A Complete Overview of Income Tax Information Systems: From Form 26AS to Faceless Assessment

Summary: The Income Tax Department (ITD) collects taxpayer information through Form 26AS and the Annual Information Statement (AIS), which provide detailed tax-related data such as TDS, TCS, refunds, and high-value transactions. Form 26AS consolidates tax credits and financial transactions, while AIS offers a comprehensive view, allowing taxpayers to provide feedback and ensure accuracy. Discrepancies in tax credits can be resolved by informing deductors or correcting challan details in the Income Tax Return (ITR). The ITD also uses systems like CPC-ITR, ITBA, and CPC-FAS for processing returns, assessments, and refunds, ensuring transparency and efficiency. Faceless assessments under Section 144B further streamline the process, reducing physical interactions and enhancing taxpayer compliance.

Part A : Collection of Information

The Income Tax Department (ITD) collects taxpayer information through various systems and processes, primarily using Form 26AS and the Annual Information Statement (AIS). Here’s how it works:

1. Understanding Form 26AS and Tax Credits

Form 26AS serves as a consolidated Annual Information Statement for a particular Financial Year (FY). It provides a comprehensive overview of various tax-related details, ensuring transparency and ease of access for taxpayers. The following information is included in Form 26AS

• Tax Deducted at Source (TDS): Details of taxes deducted by employers, banks, and other entities.
• Tax Collected at Source (TCS): Information on taxes collected by entities on behalf of the taxpayer.
• Advance Tax / Self-Assessment Tax / Regular Assessment Tax: Information on taxes deposited by the taxpayer.
• Refunds: Details of any refunds received during the financial year.
• Specified Financial Transactions (SFT): Information on high-value financial transactions, if any.
• Tax Deducted on the Sale of Immovable Property (Section 194IA): Relevant for sellers of immovable properties.
• TDS Defaults: Any defaults in TDS payments.
• Demand and Refund Information: Details of tax demands and refunds.
• Pending and Completed Proceedings: Information on ongoing and completed tax proceedings.

1.1 Addressing Discrepancies in Self-Assessment / Advance Tax

If your Self-Assessment or Advance Tax payments are not reflected in your Annual Tax Credit Statement (Form 26AS), it is essential to validate the Challan number and your PAN. This ensures that the payments are correctly attributed to your account.

1.2 Identifying Tax Credit Mismatches

To determine if there is a tax credit mismatch, you need to access the Tax Credit Mismatch page and enter your details. Here, you can check for any discrepancies between the respective TDS / TCS / other challan amounts and the amounts reflected in Form 26AS. If there is a mismatch, a message indicating the mismatch will be displayed. Conversely, if there is no mismatch, a message stating that the Tax Credit Claimed is Fully Matched with Tax Credit Available in Form 26AS will be shown.

1.3 Resolving Tax Credit Mismatches

In case of a mismatch in TDS

• Inform the employer or deductor responsible for deducting TDS from your income. They need to file a revised TDS return to rectify the mismatch.
• For other tax credit mismatches (e.g., Advance Tax or Self-Assessment Tax) as provided in your Income Tax Return (ITR)
• It is crucial to ensure that you accurately quote the challan details in your ITR. Note that the tax credit claimed in your ITR is restricted to the amount reflected in Form 26AS.

1.4 Importance of Accuracy in Form 26AS

Maintaining accuracy in Form 26AS is vital for seamless tax processing. Any discrepancies can lead to complications in tax assessments and refunds. Therefore, regular monitoring and validation of the information in Form 26AS are essential to ensure that your tax credits are accurately reflected and any issues are promptly addressed.

1.5 By staying vigilant and proactive, you can avoid potential tax-related complications and ensure compliance with tax regulations. For any further assistance or clarification, you can always refer to the Income Tax Department’s guidelines or seek professional advice.

2. Annual Information Statement (AIS)

The Annual Information Statement (AIS) provides a comprehensive view of information for a taxpayer and is displayed in Form 26AS. Taxpayers can provide feedback on the information shown in AIS, which displays both the reported value and the modified value (i.e., the value after considering taxpayer feedback) for each section (e.g., TDS, SFT, Other Information).

2.1 Objectives of AIS

• Displays complete information to the taxpayer with a facility to capture online feedback.
• Promotes voluntary compliance and enables seamless pre-filling of returns.
• Deters non-compliance.

2.2 Components of Annual Information Statement (AIS)

The AIS is divided into two parts

• Part A: General Information

Displays general information pertaining to the taxpayer, including PAN, masked Aadhaar number, name, date of birth/incorporation/formation, mobile number, email address, and address.

• Part B – TDS/TCS Information

Displays information related to tax deducted/collected at source, including the information code, description, and value.

• Other Sections

> SFT Information: Information received from reporting entities under the Statement of Financial Transactions (SFT) is displayed, including the SFT code, description, and value as below

• Cash Deposits in Savings Accounts: Exceeding ₹10 lakh in a financial year in one or more savings accounts of a person.
• Cash Deposits in Current Accounts: Exceeding ₹50 lakh in a financial year in one or more current accounts of a person.
• Credit Card Payments: Exceeding ₹1 lakh in a financial year.
• Purchase of Bank Drafts, Pay Orders, or Banker’s Cheques: Exceeding ₹10 lakh in a financial year for
• Purchase of Mutual Funds: Exceeding ₹10 lakh in a financial year.
• Purchase of Bonds or Debentures issued by a company or institution: Exceeding ₹10 lakh in a financial year.
• Purchase of Shares of a company (listed or unlisted): Exceeding ₹10 lakh in a financial year.
• Purchase of Foreign Currency: Exceeding ₹10 lakh in a financial year.
• Sale or purchase of Immovable Property: Value exceeding at ₹30 lakh or more
• Time Deposits (Fixed Deposits) (excluding renewals): Exceeding ₹10 lakh in a financial year.
• Payment of Credit Card Bills: Exceeding Cash payment ₹1 lakh in a financial year, By any other mode- ₹10 lakh in a financial year.
• Purchase of Prepaid Instruments (e.g., gift cards): Exceeding ₹10 lakh in a financial year.
• Investment in Equity or Debt-oriented Mutual Funds: Exceeding ₹10 lakh in a financial year.
• Receipt of Cash for Sale of Goods or Services: Exceeding ₹2 lakh for sale of goods or services.
• Cash Transactions with Real Estate Transactions: Exceeding ₹2 lakh for real estate transactions.
• Purchase of Jewellery or Bullion: Exceeding ₹2 lakh in cash.
• Payment of Life Insurance Premium: Exceeding ₹1 lakh in a financial year.
• Investment in Bonds or Debentures: Exceeding ₹10 lakh in a financial year.
• Receipt of Cash Donations: Exceeding ₹2 lakh
• Payment of Taxes: Information relating to payment of taxes under different heads, such as Advance Tax and Self-Assessment Tax.
• Demand and Refund: Details of the demand raised and refunds initiated during a financial year.
• Other Information: Details from other sources, such as Annexure II salary data, interest on refunds, outward foreign remittance/purchase of foreign currency, etc.
• General Information in AIS
• The General Information section includes details such as PAN, masked Aadhaar number, name, date of birth/incorporation/formation, mobile number, email address, and address of the taxpayer.
• AIS displays information related to GST turnover under the information code (EXC-GSTR3B), visible in the Other Information tab.

2.3 Tracking Activity History in AIS

You can track the activity history in AIS by clicking on the Activity History button on the AIS homepage. This provides a summary view of activities performed on the AIS functionality, including a system-generated Activity ID, activity date, description, and details.

2.4 Taxpayer Information Summary (TIS) in AIS

The Taxpayer Information Summary (TIS) is an aggregated summary of information for a taxpayer, categorized by information type (e.g., salary, interest, dividend). It shows values processed by the system (generated after deduplication based on pre-defined rules) and values accepted by the taxpayer (derived after considering taxpayer feedback and system-processed values). The information accepted in TIS is used for pre-filling returns if applicable.

2.5 Within TIS, you will find

• Information category
• Value processed by the system
• Value accepted by the taxpayer
• For each information category, details such as the part through which information was received, description, source, amount (reported by source, processed by system, accepted by taxpayer) are shown.

2.6 Submitting Feedback on AIS Information

You can submit feedback on information displayed in AIS (TDS/TCS Information, SFT Information, or Other Information) online by login to efiling portal. After successfully submitting feedback, the feedback will be displayed with the information, and the modified value will also be visible alongside the reported value. The activity history tab will be updated, and you will be able to download an Acknowledgement Receipt. Email and SMS confirmations will be sent for submission of feedback. Upon successful submission of feedback, the activity history tab will be updated, and you will be able to download an Acknowledgement Receipt. Email and SMS confirmations will be sent. The AIS Consolidated Feedback File (ACF) allows taxpayers to view all their AIS feedback (except for feedback marked as ‘Information is correct’) in one PDF for easy understanding. After submitting feedback, you can download the AIS Consolidated Feedback File. There is currently no limit on the number of times you can modify previously given feedback in AIS.

3. Difference Between AIS and Form 26AS

AIS is an extension of Form 26AS. While Form 26AS displays details of property purchases, high-value investments, and TDS/TCS transactions carried out during the financial year, AIS includes additional information such as savings account interest, dividends, rent received, purchase and sale transactions of securities/immovable properties, foreign remittances, interest on deposits, GST turnover, etc. AIS also allows taxpayers to provide feedback on reported transactions. The aggregation of transactions at the information source level is also reported in the Taxpayer Information Summary (TIS).

Part B: Filing of Return and Subsequent process

4. Filing of Income Tax Return (ITR)

• Once an assessee files their Income Tax Return (ITR) through the e-filing portal, the Central Processing Center-ITR (CPC-ITR) in Bengaluru verifies and processes the return via the CPC-ITR portal.
• Subsequently, either a demand notice or a refund order is issued.
• If there is any outstanding demand, it is displayed in the ITBA (Income Tax Business Application) portal’s ‘360 Degree Demand Recoverability Status’ under the control of the Jurisdictional Assessing Officer (AO).

5. Scrutiny Assessment Cases

• For scrutiny assessment cases, the assessment is completed by the AO or the Faceless Assessment Unit.
• This involves interaction with the Central Processing Center-Faceless Assessment System (CPC-FAS) for calculation purposes.
• Post assessment, a demand is issued to the assessee through ITBA, and the demand is reflected as pending in the ‘ITBA Recovery Module’.
• Subsequent actions such as appeal, rectification, giving effect to orders, penalty imposition, recovery of demand, etc., are managed through the ITBA.
• Section 144B of the Income Tax Act, 1961, introduced in the Finance Act, 2021, outlines the faceless assessment scheme to make the income tax assessment process more transparent, efficient, and taxpayer-friendly.
• The assessment is conducted electronically, eliminating physical interaction between taxpayers and tax officials. This section is introduced with the intention of reduction in AO’s discretion and to address the grievance related to corruption.
• The Central Board of Direct Taxes (CBDT) established the NeAC, which acts as the nodal point for all communications and coordination during the assessment process.
• Cases are assigned randomly to assessment units, ensuring anonymity and fairness.
• The NeAC issues notices and receives responses from taxpayers.
• Assessment units analyze the case and may seek assistance from verification, technical, or review units.
• The NeAC finalizes the assessment order based on the findings.
• The process is time-bound to ensure timely completion of assessments.
• Certain cases, such as those involving search & Seizure assessments and international tax issues, are excluded from faceless assessment.

6. Specific Modules within ITBA

• The ITBA comprises several modules like ‘Assessment’, ‘Rectification’, ‘Recovery’, etc., each tailored for specific functions of the Assessing Officer.
• In the ‘Recovery’ module, a dossier report is prepared, and demand analysis and recovery details regarding the assessee are recorded.

7. Legacy AST Application

• The legacy AST (Assessment Information System) application is still in use by AOs for revision/rectification of assessments related to earlier years’ ITRs.
• Upon completing revision/rectification, the demands are uploaded into ITBA.
• This updated information is then transmitted to the CPC-ITR for updating the e-filing portal and communicating with the assessee.

8. Monitoring and Management Information Systems (MIS)

The Central Board of Direct Taxes (CBDT) uses various functionalities within ITD’s IT systems for generating reports for monitoring and MIS purposes, including

8.1 CPC-ITR Portal

• Involved in processing returns under Section 143(1), making rectifications under Section 154, and issuing demand notices/refund orders.
• Interacts with the backend CPC-FAS system for calculations and other processes and also connects with the e-filing portal.

8.2 Income Tax Business Application (ITBA)

• The front-end system used by Assessing Officers for assessments.
• Used to prepare demand calculations arising from assessment orders, rectifications, reassessment orders, and appeal revisions.
• Interacts with CPC-FAS.

8.3 Central Processing Center-Faceless Assessment System (CPC-FAS)

• Functions as the backend system and interacts with all front-end systems like CPC-ITR Portal, ITBA Portal, OLTAS Portal, and legacy AST Portal.
• Handles data processing, demand calculation, refunds, and provides necessary data to the front-end systems.

8.4 Online Tax Accounting System (OLTAS)

The system application through which challan details for payment of tax, penalty, interest, refunds, etc., are managed.

8.5 I-taxnet

The reporting system through which Central Action Plan reports, viz., CAP-I, CAP-II, and Dossier reports are internally generated and submitted to the appropriate authorities.