Section 61 lets the officer examine a return, point out discrepancies and ask for an explanation. If the explanation is accepted, that ends the matter; if not, the officer may audit, investigate or raise a demand. It is a check on the self-assessment, not an assessment in itself.
Key points
- Under section 61(1) of the CGST Act, 2017 the proper officer may scrutinise a return and related particulars and inform the registered person of discrepancies, seeking an explanation (Form GST ASMT-10, Rule 99).
- If the explanation is acceptable, the person is informed (ASMT-12) and no further action is taken on it (section 61(2)).
- If no satisfactory explanation is given within thirty days, or an accepted discrepancy is not corrected, the officer may proceed to audit, special audit, inspection or search, or a demand under section 73, 74 or 74A (section 61(3)).
- The Andhra Pradesh and Allahabad High Courts have held that scrutiny is not a condition precedent to a demand resting on other information (Devi Traders, 2023; Neelkanth Entrepreneurs, 2026). The Gauhati High Court has held the section 61 procedure mandatory where a demand rests on a discrepancy in the returns (Pepsico India Holdings, 2025, single judge; the department's appeal is pending).
- Once the explanation has been accepted, a demand on the same discrepancy cannot be raised (Goverdhandham Estate v State of Rajasthan, 2024).
The provisions
61(1)–(3)Scrutiny of returns
Statutory text
(1) The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.
(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.
(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74 1[or section 74A].
*Enforced w.e.f. 1st July, 2017.
1. Inserted by section 129 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
- Rule 99, CGST Rules; Forms GST ASMT-10, ASMT-11, ASMT-12
- Instructions 02/2022-GST and 02/2023-GST — scrutiny SOPs
Cases on this provision
Devi Traders v State of Andhra Pradesh
W.P. No. 3659 of 2023 · 19.06.2023 · Andhra Pradesh High Court, Division Bench (U. Durga Prasad Rao, Venkata Jyothirmai Pratapa JJ.)
- Facts
- A groundnut trader whose registration had been cancelled received a notice under section 74 alleging that it had passed on input tax credit of about Rs. 11.85 lakh for 2018–19 through invoices without supply. The notice rested on information from the DGGI; no scrutiny of the returns had been carried out. The trader argued that section 74 could not be invoked without first scrutinising the return under section 61.
- Held
- Section 74 begins "where it appears to the proper officer"; it makes no reference to section 61 or 65. The material on which it appears to the officer that tax has been short paid may come from scrutiny, from audit, or from any other source. Scrutiny under section 61 and proceedings under section 74 are separate. The petition was disposed of with liberty to reply to the notice.
- Here
- A demand resting on independent material may be raised without a prior ASMT-10. The Allahabad High Court took the same view of section 74A in Neelkanth Entrepreneurs (2026), while noting that scrutiny may be a mandatory safeguard where the only material is a return discrepancy; the Gauhati High Court took that stricter view in Pepsico (2025).
Goverdhandham Estate Pvt Ltd v State of Rajasthan
D.B. Civil Writ Petition No. 16702/2023 · 17.01.2024 · Rajasthan High Court, Division Bench (Manindra Mohan Shrivastava ACJ, Shubha Mehta J.)
- Facts
- A hotel claimed input tax credit on lifts and air-conditioners. A scrutiny notice in ASMT-10 questioned it; the hotel explained that they were plant and machinery. The officer issued ASMT-12 accepting the explanation, yet also issued a show cause notice under section 73 demanding reversal of about Rs. 18.45 lakh on the same ground.
- Held
- Where proceedings rest on discrepancies found in scrutiny, section 61 requires the explanation to be considered; once it is accepted, no further proceedings can be drawn on that discrepancy. The show cause notice was set aside.
- Here
- Sub-section (2) is binding on the department: an ASMT-12 accepting an explanation closes the point, and a demand on the same discrepancy is without jurisdiction unless fresh material emerges.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Is an ASMT-10 scrutiny notice required before a GST demand notice?
- Not settled. The Andhra Pradesh and Allahabad High Courts have held that scrutiny under section 61 is not a precondition where the demand rests on other information (Devi Traders, 2023; Neelkanth Entrepreneurs, 2026). The Gauhati High Court has held it mandatory where the demand rests on a discrepancy in the returns (Pepsico India Holdings, 2025; appeal pending). If the officer accepts the explanation in ASMT-12, a demand on the same point cannot follow (Goverdhandham Estate, Rajasthan HC, 2024).
- How long does a taxpayer have to reply to ASMT-10?
- Thirty days, or a longer period the officer allows (section 61(3) CGST).
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The notice in ASMT-10 must identify the discrepancy and, where possible, quantify it; the taxpayer replies in ASMT-11 and may pay any shortfall with interest. The CBIC has issued standard operating procedures for scrutiny (Instructions 02/2022-GST and 02/2023-GST), which select returns on risk parameters and fix timelines.
Scrutiny is one of several routes by which a shortfall can come to light; audit under section 65 and investigation are others. The demand provisions open with "where it appears to the proper officer", and on that basis the Andhra Pradesh and Allahabad High Courts have not treated scrutiny as a gateway where the demand rests on independent material. The Gauhati High Court in Pepsico India Holdings v Union of India (19.09.2025, single judge) held the section 61 procedure mandatory where a demand rests on a discrepancy in the returns themselves; a Division Bench has admitted the department's appeal, so the point is open. Where the officer has scrutinised a return and accepted the explanation, sub-section (2) means what it says.