PERSONAL FINANCE
Income Tax Department selects 68,000 cases for e-verification, taxpayers should respond.
As the last week of the financial year 2022-23 is about to end, taxpayers are scrambling to make last-minute efforts to save tax. Amid this rush, news has emerged that the Income Tax Department has selected thousands of cases for Income Tax E-Verification, and many taxpayers are receiving notices asking them to reply. This has understandably increased the concern of taxpayers, and it is crucial to understand what e-verification is and how to respond to the notice.
It is alleged that in the selected 68,000 cases for e-verification for the financial year 2019-20, a significant amount of income has been hidden or understated in the Income Tax Return (ITR) of both individuals and corporations. The Annual Information Statement (AIS) of these taxpayers shows a difference in their financial transactions such as bank deposits and share buying and selling.
Out of these cases, 56 per cent of taxpayers, or 35,000 cases, have responded to notices or filed updated returns. The remaining 33,000 cases have not yet responded. If the taxpayer does not file an updated return or respond to the notice by March 31, 2023, for FY2019-20, the Income Tax Department can take action. So far, about 15 lakh updated returns have been filed, and tax of Rs 1,250 crore has been received.
The e-Verification Scheme, 2021, aims to match the information received from financial institutions with the information provided in the ITR by taxpayers. The process starts when a mismatch is found in a financial transaction. If a taxpayer receives a notice under section 133(6), he or she must provide an explanation or proof for not showing this transaction in the return. The taxpayer has to respond through the compliance portal. The department will either accept the reply or ask the taxpayer to update the return.
If a taxpayer receives an e-verification notice, he or she must log in to the income tax portal (https://eportal.incometax.gov.in/) and go to the 'Pending Actions' tab. Then, click on 'Compliance Portal' and select 'eVerification.' Click on the relevant financial year and download the notice using the Document Identification Number (DIN). To answer, click on the 'Submit' link and attach relevant documents, then click the submit button.
To avoid an e-verification notice for the assessment year 2021-22 or subsequent years, a taxpayer should file an updated return if there is a discrepancy by matching AIS and ITR. The updated return for the relevant assessment year can only be filed once, so it is vital to avoid mistakes. Taxpayers may seek the help of a tax advisor or CA to file updated returns accurately.
It is crucial to note the difference between e-verification and e-verification of income tax returns. Taxpayers must check AIS before filing ITR to prevent mistakes and avoid the need to file updated returns. If a taxpayer forgets to show any income or has not filed the original return, he or she can still file the updated return by paying additional tax. Updated returns can be filed up to two years after the end of the relevant assessment year. Additional tax equal to 25 per cent of the tax and interest must be paid if the updated return is filed within 12 months. After 12 months and before two years, 50 per cent additional tax must be paid for submitting the updated return.
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