Beware
before claiming any deduction/allowance in Income Tax Return which was not
considered in Form 16/16A.
Hello Folks, this post is dedicated on one of
the core issues which tax payers must face during Income Tax Return filing of
AY 2017-18 (FY 2016-17). Though officially only 3 Days remains in due date of
filing, but this post worth a read for both those who has already filed their
Income Tax Return and those who are going to file. Last One year, Modi
government took every step to clean the black economy of India and creating
complications for tax evaders using reforms like Income Declaration Scheme
(IDS), demonetisation, implementing GST, Black Money Bill, Benami Property Act,
RERA and so on. One of such measure for tax evaders had been taken by amending
Section 143(1)(a) of the Income Tax Act, 1961 in Budget 2017. Using this newly
added sword notices has been delivered to thousands of tax assessees regarding
Mismatch of Income with Form 16/16A.
This amendment is going to hit hard for those
Income Tax Assessee’s (Majorly Salaried Employees) who used to make manipulative
claims of allowances (LTA, medical, HRA etc) or deductions (Section 80C, 80D)
in Return of Income and claims refund of TDS deducted from Salary. Let’s
discuss the section and the impact of amendment made. According to this
section, on filing Return of Income, Department will process the return of
income after making following adjustments:
(i)
any arithmetical error in the return;
(ii)
an incorrect claim, if such incorrect claim is apparent from any information in
the return;
But vide Finance Act 2017, another clause has
been inserted which is as under:
(vi) addition of income appearing in Form 26AS or Form 16A
or Form 16 which has not been included in computing the total income in the
return.
This is going to impact hard for Income Tax
Returns filed after this amendment in following ways:
1. If assessee has claimed any allowance or
deduction while filing return of income, which was not considered by employer
in Form 16, then he/she must compulsorily face the Income Tax Notice enquiring
the same. If assessee failed to response that notice within 30 days, then
differential amount between Form 16 and Return of Income will be automatically
added to his income and return would be processed accordingly. In simpler language, everyone will get
notice unless Income shown in Return matches exactly or more than the Form 16/16A.
So, before making any such claim now in return of income, ensure that you have
valid evidences for same. Sample Notice image is produced below:
2. If assessee has not shown Interest Income or
other income in ITR as per Form 16A or Form 26AS, then it would also attract
Income Tax Notice. This would cause problem for those also who shows Interest
Income in their return of Income from Form 26AS only, the statement which gets
updated time to time. For an example, It might happen that while filing return
of Income it shows Rs.20,000/- amount and at the time of processing ITR it
shows Rs.25,000/- as the Form 26AS gets updated by that time.
3. Unlike earlier year, you will not get your
Income Tax Refund within one or two week, because of this prolonged process
introduced right before processing the Income Tax Return. This would cause
serious harassment for those genuine tax payers or assessee who was unable to file
their genuine proofs of allowances and deduction to employer timely and now claiming
refund. They will also face these notices and have to wait for disposal of
their responses against this notices and subsequent action by the department.
These are the following sample instances for
which one may receive a notice from department after filing return of Income:
- Deductions such as Section 80C or Section 80D or other claimed in return of income but not in Form 16 by employer.
- Exempt Allowances claimed in return of income but not in Form 16 such as HRA/LTA/ Medical Allowances.
- Interest Income accrued on Fixed Deposit not shown.
- Receipts considered under different head of Income in the return as against the section under which it is deducted.
How to respond these Notices?
Before responding these notices, carefully
analyse the reason asked in notice and then submit the appropriate explanation as
per the facts of your case under the tab “e-proceeding” after Login your Income
Tax Account.
One should consult their CA or tax
expert before proceeding or submitting any response to these notices. As in
some cases I personally observed that Income Tax Website Considered Income
twice or thrice of the amount proposed to be added.
So, this year beware before filing
return of income with any such claims unless you don’t have sufficient evidence
or proof. Though this kind of action will help government to eliminate few
thousands tax evaders, but at the same time it would cost delay in Income Tax refunds
for Lakhs of genuine tax payers also.
CA. Animesh Singi
www.animeshsingi.blogspot.com
+91 9098589691
