I-T dept flags financial reporting error after sending advance tax notices; asks tax-payers to wait for updates

Tax-payers need not act on I-T's intimations on advance tax for now, say tax experts

Tax-payers who received advance tax payment notices from the income tax (I-T) department in the last few days can heave a sigh of relief for now.

The I-T department, in a post on X (formerly Twitter) on March 11 said that it has identified some errors in the financial transaction data reported in the annual information statement (AIS) of taxpayers for the financial year 2023-24. As a result of these errors, taxpayers have received notices for payment of advance tax significantly higher than what they had anticipated for FY 2023-24.

Giving an example of what happened, Chirag Chauhan, founder of tax consultancy firm C A Chauhan & Co Chartered Accountants says, “The value of assets sold has been increased by two zeroes, for example, one share of ITC sold for Rs 450 has been shown as Rs 45,000 and property sold for Rs 1.2 crore has been shown as Rs 12 crore in the AIS, implying a huge advance tax liability.”

In its post, the I-T department has now asked such taxpayers to wait for further updates on their AIS. This means that they need not take any action on the intimations received, tax experts told Moneycontrol.

Reporting errors trigger faulty notices

This comes after the department launched an e-campaign on March 10 to intimate tax-payers whose tax payments in FY 2023-24 did not match financial transactions reported in AIS. “For simplifying compliance and strengthening taxpayer services, ITD, through e-mail and SMS, is undertaking an e-campaign to reach out to persons/entities whose tax payments may not be commensurate with their financial transactions during FY 2023-24 (AY 2024-25). The analysis (is) based on 'Significant Transactions' from AIS module of e-filing portal,” the I-T department had said in a press release.

What is AIS?

The AIS is a document detailing a taxpayer’s financial transactions such as purchase and sale of securities, immovable properties, high-value investments, TDS or TCS (tax deducted at source or tax collected at source) transactions, interest on savings accounts and deposits, dividends, rent received, foreign remittances etc. during a financial year.

What went wrong

According to the I-T department’s post, the error is the result of certain inconsistencies in the securities market-related data reported to them by one reporting entity, which it has chosen not to name in its X post.

“Based on feedback from taxpayers on the e-campaign for advance tax, the department has identified certain inconsistencies in the data of the securities market (SFT-17) provided by one of the reporting entities. The reporting entity has been asked to submit a revised statement based on updated information.

Hence, the data on AIS will be updated. Taxpayers are advised to wait for further updates on AIS based on the revised statement.

Based on feedback from taxpayers on the e-campaign for Advance Tax, the Department has identified certain inconsistencies in the data of the securities market (SFT-17) provided by one of the Reporting Entities. The reporting entity has been asked to submit a revised statement…

— Income Tax India (@IncomeTaxIndia) March 11, 2024

According to her, as a result, many people who didn't even transact above Rs 10 lakh, which is the threshold for SFT 17 reporting, received SMSes from the I-T department asking them to pay advance tax by the March 15, 2024 deadline.

Chauhan said that erroneous notices have been sent to many taxpayers who have sold shares or immovable property, to pay advance tax.

The way forward for tax-payers

Suggesting a way out for such taxpayers, Chauhan says that taxpayers should ignore these erroneous notices and go ahead and pay the correct advance tax as per their calculations by the March 15, 2024 deadline. This will help them avoid having to pay any penal interest on late advance tax payments.

Ajmera says, “Those who haven't transacted for that high an amount and aren't liable to pay advance tax needn't panic. The I-T department is trying to fix the issue and has asked the trading entity to correct the data uploaded into the system."