Income-Tax Department Introduces Automated Reconciliation System for Taxpayer Returns

The income-tax (I-T) department is preparing to introduce a new automated reconciliation system to address discrepancies between taxpayers' filed returns and the department's processed information. In some specific situations, individuals who haven't filed I-T returns (ITR) may also utilize this automated reconciliation tool.

Initially, this system will focus on discrepancies related to the financial years 2021-22 and 2022-23. Notices won't be issued for this process; instead, the I-T department will notify taxpayers via SMS and email if any discrepancies are detected.

Taxpayers can log in to their e-filing accounts to review mismatch details on the compliance portal and provide their responses to reconcile the discrepancies.

Since this process is automated, it will initially handle around 700,000 cases. Over time, the system will expand its coverage using advanced technologies like artificial intelligence (AI), machine learning (ML), and natural language processing (NLP). Only cases that remain unreconciled or unresponsive will receive notices.

No documentation is required for reconciliation. Taxpayers who can't explain discrepancies may file updated I-T returns to correct any under-declarations. Since October 2021, the department has been displaying the Annual Information Statement (AIS) for all registered taxpayers, which has contributed to increased ITR filings and tax collections.

Under a new provision of the I-T Act, taxpayers can file updated ITRs for up to two years with additional tax if discrepancies are unexplainable. This provision aims to expedite the reconciliation process and ensure compliance.

A pilot project was initiated in September 2022, resulting in updates to about 4,300 ITRs. Notices for e-verification began in May 2023, and approximately 270,000 cases have been identified for this process. The third cycle of e-verification is set to commence in March, potentially addressing around 300,000 cases.

Initially, around 700,000 cases will be addressed.

Notices will only be sent for unreconciled discrepancies or unresponsive cases.

Since October 2021, the I-T department has been displaying the annual information statement for all registered taxpayers.

This statement is then followed by e-verification.

In March 2024, the third cycle of e-verification is expected to handle approximately 300,000 cases.

Also Read: Exploring Taxation in India Before Filing ITR 2024: Differentiating Income Tax from TDS