CBDT Notifies e-Verification Scheme To Encourage Voluntary Tax Compliance

The Central Board of Direct Taxes (CBDT) has issued a press release introducing the e-Verification Scheme to encourage voluntary tax compliance and facilitate a transparent and non-intrusive tax administration.

Using information technology effectively, the scheme aims to share and verify the financial transaction information with the taxpayer, which appears to be either unreported or underreported in the Income Tax Return (ITR) filed by the taxpayer.

The department has been collecting information on financial transactions from multiple sources. Earlier, a part of it was shared with the taxpayer in the 26AS Statement. However, with a view to effectively utilizing the data collected from various sources, the entire information is now displayed to the taxpayer through the Annual Information Statement (AIS).

The AIS provides a facility for the taxpayer to object to any information if the Source has misreported any such information. The Department confirms the said information with the source, and if the source states that there is no error, the said information is subjected to risk assessment for e-Verification.

The entire process of e-Verification is digital, with notices issued electronically and responses by the taxpayers also submitted electronically. On completion of the inquiry, a verification report is prepared electronically without any physical interface with the taxpayer.

The scheme is extremely beneficial to taxpayers as it enables the taxpayer to explain the financial transaction with evidence. It also helps in data correction and cleaning, thereby preventing the initiation of proceedings based on misreported information. Further, since the information pertaining to the financial transactions is shared with the taxpayer, it provides an opportunity to correct or update income that may not have been appropriately reported in the ITR filed by the taxpayer," the Board said.

As the e-Verification Scheme makes the taxpayer aware of the risks, it nudges him/her towards voluntary compliance by providing an opportunity to update the return of income under Section 139(8A) of the Income-tax Act, 1961.

On a pilot basis, in about 68,000 cases, information about financial transactions pertaining to FY 2019–20 has been taken up for e-Verification. Details of the transactions have been initially shared with the individual taxpayer through an e-campaign. So far, e-Verification has been completed by the designated directorate in approximately 35,000 cases, and the remaining is under verification.

Press Release Dated 13.03.2023

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