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Resolving issue of mismatch between ITR information and third party information via efiling website “e-Sahyog”

Traditionally, when Income Tax Department (ITD) found mismatch in information shown in the Income Tax Return with the information submitted by third parties in the form of Annual Information Return (AIR), TDS Statement etc., the cases were selected for scrutiny. Till last year only very few cases ie less than 1% of cases used to be selected for scrutiny under CASS.

The information so collected were also used to identify cases of non filer and sending notices to non filer by Non-filers Monitoring System (NMS)

Now income tax department has found new ways to tackle information received from AIR, CIB, TDS statement.  Income Tax Department (ITD) has launched a new initiative e-Sahyog project to tackle mismatch in the income tax return with the information available from AIR etc

In contrast to scrutiny assessment, e-Sahyog project will reduce compliance cost, especially for small taxpayers.

e-Sahyog project provides an online mechanism to resolve mismatches in income Tax return without requiring taxpayers to attend the Income Tax Office. The taxpayers in whose cases mismatch has been found have been informed by SMS, e-mails and letters.

If you have not declared or incorrectly declared in any of the below transactions in the previous years, be prepared to get notice from the income tax department.

  • Transfer of  property  reported  in AIR  but  capital  gains  is  not declared in Return of Income:

Taxpayer  has  filed  the Return  of  Income in  ITR 1/4S  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 Sub Registrar of the properties by way of AIR return.

  •  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.

  • 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.

  • Payment of  compensation  on acquisition  of  immovable  property is  shown  in  TDS  return  filed  by Government  but  capital  gains  is not declared in Return of Income. 

Taxpayer  has  filed  the Return  of  Income in  ITR 1/4S  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.

  • Amount paid/credited  as  per  26 AS (194C  and/or  194J)  but  no income  from  business/profession declared in Return of Income 

Taxpayer  has  filed  the Return  of  Income in  ITR 1/2/3  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).

  • 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 

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 

  • 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
  • Amount paid/credited  in   Form  26 AS  (Section  194I)  is  significantly more  as  compared  to  the rent/annual  lettable  value  as shown in Return of Income
  • Amount paid/credited   as  interest and  winnings  from  lottery, crossword  puzzle,  races    in Form  26  AS  is  more  than  the Income  from  other  sources  shown in Return of Income\
  • Amount paid/credited   as  interest in  Form  26  AS  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).

  • 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  1/2/3  which  does  not  contain  the details of any income from business/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.

 

How to handle mismatch notice received from Income tax department

The taxpayers in whose cases mismatch has been found have been informed by SMS, e-mails and letters. The taxpayer needs to follow these basic steps

e-sahyog

The taxpayer just needs to visit the e-filing website and log in with their user-ID and password for the e-filing portal, click on “My pending action”, the taxpayer will get the information about the Return Information Mismatch under eSahyog tab, The taxpayer will be provided the information submitted by the taxpayer to the ITD in the Return of Income as well as the information received by the ITD from the third party. Tax Payer can then submit online response. If he need more information on the mismatch or clarification he can send query to [email protected].

The responses submitted online by the taxpayers will be processed and if the response and other information are found satisfactory as per automated closure rules, the issue will be closed. The taxpayer can check the updated status by logging in to the e-filing portal.

Failure to submit online response to mismatch notice may result getting notice for scrutiny assessment from the tax department.

How to file response to mismatch notice?

Tax payer can respond to the mismatch notice by clicking the link “response” to open “Return Mismatch Response”

The mismatch related information (relevant value in the ITR and third party information) will be displayed in “Return Mismatch Response”. He has to choose whether he has knowledge about “mismatch related information” or don’t have knowledge about “mismatch related information”. If he chooses the option in Part A that he has knowledge about the mismatch, then he has to submit a detailed response in Part B relating to mismatch.

The tax payer will have to provide detailed response to explain each mismatch.

There are different types of responses that the tax payer can give depending on the fact of the each case. The different types of response are.

  1. The value shown under third party information is wrong
  2. The mismatch is on account of information relating to different PAN or Assessment Year
  3. The information or transaction was not correctly declared in the return of income and revised return u/s 139(5) has been filed.
  4. Explanation other than the above

If he choose point no 3 above, he has to ensure that he has calculate correct tax liability and filed revised return before submitting response.

After submitting the response, a response id will be generated. The first submission of one or more mismatch issues will generate an Original” pdf in “View my submission” tab. After that each submission will generate a “Revised” pdf. The latest pdf (whether original or revised) will be valid for e-Sahyog and the same will be referred by the department for further reference with the taxpayer

The responses submitted online by the taxpayers will be processed and if the response and other information are found satisfactory as per automated closure rules, the issue will be treated as closed. Hence it is important to study mismatch notice carefully and submit a proper response. The taxpayers can check the updated status by logging in to the e-filing portal.

We would be glad to know your doubts or queries. In case you need our assistance in relation to “e-Sahyog” notice from income tax department, please feel free to post your comment below or email it to [email protected]

Read :

Click here to read step by step guid for return mismatch verification

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About CA Prakash Chartered Accountant Bangalore

CA Prakash Chartered Accountant Bangalore
CA Prakash is a practicing chartered accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]