Introduction
The Income tax department began sending unusual kind of message over past weekend i.e. on 24th and 25th of February 2024 stating that the department had identified certain mismatches between information received from third parties on interest and dividend income and the Income Tax Return filed by taxpayers. It stated that in many cases the taxpayers had not even submitted their ITRs.
These messages bring sceptical concerns as to what the department is up to. It may be noted that similar kind of messages were received by the taxpayers right before Christmas in 2023. Thus, there can be seen a trend that these kinds of messages or reminders are always sent out on the weekends or on public holidays, which makes life harder for the tax payers. Moreover, these high-value transactions are detected through some random filtration.
Currently, the department has sent messages regarding mismatch for FY 2021-22 and FY 2022-23, which are visible under the “e-verification” page on the e-filing compliance site. An on-screen functionality has been added to the compliance portal of the e-filing website, https://eportal.incometax.gov.in, to rectify the mistake and provide the response.
According to the CBDT, the on-screen functionality is self-contained and will allow taxpayers to reconcile the mismatch on the portal itself by providing a response without submitting any documents. But, my friends, believing that functionality is self-explanatory is extremely delusional. Nothing is self-explanatory when it comes to taxes, whether be it GST or income tax. Let me explain that with the help of an example:
> In 2017, the government implemented GST to simplify indirect taxes under the banner of “One Nation One Tax”. However, in reality, it works to the contradictory as it is “One Nation Multiple Tax”
> In 2020, the government introduced a new regime for individuals to simplify the tax and reduce the difficulties and administrative burden, which is no longer the case. Instead of streamlining the tax structure, the adoption of a new regime has complicated it.
These are only a few examples, however, there are a lot of advantages that cannot be overlooked. However, emphasis is laid down to make the point that whenever the government intends to reduce complexity, it unwittingly does the opposite. As a result, the self-explanatory system is a MYTH, since even a qualified professional is required to involve sufficient time and expertise to get to know the process and procedures due to the complexity involved. It is therefore important to forward this message or communicate immediately with your Chartered Accountant or Expert who are handling your case to get rid of this notice.
Now, let’s understand this point by point.
Page Contents
What is mismatch Campaign?
Via this campaign the Income Tax Department reaches out to the taxpayers when there is a mismatch between the details of income reflecting on AIS / TIS and the income reported by in the income tax return. It is like preliminary verification process conducted online and allowing taxpayers the opportunity to respond to it without the issuance of a formal Income Tax notice. The main objective of the department is to minimise the gap between information displayed in AIS and ITR.
Starting this year, the department has taken proactive measures to use the data or information that they have collected from various sources in a structured way.
1. Firstly, they began notifying taxpayers by email or SMS before the end of March 2023 about high-value transactions for FY 2021–2022 and before Christmas 2023 about FY 2022–2023 that were reflected on their PAN.
2. The taxpayer then replied to the data displayed on the AIS, indicating whether or not the data was accurate.
3. The taxpayer’s responses then were compared to their income tax return, and any mismatches found was sent via SMS or Email.
Further, it is important to note that the Department emphasizes that this on-screen communication is not a notice but a proactive initiative.
When the mismatch report was viewed through the compliance portal, it was discovered that the department had issued mismatch notifications mainly for interest and dividend income and not for any other income. The mismatch report e-verification tab is further structured in such a way that it displays the data as it appears in the AIS first, then compares the data from the ITR. In the event of a mismatch, it only allows you to select the reason for the mismatch from a list of nine drop down cells if you missed reporting in the ITR.
While going through the mismatch report, it was observed that this mismatch campaign had some technical glitch in their own system i.e. that there is some error in their system in fetching the data from the income tax returns. The data reported in the ITR is not being properly captured, i.e., while fetching the data from the ITR, the system is not taking into account the interest income disclosed under “others” in the ITR under Income from other sources, and as a result, a mismatch notice is issued to those taxpayers who have properly disclosed the income in the correct head under the ITR. As a result, the disparity exists between the amounts reflected in AIS and captured from ITR in mismatch report. Furthermore, there was no option in the response tab to specify that the mismatch identified is already reported under a separate line item than any other interest income. As a result, taxpayers were highly stressed.
The Department realised this error from their side and immediately on 27/02/2024 issued a press release clarifying the issue. They have specifically clarified that “In case the taxpayer has disclosed the interest income in the ITR under the line item ‘Others’ in the Schedule OS, she/he need not respond to the mismatch pertaining to the interest income. The said mismatch shall be resolved on its own and will be reflected in the portal as ‘Completed’.”
How to respond to the mismatch campaign?
1. Login to the income tax portal;
2. Select the compliance portal tab under Pending Actions;
3. Navigate to e-Verification tab;
4. Click on relevant Assessment Year under ‘List of Mismatch Campaign Generated’;
5. Click on the row displayed under e-Verification list view, where response is to be provided;
6. Click on the “Pending” button on the expanded view for the relevant information category;
a. In case where you have already reported the income under ITR under Schedule EI or Schedule BP etc.,
> provide the explanation by clicking on the “Provide Explanation, if required”.
> Upon providing the explanation the difference value will get updated automatically after that check the declaration box and click on submit button.
b. In case of actual mismatch, you need to enter the expected date of filing an updated return u/s 139(9A) and after that check the declaration and then submit it.
8. Acknowledgement receipt for the submitted response can be downloaded from ‘Activity History’ section.
What if the value reported in AIS is incorrect?
Before responding to this discrepancy identified by the department, first you should verify the figures that has been reported in AIS is correct or not. In case, the figures reported in the AIS is not correct, first respond to the transaction appearing in the AIS selecting tab of information is not correct along with the reasons as provided in the drop down button. Once you submit the response in the AIS, the data in the mismatch report will automatically get updated and even after that if the updated data is not matching with the data reported in ITR, you need to follow above steps to reply.
What is to be done after submitting the response?
In case of valid mismatch, you are expected to furnish an updated return of income under section 139(8A) for the difference value before the expected date you entered while submitting the response to avoid any future complications.
Conclusion
Many have pointed out that the Income tax Department is sending absurd mismatch information without capturing proper details from the ITR. If the AI system of Income tax department is not further improved/directed properly, a lot of litigation will arise and pile up in the near future resulting to harassment to the assessee even after the proper discharge of their tax liability.
Hope this article helps tax payers in properly dealing with the messages pertaining to mismatch report received from the income-tax department.
In case of any query, you can reach out to me on [email protected].
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