While you may have filed your income tax return (ITR) and verified it also, it may not be sufficient to ensure that you get your tax refund on time as it may depend on many other factors.
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Before the tax department issues a refund, certain checks and balances must be met. One such measure is the ‘Risk Management System (RMS),’ which the tax department employs to identify ITRs that may warrant further scrutiny. If your ITR has been identified by the tax department’s RMS, then an intimation will be sent to your email address. You can also view this intimation on the e-filing portal (steps to view are given below).
Once the tax department’s RMS has identified your submitted and verified ITR, it will not be processed until you fix the issue. In the worst-case scenario, if you decide not to take any action, then the tax department can issue you an income tax notice.
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When can the tax department’s ‘risk management’ system pause your tax refund process?
“It is seen that a claim of refund has been made in the Income-Tax filed by you. Your Income-Tax Return has been identified under the risk management process of the Income Tax Department. Your confirmation is required on the following claims(s)/deductions(s)/omissions in the return,” said the Income tax department on a intimation sent to a taxpayer as shared by CA Himank Singla on X (formerly Twitter on August 27, 2024.
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Tax lawyers say that the RMS process used by the tax department analyses various data sets to identify discrepancies.
“The Income Tax Department uses a risk management process to identify income tax returns (ITRs) that may require further scrutiny. This process involves assessing various factors, such as discrepancies in data, high-value transactions, or unusual claims. When your ITR is selected under this process, it indicates that the department wants to verify certain aspects of your return to ensure the accuracy of the tax refund claim,” says Kunal Savani, Partner, Cyril Amarchand Mangaldas.
Where to check if you have got this intimation from the income tax department
According to the Income Tax Department website, you need to go to the e-filing portal and login first. Once this is done, navigate to pending action and click on ‘Worklist’. Under the ‘For Your Action’ tab, you may get this.
“To submit the response, please login to e-Filing portal >>Pending Action >>Worklist>> Response for Refund Confirmation by selecting the correct option.
– The claim of refund is correct to the best of my knowledge and belief.
– Return of Income is being revised wherein, correct claim of refund shall be made,” said the Income Tax Department.
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Possible reasons behind Income tax RMS identifying you and sending this intimation.
Ramakrishnan says that in his experience, “Taxpayers who claim deductions/exemptions under any section, 80C, 80D, 80G, 80DDA or claim any deduction/exemption which is not shown in Form 16/AIS may receive such communication before processing of the return to enable the department to confirm the genuineness of claim with supporting documents.”
Lawyers also say that incomplete information or unusual claims in the ITR can also grab the attention of the income tax department’s RMS for your ITR. “Possible reasons for selection under the risk management process may include outstanding tax demands, discrepancies in bank account details, incomplete or incorrect information in the ITR, or unusual claims that seem excessive or inconsistent with the taxpayer’s profile,” says Savani from Cyril Amarchand Mangaldas
The screenshot below shows what is the exact campaign being run by the tax department.
The screenshot below shows what is the exact campaign being run by the tax department.
113119351Source: ITR portal as of September 6, 2024
Ankit Jain, Partner, Ved Jain & Associates, says that now the Central Processing Centre (CPC) of the tax department cross-references the information provided by taxpayers with external data sources, such as Form 26AS, Form 16, Tax Information Statements (TIS), and other available databases. “This enables the department to identify discrepancies and potential instances where due taxes may not have been fully paid. Through its risk management process, the CPC flags tax returns that exhibit inconsistencies or abnormalities based on predefined parameters,” he says.
According to Jain, these parameters may include the following:
a. “Excessive deductions: For example, unusually high claims under House Rent Allowance (HRA), charitable donations, or home loan interest
b. Inconsistent donations to political parties: Discrepancies between the amount claimed as donations and the taxpayer’s reported income.
c. Mismatch between Form 16 and the return: Differences in deductions or tax credits claimed versus what is reflected in Form 16.
d. Omission of certain types of income: Failing to report income such as dividends or interest earned from savings accounts.
e. Excessive refund claims: Unjustifiably high refund requests for advance tax payments.”
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Does this intimation from the tax department mean something is wrong with your ITR?
Pallav Pradyumn Narang, Partner, CNK, asks taxpayers who have got this intimation from the tax department not to panic and jump to conclusions.
“Being identified under this process doesn’t necessarily mean that there is something wrong with your ITR. It just means that it will be reviewed more carefully to ensure that everything is in order and an opportunity is being given to the assesses to revisit the returns, if needed, and verify that the claims are indeed correct,” says Narang.
What do you need to do if you have got this intimation from the tax department
The income tax department has urged taxpayers who received this intimation to verify the claims made in the ITR and then submit the response.
“Please verify the claims made in your Return of Income filed and submit your response accordingly within 30 days of receipt of the first email. In case of any incorrect claims/omissions, please revise your Income-tax Return (ITR) for AY 2023-24,” said the Income Tax Department.
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What if you take no action despite this intimation
Ritika Nayyar, Partner, Singhania & Co., advises that taxpayers who have got this intimation must remember that until they take any action, this will delay the processing of ITR and refund claims if any.
“This will delay the processing of your ITR until the concerns in the intimation have been resolved. The department may issue a show cause notice or a demand notice, may impose interest or penalties. By addressing the concerns raised and providing the necessary documentation, you can help expedite the processing of your return and avoid any unnecessary penalties,” says Nayyar.
Should you file a revised ITR in such cases?
Nayyar says that you should not worry about the tax department prosecuting you for not disclosing the highlighted missing information if you are filing a revised ITR. So, please file one now if you believe any information was overlooked in the initial ITR report.
“Normally the tax department will not prosecute you for filing a revised ITR in response to an intimation. The purpose of filing a revised ITR is to correct any errors or omissions in the original return. However, if the revised ITR reveals deliberate attempts to evade taxes or defraud the government, the department in an extreme measure, may take further action, including prosecution. It’s important to be honest and accurate in your revised return. The department generally views revised returns as a way to improve tax compliance. If you have reason to believe your original return was incorrect, it’s better to file a revised return voluntarily. This often results in a more favourable outcome than waiting for the department to identify the errors,” says Nayyar.
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