The new channel of collecting information in the form of Annual Information Return provided in Section 285BA of the I.T. Act 1961 has come across various issues regarding relevance, legal implications and practical problems when organizing and matching the information with a given assessee in assessment taking place.
These issues are summarized as below:
- The information about Annual Information Return (AIR) is a very huge which is spread throughout the country. The information furnished by the person furnishing the AIR by his jurisdictional Commissioner of Income Tax (CIB) is matched with the information that will be furnished in return by an assessee in an altogether different jurisdiction is difficult. This is matched with the help of PAN and Information Network Technology Electronic Data Interchange (EDI)
- The AIR is to be furnished by 31st August next subsequent the Financial Year in which the specified transaction is recorded. The said data as collected in AIR is used to verify whether the life style of the individual matches with the return of income as declared by him. Assuming an Assessee files annual income of just 5 Lac, but through AIR, Assessing officer finds out that he has bought expensive vehicle or jewellery worth 50 Lac in a year; this would arouse suspicion of Assessing officer and he may recommend case to be selected for scrutiny.
- The department will gather AIR information from two bases i.e. Assessee and the persons prescribed in section 285BA read with Rule 114E. To make the information helpful for assessment it is compulsory that the information on both the basis must be matched and crossed check. This task is cumbersome as the person who files AIR is supposed to furnish the information on their own records whereas the assessee will have to provide such information of all the agencies. There is not the proper mechanism to match these figures the department from the assessee and the persons specified in section 285BA read with Rule 114E.
- These two information may not match with each other because of differences in perceptions and interpretations of the provision too e.g. the AIR provisions are relevant to the banking companies to which Bank Regulation Act, 1949 applies. Consequently, it may not be relevant to the Co-operative sector bank or to unscheduled bank and these differences lay to mismatch of the data.
- Yet another situation may take place to the transactions with Banks where core bank facilities are offered.
- As per the ongoing scrutiny criterion the returns where the assessee has shown the cash deposit beyond Rs.10 Lac in any of his savings Bank Account, the cases will be automatically selected for scrutiny, if it is reported in AIR information or not leading to useless exercise as every deposit in Bank account may not be income quantifiable to tax.
- The selection of all these cases for scrutiny only on the basis of AIR may lead to a situation where there may be spurt in scrutiny cases but that may not be productive for revenue.
- The relevance of AIR information for assessment seems to be limited as in many cases the limitation has already expired and the Assessing officer has to resort to the provisions of section 147/148 for making assessment on the basis of such information. It is a matter of debate whether only the information of AIR, without proper and convincing material and the matching of same with the accounts of assessee, will be treated as income for the idea of assessment.
The cases are being selected for scrutiny on the basis of AIR information since Assessment Year 2005-06. It is seen that a large number of cases that have been selected for scrutiny are on the basis of AIR information are associated mainly with the investment in Shares and Mutual funds and have resulted in useless exercise.