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It is common practice usually followed by most of the salaried person to claim excessive deduction even though it is not reflecting in Form 16 issued by employer, and they have not made the investments specified under chapter VI-A of the Income Tax Act 1961. Some time it happens that person has genuinely made the investment, but it is not reflecting in form 16 issued by the employer as investment proof is submitted to employer or sometimes after submission to not considered by employer. If the employee has invested the money, then no need to worry even though it is not reflecting in form 16 & notice is received by the taxpayer.

Fake Deduction & Penalty:

For processing of the returns filled till July 31, 2022, Income tax department is using Artificial Intelligence software and with the help of AI software department is finding out whether Deduction claimed by assessee is correct or not specifically in case of assessee whose TDS has been deducted & they are claiming refund of TDS.

If the taxpayer has claimed deduction under multiple sections even though it is not reflecting in form 16 or very high compared to previous year in case of small trader then it is possible that he is receiving notice/getting email that if the taxpayer does not have proof of investment or the taxpayer has taken the wrong exemption in the return, then immediately verify the same and revise the return. Please note 200% penalty & Interest may be levied in case of addition on assessment.

Risk Management Process, Notices Coming ……!

Notices is being sent to taxpayer by department who has claimed the deductions U/s 80G for the first time, excessive deductions claimed which are not reflecting in form 16 or businessman whose gross total income decreased, or various investments are shown for claiming exemption under chapter VI-A, home loan interest are shown to reduce the tax or claim the refund of TDS deducted. Notices are also issued in cases where return is revised by taxpayer & in revised return income is reduced or additional deduction is claimed by the assess.

Time To Respond

While issuing the notice department is giving the opportunity to verify the correctness of the claim made in the return of income filed and submit the response within time period of 15 days of the receipt of the email. The taxpayer can confirm either claim made in return of Income is correct or he will revise the return of income to correct the amount of Refund claimed.

Author’s Remark:

If any taxpayer receive notice under Risk Management Process and he does not have proof of investments or exemption claimed then it is advisable to revise the return of Income and claim the deduction/exemption of which he has the proof, otherwise addition in assessment may attract Interest & 200% penalty.

Disclaimer: The above article is prepared for understanding & study purpose. We recommend you correctly report your Income and claim the genuine & actual deductions. Consult your CA or tax consultant before taking any decision & author will not be responsible for any lose due to decision take based on above article.

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Author Bio

I'm a Practicing Chartered Accountant and founder of D Rahul and Associates, Navi Mumbai. Having a rich experience of more than 14 years. Expertise in field of Income Tax and GST along with account finalization, Auditing , board presentation, MIS reporting, corporate and tax planning, cost reduction View Full Profile

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  1. Shraddha jadhav says:

    I received mail from IT department that my return is under risk management .Response submit from my IT Portal is wrong .How to correct it? Can I resubmit the response?

  2. C P Chauhan says:

    I received a notice regarding verification of refund claim. My Gross in come is 6 lakh, I invested 1.5 lakh under 80c, as senior citizen claimed 50000 Fix deposit interest rebate, and 50000 under 80D. all claims are are correct. but, do not have some receipts for medical treatment. However, even if i do not claim 50000 of 80D,, my refund claim remains the same. How do i respond/

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April 2024