Filed tax returns? Game isn’t over yet as AIS updates continue. Send feedback or revise returns

ITR filing hassles continue beyond July 31 for some tax-payers and chartered accountants

Relieved now that you are past the income tax return-filing post? For some tax-payers, receiving the return processing intimation isn’t the end of the process this year, though.

Several changes have been made to the tax laws since Budget 2022, which could mean that you would have to open your tax file again even after the returns have been filed.

The introduction of an annual information statement (AIS) is one such change, which along with the e-verification scheme launched in March 2023 could mean you would receive notices asking you for clarifications on some points that the artificial intelligence tools of the income tax department have been gathering.

Tax experts say that tackling the dynamic AIS form is difficult both while filing the returns and after the returns have been filed.

“AIS keeps on changing even after filing the return. We filed a return on July 25, this week again some new information has come in,” says Mumbai-based chartered accountant Mehul Sheth.

At any given time, some information was not captured or there was duplicity in information. “The information on shares is reported by the broker and again NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services Ltd). Joint property transactions are reported in both the names of the joint holders,” says another chartered accountant, Raju Shah.

“At times, there is wrong reporting in AIS. Even after the returns are filed, you need to match the AIS again. If some TDS (tax deducted at source) mismatch gets reported due to a revision request in the other party’s AIS, then rectifications need to be made in your return too,” adds Shah.

Tax professionals told Moneycontrol.com that due to such minor and major changes, their clients were insisting that they wait to file the returns. But they were told it was not possible to incorporate changes in the return during the short period before July 31.

These changes are the result of financial services firms updating their data based on their cycles. For instance, some banks have delayed TDS data, while some asset management companies have delayed sharing dividend information.

“Brokers continue to feed capital gains information and if someone has deducted TDS for rent of more than Rs 50,000, they may file their return after your return has been submitted,” says Sheth.

Also read: Moneycontrol's definitive income tax return-filing guide 

Taxpayers troubled to find long-forgotten information

Last week, Noida-based real estate broker Bisakha Durt received a call from her CA, asking for a particular bank account. She said the mentioned bank account had not been used for the last ten years and an application had already been made to close the account. But after filing the returns, there was some interest income reflected in this bank account, which reflected in her AIS.

“AIS being a dynamic form has now mentioned dividends for the next financial year deposited around June 30-31. The information in the AIS is jumbled up and not mentioned year-wise. To complicate matters, individuals go by the bank data up to March 31. But the credits of interest, dividends are being made up to mid-April,” says Sheth.

To avoid underreporting of income tax, professionals confessed that they tried to match the details mentioned in the bank statement and the AIS and filled the higher of the two numbers into the returns to avoid tax complications.

Also Read: Five return filing errors that could trigger income tax notices

Revision of returns

To avoid any major action, chartered accountants suggest that one files a revised return if any fresh and correct information emerges. “We expect a lot of revision of returns this year as we have filed the returns based on the details shared by the clients,” says Shah.

However, after revision of return too there could be chances of further follow up.

“Even after you revise the income tax return, you could get an intimation by the assessing officer under Section 143 (1). Post processing of return, if there is a mismatch in the reported income and AIS, the department can send a notice under Section 148 (A) questioning you about the income that you have listed under the return,” Sheth says.

Also read: ITR Refund: Can you file a revised return after getting a refund

Newly introduced e-verification scheme

Apart from verifying your returns electronically, now a system has been put in place to confirm or decline the information gathered against you. Under this, the I-T department sends notices to taxpayers to verify the accuracy of information, especially when there is mismatch/discrepancy in the data gathered by the department as against the numbers disclosed by the taxpayer in the return. Around 66,000 such e-verification notices were sent last year.

If you receive such a notice, you should respond to it within the time frame mentioned. While there is nothing to worry about if you have reported the correct income, if the data collected by the I-T department is found correct and you have tried to evade taxes—intentionally or unintentionally—then you would have to correct the error and pay the taxes.

Appropriate e-verification response

If the notice is about returns dating from more than two years prior, you would have to file an updated return too. “Whether you need an updated return or a normal response to an e-verification notice depends on the tax authority and the instructions provided in the notice itself. Tax authorities generally outline the specific response procedures, which may include utilising an updated return option or following a normal response channel,” says Sujit Bangar, founder, Taxbuddy.com.

Carefully read the notice and mentioned instructions to determine the correct response method, as non-compliance may lead to delays or potential penalties. If you fail to respond to e-verification notice, the consequences could be “rejection of the tax return, potentially leading to further investigations, penalties (fines and additional interest) or audits. There could be increased scrutiny, including investigations into the taxpayer’s affairs, resulting in legal consequences too,” warns Bangar.

Cumbersome and inaccurate process

Chartered accountants also point out that the feedback mechanism for AIS that has been offered to individuals under the e-verification scheme offers limited options: information is correct, income is not taxable, income relates to another PAN or year and information is duplicate. There are no other options to file your feedback.

Troubled by the havoc caused due to e-verification, the Chartered Accountants Association, Ahmedabad, sent a representation to the Central Board of Direct Taxes in mid-July, asking them to streamline the process of e-verification.

“We have asked the department to reduce the duplication of information and reduce the compliance burden on the taxpayers and consequential mismatch of data with the income tax return. We haven’t yet seen any action around the matter,” says an association member, who did not want to be identified.

The letter also highlighted the agony of people who have booked immovable property by paying in instalments. Even though TDS has been paid, no sale deed or document has been registered. However, such payments are reflected in the AIS, causing confusion.

Stay away from fraudsters

With the returns being processed, many have received refunds as well. But apart from genuine refunds, fake links for getting refunds too are doing the rounds. A taxpayer shared a cybercrime instance where a verification link was sent to her via email. It turned out to be a fraud.

It is easy to mistake a fraudulent email as these days tax authorities prefer communication for sending notices or e-verification requests via email. But any notice or communication would be available for view in the “Pending actions” tab once you login to the online tax portals.

Additionally, to safeguard against fake links and potential scams, taxpayers should “verify the sender. Tax authorities typically use specific domain names or official email addresses. Avoid clicking on links within emails. Instead, manually enter the tax authority official website URL into the browser to mitigate phishing risks,” suggests Bangar.

Every notice has a DIN number too. Also, notices/letters (other than e-Verification Scheme, 2021 for FY 2020-21 and onwards) where the I-T department has some information on your transactions would have a DIN pre-fixed with 'Insight'. You can view these on the portal and respond through the tab listed beside the notice too.