The CBDT e-verification scheme is another initiative facilitating voluntary compliance
The Income Tax Department has taken several progressive steps to encourage voluntary tax compliance and facilitate transparent and non-intrusive tax administration. One such important initiative is the Electronic Verification Scheme, 2021 (the “Scheme”) which was notified on December 13, 2021.
Using information technology effectively, the Scheme aims to share and verify such financial transaction information with the taxpayer that appears to be unreported or undeclared on the Income Tax Return (ITR) filed by the taxpayer.
The Department has been collecting financial transaction information from multiple sources. Previously, a portion of it was shared with the taxpayer on Return 26AS. However, in order to effectively use data collected from various sources, all information is now displayed to the taxpayer through the Annual Information Return (AIS). The AIS provides a facility for the taxpayer to challenge any information if the Source has incorrectly reported said information. The Department confirms such information with the Source and if the Source affirms that there is no error, such information is subjected to a risk assessment for Electronic Verification.
The entire Electronic Verification process is digital, with electronically issued notices and electronically filed taxpayer responses. Once the inquiry is complete, a verification report is produced electronically without any physical interface with the taxpayer.
The Scheme is extremely beneficial to taxpayers as it allows them to explain the financial transaction with evidence. It also helps in the correction/cleaning of data and therefore avoids the initiation of proceedings on misinformed information. In addition, since the information related to financial transactions is shared with the taxpayer, it provides an opportunity to correct/update income that may not have been adequately reported in the ITR submitted by the taxpayer. In other words, as the Electronic Verification Scheme makes the taxpayer aware of the risks, it pushes him towards voluntary compliance by providing the opportunity for the taxpayer to Update the income statement under section 139 (8A) of the Income Tax . Law, 1961.
On a pilot basis, in around 68,000 cases, the information of the financial transactions corresponding to the fiscal year 2019-20 was taken for electronic verification. The details of the transactions were initially shared with the individual taxpayer through an electronic campaign. So far, Electronic Verification has been completed by the designated Directorate in approximately 35,000 cases and the remaining ones are under verification.
As the Scheme has provided an opportunity for taxpayers to accept the information mismatch with respect to the original ITR filed, it is found that many taxpayers have filed updated ITRs.
To facilitate a better understanding of the Scheme and the various processes involved in it, the Frequently Asked Questions on the Electronic Verification Scheme, 2021 is available at www. taxaxindia.gov.
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