Tax notice to 21.75 lakh non-filers: Here's why you should verify the return status

It’s like killing two birds with one shot. The tax base and revenue both increased after identifying and chasing those who failed to file income tax returns. The majority of tax defaulters are not afraid of being caught in general and small portion of them are ignorant.

However, the income tax department is not going to leave the either of these two and penalties should also be imposed on intentional and regular defaulters. This will help force these defaulters to file their returns regularly in future and also declare their true income.

[caption id=“attachment_76650” align=“alignleft” width=“380”]  Image: Thinkstock[/caption]

The honest tax payers must have started cheering when the income tax department initiated the data matching in February 2013 of PAN holders and issued notices to 12.19 lakh non-filers. As per the press release by the income tax department dated February 21, 2014, out of these 12.19 lakh, 5,36,220 i.e. 44 percent have filed return in response to tax notice. The tax revenue from these defaulters collected through self assessment tax of Rs 1,017.87 crore and advance tax of Rs 898.22 crore has also been healthy. The average tax collection from these 536,220 defaulters comes out to Rs 35,733, which is really good.

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After seeing the encouraging results of tax notice to non-filers, the income tax department has now conducted the second round of data matching which has identified an additional 21.75 lakh potential non-filers and sent letters to the 50,000 out of them. Those who have already filed the return will be able to submit the response electronically and keep a print-out of the submitted response for record purposes.

The government is also regularlyputting out advertisements in the media urging citizens to disclose their true income and pay appropriate taxes.It would be worth for all i.e. honest, ignorant or wilful defaulters to verify your income tax return status and take the pending action, if any at the earliest.

Why you should verify the return status?

Honest Taxpayers: In case you are an honest taxpayer, there would be some doubts in your mind why I should be worried? The reason is that mistakes can happen by anyone and as per the income tax department data there are chances of incomplete return i.e. ITR V not received by CPC. This would be deemed as return not filed. There could be tax demand due to less or non-credit of TDS in your PAN. Once you check up your past record with income tax department, more than 50 percent chance is that demand is outstanding or return is not yet filed. You should get the demand cancelled and file return at the earliest for avoiding sudden tax and penalties.

Ignorant Taxpayer: They should take the professional advice instead of using their incomplete tax knowledge to avoid tax notice and penalties.

Wilful non-filers: Your income, expense and investment details are being shared with the income tax department on regular basis by tracking PAN. You would not be able to hide income easily now. The Computer Aided Scrutiny System (CASS) of the income tax department would catch you soon. Hence, complete your last five years tax return at the earliest and start living without fear. In case you are not sure about the tax default or return filing status take online or offline tax expert assistance to understand, identify and resolve the default.

As per the income tax laws, if the escaped income is up to Rs 1 lakh then notice can be sent within 4 years of the end of the relevant assessment year. It may be noted that the non-declaration of true and taxable income is termed as escaped income under the tax laws. In case the escaped income is more than Rs 1 lakh, then such notice can be sent to you within six years. For example, you have sold a property for Rs 35 lakh with taxable capital gains of Rs 8 lakh in April 2007 (AY 2008-09) but failed to declare the same in the return or forgot to file return. The tax department can issue tax and penalty notice for the same till 31 March 2015. If you are a resident having foreign assets then time limit is 16 years. Hence, those have taxable income of Rs 2 lakh or more but not yet filed return for any of the financial year starting from F Y 2007-08 to FY 2012-13 should file with true income at the earliest.

The author isCo-Founder & CFO, TaxSpanner.comandhas been a practicing tax consultant for the last 17 years. He is a Fellow Chartered Accountant.