The CBDT has released a set of 24 clarifications and FAQs on the e-Verification Scheme 2021, announced in Notification 137/2021, with the goal of providing general guidance in understanding the procedures and processes thereof.
These FAQs are presented in an easy-to-understand format that avoids using technical terms from the Income Tax Act to the extent possible.
Furthermore, CBDT has stated that these FAQs are intended to be informative and advisory in nature and that they may be updated as needed. These FAQs should not be construed as legal interpretations of the e-Verification Scheme, 2021, or the Income Tax Act, 1961. Taxpayers may wish to make an informed decision about their tax obligations in this regard.
1. Where can I find information about my financial transactions reported to the Income Tax Department by sources or reporting entities?
The Income Tax Department collects financial transactions such as your TDS/TCS receipts, immovable property purchase or sale, bank deposits, investment in shares/mutual funds, time deposits, and so on.
You can view all of these transactions in the AIS portal of your income tax account beginning with FY 2020–21. The procedure is as follows:
a) Use the URL https://eportal.incometax.gov.in/ to access the e-filing portal.
b) On the home page, click the “Services” tab.
c) In the menu, under the tab “Services,” select “Annual Information Statement (AIS)” to be taken to the AIS portal.
d) On the AIS portal, select the relevant financial year and click on “Annual Information Statement” to view the financial transactions.
2. What should I do if I discover a transaction that was incorrectly recorded or does not apply to me?
As previously stated, once you are viewing information under AIS, click on a specific piece of information. Once the details of the information are shown, the taxpayer can use the menu options to give feedback by clicking the feedback button on the right.
3. What happens after I file an objection to an AIS transaction?
In the next 3–4 months, the Income Tax Department will begin contacting the source or reporting entity that reported the information/transaction to confirm the accuracy of the data. Once this process is in place, the following will occur:
i) If the source or reporting entity agrees that a mistake has occurred, the data will be corrected in due course after the source or reporting entity files its corrected statement. This procedure is carried out using an automated information technology-driven procedure.
ii) If the source or reporting entity stands by the data and does not support your objection, you will be required to provide additional explanation or evidence under the e-Verification Scheme 2021, as explained in the following questions.
4. What is the 2021 e-Verification Scheme?
i) When a financial transaction reported by a source or reporting entity is not considered or included by you when filing your income tax return (ITR), a computerised process is used to identify the mismatch.
ii) A communication is sent to the source or reporting entity, requesting confirmation of the transaction or data that it has reported. The source or reporting entity can either confirm the information provided by it or state that it has reported incorrectly and can change the information by revising earlier filed statements.
iii) If the source or reporting entity confirms the information, in appropriate cases, proceedings under the e-Verification Scheme will be initiated for the taxpayer. A notice under Section 133(6) will be issued to the taxpayer electronically via the Compliance Portal, which can be accessed at https://eportal.incometax.gov.in, requesting an explanation or evidence as to why the transaction was not considered or included in the Return of Income. In exceptional circumstances, the notice could also be sent via Speed Post.
iv) The taxpayer must provide an explanation, evidence, or compliance to the notice under Section 133(6) of the Income Tax Act, 1961, via electronic means, using the Compliance Portal (https://eportal.incometax.gov.in).
v) Based on the explanation or evidence provided, the prescribed authority conducting the e-Verification will form an opinion about the transaction being or not being suitably reflected in the return of income.
vi) Following this process, a communication will be sent to the taxpayer informing him or her that:
a) No further clarification on the issue under verification proceedings is currently required from the taxpayer; or
b) the explanation is not found sufficient to explain the mismatch in the specific information, and the taxpayer may consider updating the return of income under Section 139(8A) of the Income Tax Act, if eligible.
5. What is the significance of the 2021 e-Verification Scheme?
Several steps have been taken to encourage voluntary compliance. The most recent are information sharing via AIS and pre-filling of income tax returns. Another example is the e-Verification Scheme. It will assist in the following ways:
i) Correcting inaccuracies in data or information provided by the source or reporting entity;
ii) To notify the taxpayer of any transaction that may have been overlooked in computing income and taxes and filing the Return of Income;
iii) To give the taxpayer the opportunity to correct any omissions in the Return of Income by filing an updated Return of Income and paying the tax due on the income missed in the original Return of Income; and
iv) To give the taxpayer an opportunity to explain a transaction that is being verified before any further action, such as an assessment or reassessment, is taken.
6. Is the e-Verification Scheme the same as ITR e-Verification?
You must verify your income tax return (ITR) after filing it to complete the return filing process. An ITR is considered invalid if it is not verified within the time frame specified. e-Verification is the most convenient and immediate method of verifying your ITR. You can e-verify your return online by using an OTP sent to your Aadhaar-registered mobile number, net banking, a digital signature, and other methods. The e-Verification Scheme 2021 differs from the e-Verification of Return.
7. Where can I find the notice issued to me under Section 133(6) requesting an explanation for a transaction that I did not include in my income tax return? How do I respond to the notice issued under Section 133(6) of the e-Verification Scheme, 2021? Alternatively, what should I do if I receive an e-Verification notice?
The notice issued under Section 133(6) of the Income Tax Act will be visible to you in the Compliance Portal (accessible via https://eportal.incometax.gov.in). Normally, you will also be notified via SMS on your registered mobile phone and via email on your registered email address. The following are the steps involved in accessing the notice under Section 133(6) and filing the response electronically:
Step 1: The taxpayer will access the e-filing portal through the URL https://eportal.incometax.gov.in/.
Step 2: Navigate to the “Pending Actions” tab.
Step 3: Select “e-Verification” from the “Compliance Portal.”
Step 4: Select the appropriate fiscal year.
Step 5: To download the notice, click the “DIN” button.
Step 6: Provide your response by clicking the “Submit” button.
Step 7: Enter your comments, attach any supporting documents, and click “Submit” to send your response to the notice.
Responses must be submitted electronically, as detailed in the preceding steps.
8. After logging in and responding to the e-Verification notice, nothing appears and only a blank screen page opens. How should I proceed?
Please enable “pop-ups” from the “Privacy and Security” settings in Google Chrome, Firefox, and other browsers.
9. How do I know if I’ve received an e-Verification notice?
The Income Tax Department will issue a notice in accordance with Section 133(6) of the Income Tax Act, 1961. This will be visible on your incometax.gov.in e-filing portal account. The notice is also emailed to the most recent email address provided to the Income Tax Department when filing the income tax return. You will also receive SMS messages on the most recent mobile number associated with your PAN.
10. What should I do if I am unable to access the compliance portal to view notices or submit responses?
You can file a complaint with the “Compliance” portal’s helpline by dialling 1800-103-4215. Please keep in mind that the helpline number is unique to each portal. Please use the Compliance Portal helpline to resolve any issues.
11. How does the taxpayer confirm the authenticity of the notice received?
A facility for verifying the authenticity of the notice from the DIN mentioned in the notice will be available very soon. The taxpayer will be able to verify the DIN from the e-portal and determine whether the notice is genuine by clicking on the “Authenticate Notice or Order Issued by ITD” link in the e-Quick portal’s Links section and following the process outlined in the e-portal. The taxpayer must respond to the notice only through the Income Tax Department’s Compliance Portal (https://eportal.incometax.gov.in), not by email. The instructions for providing the information can be found in Annexure 2 of the notice sent to the taxpayer.
12. When responding to a notice issued under Section 133(6) of the Income-tax Act in the Compliance portal, attachments larger than 10 MB are not accepted. How should such large documents be submitted?
As attachments, 10 documents of 10 MB each can be uploaded with each response. Large documents that must be attached can be divided into smaller documents of less than 10 MB in size and then attached and uploaded.
13. What if my explanation is found to be adequate?
A communication is sent to the taxpayer informing him that “no further clarification on the issue under verification proceedings is presently required from you.” This could change if additional evidence or information comes to the attention of the Income Tax Department later on.
14. What happens if the explanation is deemed insufficient?
If the explanation is not found satisfactory, the e-Verification proceedings will be terminated with a communication to the taxpayer informing him or her that “the explanation was not found sufficient to explain the mismatch in the specific information, and the taxpayer may consider updating the return of income u/s 139(8A) of the Income Tax Act, if eligible.” If the taxpayer fails to update the Return of Income on time, the Income Tax Department will initiate risk-assessment-based proceedings such as assessment or reassessment, which may result in a tax demand and penalty, among other things.
15. What should I do if I discover that I overlooked a transaction while calculating my income in an earlier Return of Income?
If you are eligible, you may consider updating your return of income under Section 139(8A) of the Income Tax Act 1961 by paying tax on the missed income as well as additional tax to avoid further proceedings in the form of assessment or reassessment, which could result in a tax demand and penalty.
16. Can I respond to the notice issued under Section 133(6) of the Income Tax Act 1961 by paying additional tax on the transaction being e-verified by the Income Tax Department?
Yes. This should be stated explicitly in the response. The Income Tax Department will verify the updated return of income with the information and make an appropriate decision.
17. Do I have to pay a penalty if I update my return?
There is no such thing as a penalty. However, while updating your return, you must pay an additional tax of 25% in the first year and 50% in the second year.
18. Is it possible for me to meet with the officer in person?
This scheme does not permit the prescribed authority to conduct a physical hearing. You are required to submit your response online via the portal. In the event of a query or clarification, the prescribed authority will communicate via the portal and provide you with ample opportunity to clarify, as well as supporting documents. In exceptional circumstances, a video conference facility is available. This facility is currently being developed.
19. Why should I revise or update my tax return?
The Income Tax Department is allowing you to pay tax on income that you did not report on your return but about which the Income Tax Department has received information. If you do not take advantage of this opportunity to pay tax on such income and update your return, the Income Tax Department may initiate appropriate proceedings under the Income Tax Act, 1961, based on facts.
20. What is an updated return, and how does it benefit the taxpayer?
Section 139(8A) of the Income Tax Act has been added by Finance Bill/Act 2022. This new section requires taxpayers to file an “Updated Return.” The taxpayer has two years from the end of the relevant assessment year to file an updated return. As a result, taxpayers can file ITR-U for fiscal years 2020–21 and 2021–22 during the current fiscal year, 2022–23. That is, the return for financial year 2019–20 can be updated until March 31, 2023.
Whether or not the original return was filed by the taxpayer, an updated return can be filed. To file an updated return, however, the taxpayer must meet the conditions outlined in Section 139(8A) of the Income Tax Act 1961, which include:
i) The updated return can be filed only if the taxpayer is required to disclose any additional income that was previously missed or omitted, as well as pay the additional tax;
ii) An updated return cannot be filed to reduce any income and report loss, or to increase the loss, resulting in a lower tax liability or a higher tax refund;
iii) The option of an updated return is only available once per assessment year; and
iv) If the updated return is not filed within 12 months of the end of the relevant assessment year, an additional 25% income tax and interest will be due. If the return is not filed within 24 months of the end of the relevant assessment year, an additional 50% of income tax and interest will be due.
This option to file an updated return can also be viewed as an opportunity to disclose previously unreported income and avoid further proceedings under the Income Tax Act.
21. How does the e-Verification Scheme differ from scrutiny or reassessments?
This is primarily a preliminary verification based on information received from various reporting entities by the IT Department. Because this is not a notice of assessment or reassessment, no order is required to be issued. This is only for verification purposes. Once information is verified and correctly reflected in the ITR, the Income Tax Department may not take any further action with regard to the specific information verified. If information is missing from the return of income, the taxpayer can update the tax return as described above.
22. What should the taxpayer do if the Income Tax Department’s information is incorrect? OR What should I do if I receive a notice with duplicate entries under the e-Verification Scheme?
If you review the notice and discover that the information mentioned in the notice does not belong to you, is a duplicate entry, or is incorrect (fully or partially), you must clearly state this in your response on Insight and provide supporting evidence, if applicable. The Income Tax Department would then confirm the veracity of the information with the source and take appropriate action.
23. What if you agree to the mismatch between your income tax return and the information explained to you in the notice issued under Section 133(6) of the Income Tax Act, 1961, as part of the e-Verification Scheme?
The taxpayer can update his ITR and pay the additional taxes under Section 139(8A) of the Income Tax Act. A response can be submitted indicating that the mismatch has been accepted and that the ITR has been or will be updated.
24. What are the possible causes of difficulties in responding to the notice under Section 133(6) of the Income Tax Act?
The following are some of the most common reasons:
i) The taxpayer’s response must be submitted via the compliance portal, which is accessible via the e-filing portal (www.incometax.gov.in). Other Income Tax Department portals are for specific compliances and will not accept responses to notices under the e-Verification Scheme.
ii) The taxpayer’s web browser has not been updated to the most recent version, and thus the website is not supported by the browser.
iii) The web browser’s POP-UP Blocker is enabled, preventing access to the response window.
CBDT Communication dt. 01/02/2023: FAQs on e-Verification Scheme 2021
CBDT Income Tax Notification 137/2021 dt. 13/12/2021: CBDT has notified the ‘e-Verification Scheme, 2021’ for faceless collection of taxpayer’s information by the Assessing Officer (AO), applicable w.e.f. 13/12/2021