Individual taxpayers should ensure that their income statement (incomeITR) matches with that in AIS. If there is a mismatch, the Income Tax Department can send you income tax notice,
Let us tell you, while filing income tax return this year, you forgot to download and check the information in your AIS. Suppose there is an error in AIS which you have not corrected, let’s say interest earned from a bank account that was closed two years ago. Since the bank account has already been closed, you will not get interest. However, your AIS states that you have earned interest from that bank account during the financial year, and you have not disclosed the same in your ITR form. The tax department will send you an income tax notice with additional tax demand.
What are the consequences of such errors, does the taxpayer have to be penalized for not checking AIS before filing ITR? ET Wealth spoke to experts and what they have to say on such discrepancies in ITR and AIS.
Shashi Mathews, Partner, Induslaw: According to the Income Tax Department, it is the responsibility of the taxpayers to ensure that the information in the AIS is correct and any amendment should be reported to the tax department. While there is no penalty prescribed under the law for not reporting errors in the AIS, the taxpayer should ensure that regardless of whether the errors are reported to the department, the return filing must be complete with all accurate and correct details. If there is any mismatch, let’s say AIS shows particular income but it is not declared in ITR, then income tax department can ask to explain it. If the return is filed with correct and correct information, the taxpayer need not worry.
S Vasudevan, Executive Partner Lakshmikumaran and Sreedharan Attorney: No penalty will be imposed on taxpayers for not correcting errors in AIS before filing the tax return. However, these errors may invite adjustment notices from the Centralized Processing Center while the return is in process or may be inquired from the Assessing Officer during the assessment/revaluation proceedings. Therefore, it is advisable that the taxpayers refer to the AIS and give timely feedback for rectification. It may also be noted that if there is a difference between the TDS/TCS/Tax payment details as displayed in Form 26AS on the TRACES portal and the TDS/TCS/Tax payment details displayed in the AIS on the Compliance Portal, the taxpayer may can rely on. Information displayed on the TRACES portal for the purpose of filing tax returns and other tax compliance.
Mitesh Jain, Partner, Economic Law Practice: The taxpayer should not be subject to any penalty for failure to furnish the response before filing the return of income. However, in case of discrepancy between the information reflected in the AIS and the return furnished by the taxpayer, the tax authority may issue a notice to the taxpayer to examine such transaction/discrepancy in more detail.
What is Annual Information Statement (AIS)?
AIS was launched by the Income Tax Department in November 2021. Whose extension is this originally? Form 26AS which was issued earlier. While Form 26AS will continue for now, AIS has more detailed information and information from more sources.
AIS shows certain information related to the taxpayer (such as interest income, dividend income, securities transactions, mutual fund transactions, foreign remittance information, etc.).
At the time of the launch of AIS, the Income Tax Department had provided the facility of giving feedback to the taxpayer if the taxpayer feels that the information is incorrect.
This submission of feedback is an option provided to the taxpayer to rectify/correct any discrepancy in the information and no obligation is imposed on the taxpayer to mandatorily submit the feedback/correct the discrepancy before filing the return . Further, the provisions of the IT Act or the IT Rules also do not prescribe any penalty for failure to submit such response.
In any case, to be on the safe side, if there is any discrepancy, the taxpayer should always inform the tax department using the online functionality. There is also no time limit for reporting discrepancies.