IT Dept Intensifies Data-Driven Tax Scrutiny; Issues Bulk Notices After AIS, TIS and Form 26AS Mismatch Detection

The Income Tax Department has reinforced its data-driven scrutiny to closely monitor taxpayer compliance. This step has been taken after detecting so many discrepancies in the information of AIS, TIS, Form 26AS, banking data, foreign asset disclosures, etc. In conclusion, the department is now issuing bulk notices to the taxpayers where mismatches and non-compliances have been found in their returns. These notices are mainly aimed at cases where income, assets, or deductions are not correctly reported in the Income Tax Return (ITR).

Here are the key reasons that have been detected by the tax department behind issuing these notices:

1. Foreign Investments and Assets Not Disclosed

The Income Tax Department is issuing notices to the taxpayers who have invested in foreign shares/securities or have earned dividend income from foreign investments but have failed to disclose them in their Income Tax Returns (ITRs). Taxpayers who have not disclosed foreign assets such as foreign bank accounts, overseas shares, and ESOPs issued by foreign companies.

2. Incorrect or False Deduction Claims

The Income Tax Department is keeping a close eye on returns, making wrong claims under Chapter VI-A, especially claiming deduction under Section 80G instead of Section 80GGC, or vice versa, making false or ineligible claims under Sections 80G / 80GGC, and claiming deduction for donations made to unrecognised or non-eligible trusts.

3. Non-Filing or Incorrect Filing of ITR

The Income Tax Department is identifying cases where taxpayers have either not filed their returns or filed them incorrectly. The tax department is flagging cases where taxpayers have not filed any return despite high turnover/large financial transactions or, if filed, income is reported under an incorrect head of income, an incorrect ITR form is used, or significant transactions appear in AIS/TIS but are not properly reported in the return.

4. Data Discrepancy Issues

The Income Tax Department is also issuing notices in cases where discrepancies have been noticed in information of AIS, TIS, Form 26AS, income reported in the filed ITR, etc.

This time, even a small mistake can lead to the issuance of a tax notice; hence, taxpayers are advised to thoroughly cross-check even minor details while filing the returns, as even small inconsistencies can trigger automated notices.

Taxpayers are strongly recommended not to ignore any notice received from the income tax department, even if they feel they have not done anything wrong. Firstly, read the complete notice thoroughly and try to understand what the notice is trying to say. If notice is flagging any mistake, discrepancy, omission, or incorrect claim, then the taxpayer should either file a Revised Return (Revised ITR or ITR-U) or should furnish a Rectification Application under Section 154, depending on the nature of the issue.