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Income Tax Department Raises Red Flags on High-Value Transactions as Updated ITR Deadline Approaches

In a recent development, the Income Tax Department has initiated communication with numerous individuals concerning significant transactions observed during the financial year 2020-21. As the deadline for updated Income Tax Returns (ITR) draws closer, taxpayers are being urged to address queries regarding these transactions promptly.

Many individuals have reported receiving email notifications from the Income Tax Department regarding substantial or high-value transactions highlighted in their Annual Information Statement (AIS). To gain insight into these transactions, individuals are directed to the AIS/Compliance Portal’s ‘e-Campaign’ section.

According to a frequently asked question (FAQ) section on the AIS/Compliance Portal, the tax department reaches out to taxpayers for clarification on information gathered from various sources. Taxpayers are expected to provide responses or explanations through the e-Campaign portal, covering areas such as non-filing of returns and significant transactions.

Naveen Wadhwa, VP at Taxmann, elucidates, ‘The communication visible in the AIS/Compliance Portal under the e-campaign tab is an intimation that the tax department has found certain information that does not match with the income disclosed by the taxpayer in his ITR.’

As the deadline for filing updated returns for FY 2020-21 approaches (31st March, 2024), eligible taxpayers are encouraged to rectify errors or omissions in their previously filed ITRs. Mihir Tanna, associate director-direct tax at S.K Patodia LLP, highlights the urgency, stating, ‘Since the deadline to file ITR-U is near, the tax department is sending emails pertaining to FY 2020-21 to some taxpayers.’

To check if they’ve received such communications, taxpayers can log in to the ITR e-filing portal and navigate to the pending action tab, followed by the Compliance Portal. Here, they can access the e-Campaign section to view flagged transactions and further details.

Tanna shares a client’s experience of receiving communication for a property purchase in FY 2020-21, underscoring the importance of distinguishing between the AIS Compliance Portal and the Compliance Portal.

Tax experts emphasise that these communications aim to bolster compliance and authenticate financial transactions. Punit Agarwal, founder of KoinX, explains, ‘The purpose behind such communications is to authenticate financial transactions, based on the information sourced by the tax department.’

In cases where taxpayers fail to respond adequately, Wadhwa warns of potential scrutiny proceedings or assessments by the tax department. He states, ‘If the taxpayer does not respond or the response is unsatisfactory, the tax department can initiate scrutiny proceedings or assessment for the escaped income.’

With the deadline looming, taxpayers are advised to address any communications promptly to avoid potential repercussions from the tax department.

Monika Shanmugam