“Received an SMS/Email from Income Tax? Explore insights on the high-value transactions advisory, its purpose, and how to respond. Understand the significance of AIS, discrepancies, and consequences of non-compliance. Stay informed with professional advice.”

Introduction: Before Christmas, the Income Tax Department began sending emails and SMS to a large number of assesses based on a random filtration of High Value Transactions recorded in FY 2022-23. The message sought to alert the tax payers about having missed filing of income tax returns or possible non-disclosure of high-value transactions in the ITR.

Many of the assesses who were hoping to finish their 2023 happily were taken aback when a message from the Income Tax Department arrived in their inboxes. Naturally, this has raised concerns among the tax payers about what this is all about and what should be done next. Also, as a result of this, there has been a lot of havoc on social media. As a result, the income-tax department clarified the following on December 26th via social media post:

the income-tax department clarified

The post indicates that what has been sent to taxpayers is only an “advisory” and should not be construed as a Notice issued by the department.

What is it actually?

The income tax department has launched an e-campaign to facilitate voluntary compliance for the convenience of taxpayers. Under e-campaign, they send emails/SMS to relevant people to verify their financial transactions according to the information received from SFT, TDS, TCS, etc. It covers the following categories of taxpayers:

a) Individuals who do not file their income tax return

b) Taxpayers with discrepancies/deficiencies in their returns

Assessee should take advantage of this e-campaign to save themselves from the trouble of dealing with a high value transaction income tax notice.

Purpose

The purpose of sending emails and SMS is mainly the following:

1. To verify the accuracy of the data acquired through the various sources under SFT;

2. To remind tax payers to file belated return in case they missed filing the return or to revised their return in case they missed disclosing that transaction on or before December 31.

Further, it has only been sent to those tax payers where there is an apparent mismatch between disclosures in the ITR & information obtained from the Reporting Entity that is shown in AIS.

How and why, it has been started? An intelligent strategy!!

You must be aware that over the past few years, the income-tax department has been gathering massive data on various types of financial transactions that everyone in the country carries out. From 01/11/2021, all the information collected by the department are available to tax payers on their PAN, which is also called as Annual Information Statement (AIS). An AIS is similar to Form 26AS which contains details of all the financial transactions carried out by the assessee during the financial year. So, the income-tax department now has complete record of all your incomes, expenditures, assets and liabilities.

Department has been strategizing the use of massive information gathered through following means:

1. Linking of PAN with Aadhar:

You should be aware that PAN and Aadhar are very crucial documents. So, earlier before engaging in any financial transaction, one of the documents listed above was required. As a result, some transactions are entered by sharing PAN and others by sharing Aadhar Card, the department was unable to maintain track of the transactions.

Therefore, to alleviate this challenge, they simply made it mandatory for everyone having PAN to link it to Aadhar. Once the PAN is linked with Aadhar, all the transactions entered by sharing your Aadhar gets reported on your PAN becauase both are interlinked with each other If it is not linked, and you do not fall into the exceptional category of people who are exempt from linking their PAN to Aadhar, your PAN will be revoked. As a result, you can observe that whenever you enter into any financial transactions, the PAN and Aadhar are required. You cannot enter into any financial transaction without giving your PAN or Aadhar card.

2. Shifting responsibility on Tax Payers:

The primary responsibility to collect the data from various sources was of income tax department. However, because this was a time-consuming and tedious process, they shifted the responsibility on some of the entities that contribute to our country’s GDP. By amending the income tax laws, they have made it essential for some entities to report to the department all the transactions entered by tax payers. As a result, the department now has easy access to all data shared by reporting entities. Furthermore, there is a penalty for non-reporting of information if reporting entities fails to submit data with the government. So, it’s a win-win situation for the department; they got the data from the reporting entities, and if they didn’t, they got the money in the form of late fees and penalties.

The reporting data includes following:

a. Immovable property deals

b. Shares and Mutual funds Sale and Purchase transactions

c. Credit card expenses

d. Interest on Deposits and Saving Bank Accounts

e. Transactions on which TDS or TCS is being deducted/collected

f. Remittances under LRS

g. Purchase of foreign currencies

h. Purchase of foreign tour packages

i. Cash Deposits etc.

Now, the details of all these transactions are then made available by the department to each PAN holders in AIS.

Now, what is to be done?

After receiving all of this data, the department wanted to determine whether the data reported by reporting entities was accurate. To do so, the department compares the data to your submitted income tax returns. On the basis of analysis, if any inconsistency or disparity is found such as mismatch in income stated by the taxpayer or the acquisition of a property worth more than 50 lakhs, or having credit card bills worth more than 10 lakhs but no major income reported in that year. As a result, in order to verify the veracity of the data reported by reporting entities, the department has begun sending emails and SMS to taxpayers when there is an obvious mismatch in income, assets or expenditure sources.

So, all you have to do is submit an online response to the information reported in the AIS via the e-Campaign option under Compliance Portal. There is no deadline for responding. It is, nonetheless, preferable to respond as soon as possible.

Why you should respond and what are the Consequences of Ignoring this message?

The IT Department keeps a close eye on high-value transactions to prevent black money generation and tax evasion. The taxpayers should respond to high-value transactions to avoid any legal consequences down the road.

Although it has been clarified by the government that it only an only an “advisory” and should not be construed as a Notice issued by the department, it is always better to respond to this message because if you have not responded to the high value transaction and there is a substantial mismatch then there is a possibility that they can initiate the assessment proceedings by way of a scrutiny assessment.

Important Points and Precautions

1. Verification data with AIS before filing an ITR

Ideally, each tax payer should before filing an ITR should download AIS and ensure that the transactions reported in the same are duly reflected or disclosed in the ITR to avoid any lapses. If the ITR is not in line with AIS, chances of receiving notice shall increase, consequence of which are unpleasant. Hence, the verification becomes crucial.

2. Verify the source of investments and expenditures

It is not necessary that all the things reported in the AIS is required to be reported or disclosed in the ITR. Because AIS also reflects details of your expenditures and investments which cannot be disclosed in the ITR. But obviously you need to verify source of the expenses and assets and whether that has been considered while filing ITR or not.

3. Disclosure of all your assets in ITR

if your taxable income exceeds Rs. 50 lakh then you are supposed to fill up one schedule in the ITR called Schedule AL. Here you are supposed to give details of certain assets (such as immovable property, shares, mutual funds etc). Now, the cost of the newly acquired immovable property or any investments ought to have been disclosed in Schedule AL if this schedule was applicable to you.

4. Joint Transactions

We have encountered several cases where, in the case of shared ownership or a joint transaction, these reporting entities report the full value of the transaction on all of their PANs rather than just their share. As a result, there has always been a situation where the information reflected in the AIS do not match the income tax return filed independently by the joint owners. So, in order to avoid any unpleasant consequences from the income tax department, it is usually best to respond to the AIS transaction reflected on the Portal before filing an ITR. So they know the tax payer is aware of the transaction and the amount reported on the portal is incorrect. Furthermore, the department should modify their forms that way to include all of these possibilities so that taxpayers do not have to worry about misreporting of transaction.

5. What if you have missed the deadline?

In case you identified the difference and wanted to rectify your mistake but missed the deadline for revising or belated filing of income tax return, you don’t need to worry. The Union Budget 2022, has introduced a new concept i.e. Updated ITR. The updated ITR is a rescue for those who have not filed their ITR or made inaccurate and false entries while filing their income tax return.

To understand in detail, you can refer my below article: https://taxguru.in/income-tax/one-time-opportunity-submit-itr-fy-2019-20-fy-2020-21.html

Conclusion

So, one need not worry much about such things. However, it is critical that proper professional advice is taken while deciding whether any item reflected in the AIS is required to be disclosed anywhere in the ITR or not. With the integration and availability of information to the income tax department, professional expertise is required to ensure that the ITR is filed correctly. If the ITR is filed with negligence, the consequence can turn out to be harsh.

 #AIS #IncomeTax #DirectTax #TaxAudit #TaxPlanning #TaxCompliances

*****

Hope this article helps tax payers in properly dealing with the messages of high value transactions received from the income-tax department. In case of any query, you can reach out to me on sharshil323@gmail.com.

Author Bio

Qualification: CA in Job / Business
Company: P C Ghadiali and Co LLP
Location: Mumbai, Maharashtra, India
Member Since: 18 Nov 2019 | Total Posts: 13
A Qualified Chartered Accountant having more than 5 years of Post Qualification Experience in Direct and Indirect Taxation. Also, having specialized experience in Compliances related to Charitable and Religious institutions. You can reach out to me on sharshil323@gmail.com. View Full Profile

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13 Comments

  1. Jay says:

    Sir, the info category is wrong. All mentioned as foreign remittances. These are all dividends from Indian companies and interest from IT department . the info category is non editable field. How to give the feedback in AIS. All dividends and interest is reported correctly in the ITR and assessed on time. How to get the info category field corrected which was not inputted by me. Thanks in advance.

  2. Darshan says:

    Hello,

    I have some correction in ITR after receiving High value transaction notice, now which revised ITR should I file, I’m not getting any option on portal to submit revised ITR online

    1. sharshil323 says:

      Dear Sir,
      The revised return can only be filed on or before 31st December. Now, if you have missed out any transaction and want to incorporate in the ITR, you can do so by filing Updated Return on the portal.

  3. Sunita says:

    Request rhe concerned authorities to change the final date for audit every year we miss out on diwali and Christmas holiday celebration as a family

  4. Dwarkanath k c says:

    Sir, thanks for the detailed enlightening article. Please advise as to what we should do if AIS contains either incorrect information or transaction not pertaining to that PAN holder. Whom should we contact to rectify this and avoid getting notification form the department at a later date. Thanks

    1. sharshil323 says:

      There is an option on AIS to state whether a transaction relates to you or another person. If the transaction does not belong to you, you can straight away deny it by stating that the information is incorrect and If you are certain that the transaction belongs to someone else, enter their PAN and submit the response.

  5. Vijesh kumar sharma says:

    I am having multiple credit cards and the same are getting used by my friends and family relatives frequently and now I got a mail from ITD that high value transactions are noticed like I have made credit card payment.
    What should I do now

    1. sharshil323 says:

      First and foremost, if the payments are made with your credit card, you have to respond stating that the information is correct. If you receive any notice asking you for the sources of your credit card payments, you can explain your case to the officer.

  6. Rakesh Mohan Bagri says:

    Response to thes transactions are preformated.How one can explain things which needs detailed explanation.Please if someone can clarify

    1. sharshil323 says:

      Dear Sir, all you have to do now is respond to the transaction that has been flagged. In case if you receive any notice in future, you need to explain your case to them based on the response you submitted.

  7. Purushottamgajare says:

    Sir,I made one Transaction of 700000rs foreign remittance.And compliance portal shows 5 transaction of same amount on same date. what is to be done.

    1. sharshil323 says:

      Sir, of those five transactions, please respond to one by stating that the information is correct and to the other four by selecting the option that the information is duplicate.

  8. Sreejit Banerjee says:

    while i encourge that every legitimate Rupee that is due to IT should be collected but the honest taxpayers who are paying 100% tax on time shouldnt be harassed by such action . many of these notices are send with wrong data

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