The Income Tax Department, under the Central Board of Direct Taxes (CBDT), has started the verification of the reporting entities. The Income Tax Department actively encourages taxpayers to comply voluntarily. To facilitate this, the department obtains financial transaction information from Reporting Entities such as banks, currency dealers, sub-registrars, and others.
The Income Tax Department requires information from reporting entities, including banks, financial institutions, businesses, and other organisations, regarding specific financial transactions of taxpayers.
Taxpayers can access the Annual Information Statement (AIS) through their e-filing accounts, which contain the said data. The AIS serves as a valuable tool for taxpayers, providing them with the necessary information to ensure the accuracy of their income tax return filing.
While most Reporting Entities willingly fulfil their legal obligations by providing accurate and comprehensive Statements of Specified Financial Transactions (SFTs), the department has identified some instances of non-compliance.
In a press release from the department dated June 30, 2023, a well-known bank headquartered in Tamil Nadu has been identified by the department to address compliance issues with reporting entities. Several irregularities were discovered during the evaluation process. It was found that the bank sometimes failed to submit a Statement of Financial Transaction (SFT) and in some instances provided inaccurate or incomplete information.
In some instances, SFTs were also not submitted for cash deposits exceeding Rs 2,700 crore across more than 10,000 accounts, credit card transactions exceeding Rs 110 crore, dividend payments exceeding Rs 200 crore, and share issuances exceeding Rs 600 crore.
Furthermore, the government found that the SFTs filed by the bank were lacking in several places. The bank did not report significant transactions such as interest payments exceeding Rs. 500 crore, time deposits, cash deposits, and withdrawals from current accounts.
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During the verification process, incorrect Form 61B filings for Automatic Exchange of Information (AEOI) regarding “resident” account holders in other countries were also revealed that they were defective.
The Department also examined two cooperative banks in Uttarakhand and discovered transactions totalling several thousand crores that have not been disclosed.
As a result, the board aims to address the challenges faced by Reporting Organizations and provide clarity on the legal requirements and procedures. The Department regularly organises outreach programs across the country. This initiative by the Department is another step towards simplifying compliance.
