IT Dept: Verification of Reporting Entities Conducted By Income Tax Department

The IT Department has directed its attention towards encouraging voluntary adherence. In pursuit of this objective, details regarding taxpayers' financial transactions are acquired from Reporting Entities, including banks, forex dealers, sub-registrars, and similar entities.

Verification of Reporting Entities

To encourage voluntary compliance, the Income Tax Department has dedicated its efforts. To achieve this goal, relevant data regarding taxpayers' financial transactions are acquired from Reporting Entities such as banks, forex dealers, sub-registrars, etc. 

The obtained information is then presented to taxpayers in the form of the Annual Information Statement (AIS) through their e-filing accounts. This significant measure aims to simplify the process of accurately filing income tax returns for individuals.

While most Reporting Entities dutifully fulfill their statutory responsibilities by submitting accurate and thorough Statements of Specified Financial Transactions (SFTs), there have been sporadic cases of non-compliance.

The Department recently verified a large Tamil Nadu-based bank to address Reporting Entity compliance difficulties. During the verification process, multiple discrepancies came to light. It was found that the bank had failed to submit Statements of Specified Financial Transactions (SFTs) in certain instances, and in other cases, the submitted particulars were incomplete or inaccurate. 

Specifically, SFTs were not filed for cash deposits exceeding Rs.2,700 crore across over 10,000 accounts, credit card payments with a total transaction value surpassing Rs.110 crore, dividends exceeding Rs.200 crore, and shares issued above Rs.600 crore.

Additionally, the bank's previously submitted Statements of Specified Financial Transactions (SFTs) were found to be lacking in several aspects. 

Significantly, the bank neglected to disclose important transactions, including interest payments surpassing Rs.500 crore, time deposits, cash deposits, withdrawals from current accounts, and other notable transactions.

During the verification process, it was uncovered that the filing of Form 61B for Automatic Exchange of Information (AEOI) regarding account holders considered "residents" in foreign countries was done incorrectly.

In recent times, the Department conducted verification of two cooperative banks in Uttarakhand and identified transactions amounting to several thousand crores that these institutions had not reported.

As part of its ongoing efforts to simplify compliance, the Department regularly organizes outreach activities across the country. These initiatives aim to clarify legislative requirements and processes while addressing challenges faced by Reporting Entities.

Also Read: AAR Decides: Same Place of Business Doesn't Require Separate GST Registration for Each Type of Business

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