“e-Sahyog” Highlight: Income Tax Department to cross-verify data filed

Income Tax to cross-verify data

Income Tax Department to cross-verify data filed with the other departments as a part of    “e-Sahyog”.

In a bid to control the black money generation within the nation and ensure that entire income generated by the assessee is duly accounted for in the books of account, the Income Tax department has taken a welcome initiative in the “e-Sahyog” pilot project launched on 27th October, 2015.

e Sahyog Highlight - Income Tax Department to Cross-Verify Data

The main objective of e-Sahyog is to reduce compliance cost for small-taxpayers by provision of online mechanism to resolve mismatches in the Income Tax returns of those assessees who have not been selected for scrutiny. A major highlight of this project is that now Income Tax Department shall cross-verify data filed with other departments.

The term “data filed” includes various returns filed in the past by the assessee himself or the other party to the transaction in which the assessee was involved. Further it also includes various other data filed (E.g.: AIR i.e. Annual Information Report) with other departments (E.g. Service Tax, Central Excise etc.) by persons other than the Assessee (E.g.: Local authorities, registration department, postal authorities, land acquisition authorities, SEBI, RBI etc.)

Effects of Cross-verification of Data by Income Tax Department with other departments

Due to cross-verification of data by the Income Tax Department with the other departments –

  • A Tax payer needs to ensure that the information furnished by him in the first phase itself is accurate and a uniform data is submitted to all departments. Furthermore there is no scope of trying to conceal income especially in property transactions.
  • A professional is now required to be more proactive and ensure re-conciliation of all the data.
  • Ethical and logical responsibility to report such unreconciled transactions and generation/concealment of income in toto lies on the professionals. In case, such transactions go unreported, now the department will do the needful.
  • The department shall now work with enhanced responsibility towards stream-lining the similar data submitted by the assessee within various departments. This will ensure zero-tolerance towards window-dressing of similar data submitted across various departments and will help in reduction of fraud.

List of Common Issues detected during the Cross-verification of Data by Income Tax Department with various Departments

Following is a list of the 12 most common issues wherein mis-matches have been observed due to various reasons including 1. carelessness or ignorance on the part of the tax-payers vis-à-vis the same data submitted to the department by the other parties and 2. Inflated reporting or window-dressing of the data by the other parties.

S.No. Head of Income Scenario Explanation
1 Capital Gain Transfer of property reported in AIR but capital gains is not declared in Return of Income. Tax – payer has filed the return of Income using ITR – 1 or ITR- 4S which does not consist of any details pertaining to such a transaction. On the other hand the Income Tax Department has received the details of about the transfer of the property by the taxpayer from the Sub Registrar of the properties by way of AIR return.
2 Capital Gain Value of property transferred as reported in AIR is higher than the value of property transferred as reported in Return of Income The value of property transferred during the year as reported in the AIR return filed by the Sub Registrar office, is higher than the Full value of consideration adopted as per section 50C for the purpose of Capital Gains as declared in the Capital gains Schedule of Return of Income.
3 Capital Gain Payment of compensation on acquisition of immovable property as shown in TDS return filed by acquirer is more than sale consideration reported in the Return of Income The value of property transferred during the year as reported in TDS return filed by the Government under section 194LA, is higher than the full value of consideration received/receivable as declared in the Capital gains Schedule of Return of Income.
4 Capital Gain Payment of compensation on acquisition of immovable property is shown in TDS return filed by Government but capital gain is not declared in Return of Income. Taxpayer has filed the Return of Income in ITR 1 or ITR 4S which does not contain the details of any transfer of property by the taxpayer. While the Income Tax Department has received the details about the transfer of the property by the taxpayer from the TDS return under section 194LA filed by the Government.
5 Profits and Gains from Business and Profession Amount paid/credited as per 26AS (194C and/or 194J) but no income from business/profession declared in Return of Income Taxpayer has filed the Return of Income in ITR 1 or ITR 2 or ITR 3 which does not contain the details of any income from business/profession, while the Income Tax Department has received the details about amount paid/credited u/s 194C and/or 194J to the taxpayer during the year as reported in the TDS return filed by the deductor(s)
6 Profits and Gains from Business and Profession Amount paid/credited as per Form 26AS (Section 194C and 194J) is more than the gross turnover or gross receipts shown in Return of Income Amount paid/credited as per Form 26 AS (Section 194C and 194J) is more than the gross turnover or gross receipts shown in Return of Income filed in ITR 4S
7 House Property Amount paid/credited reported in Form 26 AS (Section 194I) is significantly more as compared to the income from house property as shown in Return of Income i.e. Rent income is more as per 26AS Amount paid/credited reported in Form 26 AS (Section 194I) is significantly more as compared to the income from house property as shown in Return of Income filed in ITR 1 or ITR 4S i.e. Rent income as per 26AS is more as compared to the rent income reported in the return of Income
8 Profits and Gains from Business and Profession Amount paid/credited in Form 26AS (Section 194I) is significantly more as compared to the rent/annual lettable value as shown in Return of Income Amount paid/credited reported in Form 26 AS (Section 194I) is significantly more as compared to the income from house property as shown in Return of Income
9 Income from Other Sources Amount paid/credited as interest and winnings from lottery, crossword puzzle, races etc. in Form 26AS is more than the Income from other sources shown in Return of Income Amount paid/credited as interest and winnings from lottery, crossword puzzle, races etc. in Form 26 AS is more than the Income from other sources shown in Return of Income filed in ITR 1 or ITR 4S
10 Income from Other Sources Amount paid/credited as interest in Form 26AS is more than the interest income shown in Return of Income Gross Interest shown in Return of Income is less than Interest paid/payable during the year reported in the TDS return filed by the deductor(s).
11 Profits and Gains from Business and Profession Turnover from services reported in Service Tax Return but no income from business/profession declared in Return of Income Assessee has declared turnover from services in its service tax return(s) submitted to the Service Tax Department while the Income Tax Return is filed in ITR 1 or ITR 2 or ITR 3 which does not contain the details of any income from business/profession.
12 Profits and Gains from Business and Profession Higher turnover reported in Service Tax Return as compared to gross turnover or gross receipts reported in Return of Income Amount of turnover from services during the year, declared by the assessee in the service tax return submitted to the Service Tax Department is higher than the amount of turnover reported in ITR 4S.

In a Nutshell

We would just like to say that ensure that you report only the actual data without inflating or concealing it, as in either scenario the results can be extreme.

Contributed by:

Heer

Heer Gajjar, KCJM

You can reach out to her on support@kcjm.in

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