive help taxpayers?
'This is a step toward restoring trust,' said Shah. 'It forces assessing officers to apply their minds before raising a query and prevents blanket, template-based questioning.'
Surana emphasized that it's especially helpful for senior citizens who rely on pensions or interest income. 'Focused scrutiny will spare them from excessive documentation or irrelevant questions,' he said.
SR Patnaik, partner (Head – Taxation) at Cyril Amarchand Mangaldas, said the move will 'provide clarity by narrowing the scope of enquiry to specific transactions, making it easier for taxpayers to respond effectively.'
Experts say taxpayer must do these things about queries they find irrelevant:
-Respond politely, referencing relevant ITR sections or AIS data
-Escalate the issue under the faceless assessment structure or through a grievance under e-Nivaran
-Cite the CBDT directive to highlight non-compliance
As a last resort, approach the Principal Commissioner or even consider a legal writ, said Patnaik
'It helps to get a tax professional involved if the queries remain repetitive or unjustified,' said Shah
How will the faceless assessment system improve?
The CBDT has placed the onus of quality control on assessment unit (AU) heads. 'This makes AU heads directly responsible for the relevance and clarity of queries,' said Shah. 'Over time, this should reduce 'fishing expeditions' by junior officers.'
Mehta agreed, adding that the new responsibility 'should lead to fewer standardised notices and more case-specific scrutiny.'
Patnaik, however, cautioned that implementation remains key: 'The faceless system is still evolving. Without a way to directly engage with officers, grievances can remain unaddressed unless structural reforms accompany these directives.' 'The faceless assessment system was meant to ensure transparency, but due to poor implementation, it has often led to genuine claims being rejected and even incorrect notices being issued,' said Rashi Khanna, associate partner at DMD Advocates. 'The department must ensure accountability of assessment units, incentivise reasoned orders, and create a feedback mechanism to improve trust and efficiency.'
With enhanced oversight and accountability, the new framework aims to bring more fairness and professionalism to tax scrutiny, a welcome change for compliant taxpayers.