Attention Income-tax Payers: A Stitch in Time Save Nine – Know about E-verification Scheme – 2021
The Income-tax Department has launched e-Verification scheme, 2021 on 13th December, 2021. Vide this scheme the Department is empowered to collect certain information. As the readers would know, the Department collects information about various financial transactions from various sources and utilizes the same for various actions under the Income-tax Law. What is then the purpose of e-Verification scheme, 2021? This article aims to explain in simple terms the purpose and scope of the scheme and its impact of the taxpayers.
Firstly, let us understand what data is available with the Income-tax Department. Information consistently flows in electronic mode & organized manner from multiple sources like Banks, Co-operative Banks, SROs registering the immovable property transactions. Companies, Mutual fund, Credit Card Companies etc. The information about the cash deposits, withdrawals, investment and expenditure is available with the income tax department and has a bearing on the income of the taxpayer. In addition to this, the information of turnover as per GST Database, TDS/TCS Details, is also forms part of Income-tax Department database.
There is a possibility that the taxpayer misses out on income arising out of such financial transactions, may be either by ignorance or oversight or negligence. This scheme offers an opportunity to the taxpayer to offer the correct income by updating the return and paying correct taxes thereon.
Accuracy & Error in the Information:
There is also a possibility that the information provided by the source has an error in it. For example, the amount of investment in Bank FDR is entered as 520 lakhs instead of 52 lakhs. This would be erroneous reporting by the source and needs correction. There is also a possibility that the investment has been done in joint name but the income has been offered in the name of any one person. The information is obviously, reflected in the name of all the joint holders and the system identifies it as non-reporting of income by other joint holders. This will need clarification by the taxpayer as to how correct income has been offered to tax and in whose name it has been offered. The scheme offers an opportunity to the taxpayer to explain the facts at an initial stage and avoid his or her case unnecessarily getting selected for scrutiny assessment or other proceedings. It also offers an opportunity to the source providing the information to correct it.
The “e-Verification Scheme-2021” aims to remove mismatch of information. Identification of mismatch begins with sharing of information with the taxpayers and giving them opportunity to point out the discrepancy, if any. Income Tax Department is working on the principle of transparency whereby the information available is shared with the respective taxpayers with an option to give feedback over it. All the third party information pertaining to a particular taxpayer available with the Income Tax Department is reflected in the Annual Information Statement (AIS) and Taxpayer Information Statement (TIS) of that taxpayer. It is expected from the taxpayer that feedback would be provided about its accuracy and acceptance.
How e-verification of the information is carried out:
The entire process of e-verification is in electronic mode without any personal interaction. Whenever, the information is not accepted by the taxpayer or no response has been provided or there is no registered e-mail id or mobile number, the same is sent to the Prescribed Authority for verification after processing it and applying risk management strategy. The Prescribed Authority for the purposes of e-Verification Scheme, 2021 is the Directorate of Intelligence and Criminal Investigation.
Notices are issued to the taxpayers by the Prescribed Authority in cases sent by the CIT (e-Verification). On receiving the response form the taxpayer, a preliminary verification report is submitted by the Prescribed Authority. Based on this report further action is taken by the Department. This collection of information by the Department achieves removal of mismatch in the information, updation of return of income and if required, further action like reopening of assessment.
Responsibility of Taxpayers in e-Verification scheme, 2021:
1) The e mail address and mobile number should always be updated in the Income-tax Department database.
2) Timely feedback on the information seen in the AIS and TIS should be given.
3) The notices received from the Prescribed Authority should be replied within the prescribed time limit.
4) If income reflected in the information provided by the third party is not offered to tax in the return of income, the same should be offered to tax by updating the return of income u/s 139(8A) of the Income Tax Act, 1961 and paying the due taxes thereon.
Conclusion:
A stitch in time saves Nine. By responding to the information over the electronic portal, one can avoid future unintended consequences. The taxpayers must use this facility at the initial stage so as to further notices & action by the department. Government is attempting to make the tax system seamless, painless, face-less. It’s time for the taxpayers to remain proactive and respond in a time bound manner.
