Financial Transactions Covered in Annual Information Return (AIR)

The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financial transactions to the Income Tax Department.

1. Who Needs to File AIR/SFT?

The following entities must report transactions exceeding the specified limits:
✔️ Banks & Post Offices
✔️ Mutual Fund Companies
✔️ Stock Exchanges & Depositories
✔️ Companies Issuing Bonds & Shares
✔️ Property Registrars

2. Key Financial Transactions Reported in AIR/SFT

3. How is AIR/SFT Data Used by the Income Tax Department?

✔️ Cross-verification of tax returns to detect undisclosed income.
✔️ Matching financial transactions with the taxpayer’s PAN.
✔️ Identifying high-value transactions that may require scrutiny.
✔️ Ensuring compliance with tax laws and preventing tax evasion.

4. How to Avoid Tax Scrutiny Due to AIR/SFT Reporting?

✅ Ensure that your PAN is linked to all financial transactions.
✅ Report all high-value transactions accurately in your ITR.
✅ Keep supporting documents (bank statements, property agreements, etc.) for verification.
✅ Avoid cash transactions exceeding prescribed limits to prevent scrutiny.

Final Thought

AIR/SFT helps the Income Tax Department track large transactions to detect tax evasion. If you have undertaken such transactions, declare them properly in your tax return to avoid any penalties.

How to Identify and Rectify Mistakes in an Income Tax Notice?

Receiving an Income Tax Notice can be stressful, but errors in the notice can be rectified if pointed out correctly. Here’s how you can identify mistakes and request rectification under Section 154 of the Income Tax Act.

1. Common Mistakes in an Income Tax Notice

🔹 Mismatch in Income Details – The income mentioned in the notice may not match your ITR filing.
🔹 Incorrect Tax Calculation – Errors in tax liability computation, deductions, or rebates.
🔹 TDS Mismatch – TDS credit not given as per Form 26AS.
🔹 Incorrect Demand Raised – Wrong tax demand due to an automated system error.
🔹 Penalty or Late Fee Error – Unjustified penalties applied.
🔹 Arithmetical or Clerical Mistakes – Typing errors in PAN, name, or assessment year.

2. How to Verify the Mistake?

✔ Check Your ITR Acknowledgment – Compare details with the notice.
✔ Download Form 26AS & AIS – Cross-check TDS/TCS details and reported income.
✔ Refer to Intimation u/s 143(1) – Verify whether the calculations are correct.
✔ Match Deductions & Exemptions – Ensure all eligible deductions (e.g., 80C, 80D, 80G) are considered.

3. How to Rectify the Mistake?

✅ Step 1: Login to the Income Tax e-Filing Portal (https://www.incometax.gov.in)
✅ Step 2: Go to ‘Rectification Request’ under ‘Services’ section.
✅ Step 3: Select ‘Section 154 – Rectification’ and enter the details.
✅ Step 4: Upload Supporting Documents (ITR acknowledgment, Form 26AS, Tax Challans, etc.).
✅ Step 5: Submit the Request and Track Status

📌 If the mistake is on the department’s end, the rectified order will be issued within a few weeks.

4. What If the Error is Not Rectified?

🔴 If the mistake is not rectified, you can:

• File a Grievance through the e-filing portal.
• Submit a written application to the Jurisdictional Assessing Officer (AO).
• File an Appeal before the CIT(A) under Section 246A (if demand is incorrect).

Time Limits for Issuing Notices Under the Income Tax Act

The Income Tax Act prescribes specific time limits for issuing different types of notices. Below is a summary of key provisions and their respective deadlines.

1. Notice for Scrutiny Assessment – Section 143(2)

📌 Purpose: Issued when a return is selected for detailed scrutiny.
📅 Time Limit: Within 3 months from the end of the financial year in which the return is filed.
🔹 Example: If a return for AY 2023-24 was filed on July 15, 2023, notice under Section 143(2) can be issued until June 30, 2024.

2. Notice for Income Escaping Assessment – Section 148

📌 Purpose: Issued when the Assessing Officer believes income has escaped assessment.
📅 Time Limits:

• Within 3 years from the end of the relevant assessment year (for income escaping ₹50 lakh or less).
• Within 10 years from the end of the relevant assessment year (if escaped income is more than ₹50 lakh).

🔹 Example: If income for AY 2019-20 escaped assessment, notice can be issued up to March 31, 2023 (for income ≤ ₹50 lakh) or March 31, 2030 (for income > ₹50 lakh).

3. Notice for Defective Return – Section 139(9)

📌 Purpose: Issued when a return is found defective due to missing details or incorrect disclosures.
📅 Time Limit: No fixed deadline, but usually issued within 6 months from return filing.
🔹 The taxpayer must rectify the defect within 15 days (or as allowed by the AO).

4. Notice for Best Judgment Assessment – Section 144

📌 Purpose: Issued when a taxpayer fails to file a return or does not respond to notices.
📅 Time Limit: Within 3 months before the end of the assessment year.

5. Notice for Inquiry Before Assessment – Section 142(1)

📌 Purpose: Issued when additional documents or explanations are required before completing an assessment.
📅 Time Limit: No prescribed limit, but usually issued before assessment completion.

6. Notice for Penalty – Section 274

📌 Purpose: Issued before imposing a penalty for non-compliance or misreporting of income.
📅 Time Limit: Generally within 6 months from the end of the financial year in which the assessment order is passed.

Final Thoughts

Timely compliance with notices is crucial to avoid penalties and interest. If you receive an Income Tax notice, verify its validity and time limits before responding. 🚀

When Can a Notice Under Section 143(1) NOT Be Issued?

A notice under Section 143(1) of the Income Tax Act is an intimation issued by the Income Tax Department after processing the Income Tax Return (ITR). However, in certain cases, this notice cannot be issued. These situations include:

📌 1. If the Return is Not Filed

• A Section 143(1) notice is generated only if a taxpayer has filed an ITR.
• If the return is not filed, a notice under Section 142(1) or 148 (for non-filing or reassessment) may be issued instead.

📌 2. If a Scrutiny Assessment Has Already Been Initiated (Section 143(2))

• If a detailed scrutiny notice (Section 143(2)) has already been issued, then an intimation under Section 143(1) cannot be issued later.
• The scrutiny process involves a deeper examination of financial records beyond the automated processing of 143(1).

📌 3. If More Than 9 Months Have Passed from the End of the Financial Year

• As per the Income Tax Act, a Section 143(1) notice must be issued within 9 months from the end of the financial year in which the ITR was filed.
• If this time limit expires, the notice cannot be issued.

📌 4. If No Adjustments Are Required in the Return

• The notice under Section 143(1) is issued only when:
  • There is a mismatch in the return filed and tax computation by the department.
  • There are arithmetical errors, incorrect claims, or tax credit mismatches.
• If no such adjustments are required, no notice is issued, and the return is processed smoothly.

📌 5. If the Return is Already Processed & Refund Issued

• Once the return is processed and a refund (if applicable) is issued, a Section 143(1) notice will not be sent again unless there is an error detected later.

📌 6. If the Return is Invalid or Defective (Section 139(9))

• If the return is declared defective or invalid under Section 139(9) and is not corrected within the given time, a Section 143(1) notice cannot be issued.

📢 Final Thoughts

A Section 143(1) intimation is an automated processing summary, but it has limitations. If you receive a scrutiny notice (143(2)), missed the time limit, or have not filed a return, then a 143(1) notice cannot be issued. Always verify your tax filings to avoid unnecessary notices. 🚀

Read:What are the time limits of issuing of Notices under Income Tax Act?

Self-Assessment Under Income Tax Act – Section 140A

Self-assessment is the process where a taxpayer calculates and pays their own tax liability before filing the Income Tax Return (ITR). It ensures that all due taxes are paid before submission of the return.

📌 Key Aspects of Self-Assessment Tax

1️⃣ Applicable Section

• Self-assessment tax is governed by Section 140A of the Income Tax Act, 1961.

2️⃣ Who Needs to Pay It?

• If, after considering TDS, Advance Tax, and tax credits, there is any outstanding tax liability, the taxpayer must pay it as self-assessment tax before filing the ITR.

3️⃣ How to Calculate Self-Assessment Tax?

• Total Tax Liability (as per taxable income)
• Less: TDS Deducted
• Less: Advance Tax Paid
• Add: Interest under Sections 234A, 234B, 234C (if applicable)
• Balance Amount = Self-Assessment Tax Payable

4️⃣ Time of Payment

• Self-assessment tax must be paid before filing the ITR.
• If tax remains unpaid, the ITR will not be processed.

5️⃣ How to Pay Self-Assessment Tax?

• Pay online through Challan ITNS 280 at the Income Tax e-filing portal.
• Banks also accept payments for self-assessment tax.

6️⃣ Interest and Penalty

• If self-assessment tax is not paid on time, interest may be charged under Section 234A, 234B, and 234C.
• Late filing of the ITR can also lead to penalty under Section 234F.

7️⃣ Acknowledgment

• After payment, a challan receipt is generated, which should be mentioned in the ITR while filing.

📢 Final Thoughts

Self-assessment ensures that a taxpayer clears any pending tax before filing returns. Timely payment avoids interest and penalties, ensuring a smooth tax filing process. 🚀

Read:What are the time limits of issuing of Notices under Income Tax Act?