CA Animesh Singi

Animesh

Hello Folks, this post is dedicated on one of the core issues which tax payers must face during Income Tax Return filing of AY 2017-18 (FY 2016-17). Though officially only 3 Days remains in due date of filing, but this post worth a read for both those who has already filed their Income Tax Return and those who are going to file. Last One year, Modi government took every step to clean the black economy of India and creating complications for tax evaders using reforms like Income Declaration Scheme (IDS), demonetisation, implementing GST, Black Money Bill, Benami Property Act, RERA and so on. One of such measure for tax evaders had been taken by amending Section 143(1)(a) of the Income Tax Act, 1961 in Budget 2017. Using this newly added sword notices has been delivered to thousands of tax assessees regarding Mismatch of Income with Form 16/16A.

This amendment is going to hit hard for those Income Tax Assessee’s (Majorly Salaried Employees) who used to make manipulative claims of allowances (LTA, medical, HRA etc) or deductions (Section 80C, 80D) in Return of Income and claims refund of TDS deducted from Salary. Let’s discuss the section and the impact of amendment made. According to this section, on filing Return of Income, Department will process the return of income after making following adjustments:

(i) any arithmetical error in the return;

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;

But vide Finance Act 2017, another clause has been inserted which is as under:

(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return.

This is going to impact hard for Income Tax Returns filed after this amendment in following ways:

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1. If assessee has claimed any allowance or deduction while filing return of income, which was not considered by employer in Form 16, then he/she must compulsorily face the Income Tax Notice enquiring the same. If assessee failed to response that notice within 30 days, then differential amount between Form 16 and Return of Income will be automatically added to his income and return would be processed accordingly. In simpler language, everyone will get notice unless Income shown in Return matches exactly or more than the Form 16/16A. So, before making any such claim now in return of income, ensure that you have valid evidences for same. Sample Notice image is produced below:

Part -A

Adjustments u/s 143(1)(a)

(vi) Additional of Income Appearing in form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return-143(1)(a)(vi)
Sr. No. Form used for Comparision Income as per Return Income as per Form Proposed additional of income
(i) (ii) (iii) (iv) (v) (vi)
1. Form 16A/16-Other Income 0 11048 11048
2. Form-16 Gross Total Income 378584 389632 11048
3. Form 16 Taxable Total Income 277980 289024 11048

2. If assessee has not shown Interest Income or other income in ITR as per Form 16A or Form 26AS, then it would also attract Income Tax Notice. This would cause problem for those also who shows Interest Income in their return of Income from Form 26AS only, the statement which gets updated time to time. For an example, It might happen that while filing return of Income it shows Rs.20,000/- amount and at the time of processing ITR it shows Rs.25,000/- as the Form 26AS gets updated by that time.

3. Unlike earlier year, you will not get your Income Tax Refund within one or two week, because of this prolonged process introduced right before processing the Income Tax Return. This would cause serious harassment for those genuine tax payers or assessee who was unable to file their genuine proofs of allowances and deduction to employer timely and now claiming refund. They will also face these notices and have to wait for disposal of their responses against this notices and subsequent action by the department.

These are the following sample instances for which one may receive a notice from department after filing return of Income:

  • Deductions such as 80C or 80D or other claimed in return but not in Form 16  by employer.
  • Exempt Allowances claimed in return but not in Form 16  such as HRA or LTA or Medical Allowances not claimed through employer but claimed in return.
  • Interest Income accrued on Fixed Deposit not shown.
  • Receipts considered under different head of income in the return as against the section under which it is deducted

How to respond these Notices?

Before responding these notices, carefully analyse the reason asked in notice and then submit the appropriate explanation as per the facts of your case under the tab “e-proceeding” after Login your Income Tax Account.

Notices

One should consult their CA or tax expert before proceeding or submitting any response to these notices. As in some cases I personally observed that Income Tax Website Considered Income twice or thrice of the amount proposed to be added.

So, this year beware before filing return of income with any such claims unless you don’t have sufficient evidence or proof. Though this kind of action will help government to eliminate few thousands tax evaders, but at the same time it would cost delay in Income Tax refunds for Lakhs of genuine tax payers also.

(Author can be reached at animeshsingi@gmail.com,  www.animeshsingi.blogspot.com, +91 9098589691)

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Category : Income Tax (25143)
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Tags : Form 16 (45) Form 16A (28) itr 1 (52)

16 responses to “Beware before claiming any deduction/allowance in Income Tax Return which was not considered in Form 16/16A”

  1. Dr S P Sachdeva says:

    I recd notice u/s 143(1)(a). Error shown was my 80c deductios claimed in return but not mentioned in F16. Which is not correct as my 80c deductios r mentioned in F16 issued to me by employer. I have uploaded my F16 to ENIVARAN as grieveance.Response efiling problem is coming to answer HEAD OF INCOME/SCHEDULE UNDER WHICH REPORTED IN RETURN.Kindly help what to do. I m being harassed by income tax deptt

  2. Dr S P Sachdeva says:

    I m pensioner. I recd notice under 143(1)(a).Error shown was my 80c deductios not mentioned in F16.but claimed in return. But actually this is not correct.My In my F16 80c deductions are mentioned which are claimed in the return. I have efiled my grieveance to Enivaran but no reply.When I efile response problem came to answer question Head of income/schedule under which reported in the return..because answer seeke numerical figure.I m harrassed a lot Kindly help.

  3. Aleem says:

    What should employees do when deductor made mistake. For example he not considered employee other savings which not included in form 16. .example in form 16 deduction. Show 1 lakh but emplyee have more than 1 lakh. Are 1.50. Lakh.then what kind of action will be taken against deducters.

  4. GANDHI MOHAN BHARATI says:

    The author may kindly clarify as to wher from the CPC takes “Income as per Return”; is it from Head Salary or Schedule? if income is correctly noted in the ITR under Head Salary and deduction claimed seperately, the “taxable income” noted in Form 16 my vary because 80C and other claims are made separately,
    Example –
    Income in ITR under Head Salary – 5,00,000
    Gross Total in ITR – 5,00,000
    Income under Head “Other Income” – 3,00,000
    Chapter VI deduction -1,50,000
    Taxable Income in ITR – 6,50,000

    The Chapter VI deductions were omitted by Employer-
    Gross Total in Form 16 – 5,00,000
    Other Income not reflected by Employer 0
    Taxable Income in Form 16 – 5,00,000
    Other Income in Form 16A – 2,20,000 (because some exempt interest may not get reflecred in Form 16A or Form 26AS)
    Thus Total income as per Form 16 & 16A – 7,20,000
    Will it attract notice?
    The IT Department may clarify.

  5. HPP says:

    What is the course of action after filing data in ‘submit’ section with ‘disagree’ option.

  6. vswami says:

    OFFHAND

    The newly inserted clause reads, – “(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return.”

    Even on the first blush, according to a plain reading of the said clause, it must be obvious that the wording is so clumsy, that it does not speak of or clearly bring out the real intent behind the amendment. To be precise, to one’ s understanding, the addition is to be of the amount of deduction taxpayer will be entitled to be allowed in terms of CHAPTER VIA; which, may have been reported to the payer / tax-deductor in Form 12 BB, at the stage of TDS itself, as provided for by the law. For , in that event, the total income taken for TDS, would have been no different but match with that as per the ITR filed.

    Any eminent or better but different way of smart reading the new clause; if so, welcome to share for the common good.

  7. NATINDER GUPTA says:

    Interest on Saving Bank accounts does not form part of Form 16/ !6A. If CPC keep on issuing notices. Income Tax deptt will not be able to achieve the target of bringing maximum number of persons under the tax net. A salary class person has nothing to conseal. Then why such harassment.

  8. GANDHI MOHAN BHARATI says:

    I am a pensioner. The Bank through which I receive my pension reports Gross Total paid as 5,02,483 and Taxable Income as 4,99,983.

    I had Interest income from Banks also which are reflected more by me due to Interest on SB A/c.

    I have reflected pension as 5,02,483 in ITR1 and claimed 80C and 80D deductions separately in the ITR1.

    Will this attract notice by the IT Dept?
    .

  9. Anonymous says:

    Hi Animesh,

    I have received an intimation under section-143(1) which says that I’ve not shown FD interest in Form-16/16A.

    When I tried to modify my return in incometax e-filing website (by adding that amount X), the final amount is becoming 3X.

    If I use your above example, the amount which needs to be added in Form-16/16A should be 11048, but incometax e-filing website shows that I should add 33144 to the return (11048*3).

    Is this number correct? Am I missing anything in my calculation?

  10. ricky gupta says:

    Very nicely written in easy understandable way and concerned with future problems that may not happen to clients as well as to tax consultants
    Thanks
    Regards
    Advocate Ricky Gupta
    Taxation company
    Sardulgarh

  11. GANDHI MOHAN BHARATI says:

    OK. In respect of Salaried class or pensioners, Form 16 may or may not show deductions under 80C 80D etc.. What about persons who have income only from interests from Banks. Form 16A has no coloumn to claim deductions.
    How is the CPC going to tackle it.
    Obviously we will get notices.

  12. GANDHI MOHAN BHARATI says:

    I am a pensioner. I did not intimate my Senior Citizen Savings Scheme Deposits in Post Office to to the Bank paying me the pension. So the entire pension was taxed by the Bank/
    I have claimed deduction in the ITR.
    Will I get notice?

  13. HPP says:

    There can be case where employer side accountant/HR person has left the job, things were not accounted correctly, then why should genuine employee should suffer? Even banks may make errors, or reports accrued but not due interest at 31/03 every year. Does that mean assessee should change his method of accounting?

  14. HPP says:

    Sorry*employer

  15. HPP says:

    What if Employee has made an error while computing or filing the annual return? How to solve the issue.

  16. TDS deducted by ex employer indicated on salary slip but not reflected on form 16a. Pls adv as self will have to pay taytax once again. Pls advise corrective action.

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