You may receive these notices in cases where you haven't filed ITR, and the data with the tax department shows potential tax liability due to some high-value transactions.

Taxpayers have been receiving SMSes and emails from the income tax department to file their income tax return (ITR) for the financial year 2018-19. 

You may receive these notices in cases where you haven't filed ITR, and the data with the tax department shows potential tax liability due to some high-value transactions.

In addition, the people who have already filed ITR and did a high-value transaction in FY2018-19 but the same did not reflect in their ITR, are also getting queries from the tax department.

Kush Vatsaraj, Associate, TP Ostwal & Associates LLP said: "The reminder to file returns is part of the efforts to increase tax collection and ensure genuine taxpayers don’t inadvertently miss out on filing their return."

These notices are a part of the e-campaign on voluntary compliance started by the Central Board of Direct Taxes (CBDT) from July 2020.

Vatsaraj explained that "the tax authorities collect information from several sources, especially regarding certain types of transactions. Banks and other institutions submit reports periodically for analysis. Triggers are defined to flag files that may need closer attention. It only means that the authorities monitor transactions."

Objective of compliance campaign by CBDT

The objective of the e-campaign is to facilitate taxpayers to validate online their tax/financial transaction information available with the I-T Department, especially for the assessees for FY 2018-19, and promote voluntary compliance so that they do not get into notice and scrutiny process, etc.

Under this e-campaign, the Income Tax Department will send email/SMS to identified taxpayers to verify their financial transactions related information received by the I-T Department from various sources such as Statement of Financial Transactions (SFT), Tax Deduction at Source (TDS), Tax Collection at Source (TCS), Foreign Remittances (Form 15CC), etc. 

In addition, the tax department has collected information related to GST, exports, imports, and transactions in securities, derivatives, commodities, mutual funds, etc., under information triangulation set up and data analytics. 

CBDT also stated that data analysis has identified certain taxpayers with high-value transactions who have not filed returns for AY 2019-20 (relevant to FY 2018-19). In addition to the non-filers, another set of return filers have also been identified wherein the high-value transactions do not appear to be in line with their Income Tax Return. 

What should you do if you receive a notice?

If you have received such communication from the tax department, you will have to respond to it in a timely manner. If a taxpayer has received any such message or e-mail, he or she must revisit his financial transactions undertaken during relevant FY2018-19, match it with the ITR filed and if required, file a belated or revised ITR correctly declaring all the transactions.

If there is no such transaction to be reported or there is no need to file or re-file the ITR, then an appropriate written response should be filed by the taxpayer in response to the notice received.

Vatsaraj said: "Receiving a reminder is no cause for concern at all. I have received them myself. Just file your returns on time and pay your taxes correctly. Maintain basic records and documents in case explanations are sought later. In the event of doubts, it’s best to consult a CA."