S.285BA of the Income-tax Act (Act) read with Rule 114E of the Income-tax Rules (Rules) requires certain specified persons to file Annual Information Returns (AIR) every year. Income-tax Return Forms, ITR — 1, 2, 3 and 4, applicable to Individuals/HUF, require such assessees to give information about certain transactions entered into during the previous year, which are reportable in the AIR u/s.285BA. It is stated that the purpose of collecting such information is to ensure that such assessees account for all transactions for which information is independently collected from the specified persons through AIR. If one were to compare the requirements of AIR and ITR, it will be noticed that there is mismatch between the information collected through AIR and ITR. There is no proper guidance about the items to be stated by the assessee in the ITR. Therefore, it is possible that information given in ITR may not match with the information collected through AIR. It is stated that if such information does not match, the case of such assessee will be taken up for scrutiny, at least for the limited purpose of matching the figures. This will result in a number of assessees getting notices from their assessing officers for this limited scrutiny. In this article, the important provisions of AIR and ITR are discussed in order to highlight the issues which are likely to arise due to mismatch of information in the two documents.
2. S. 285BA of the Act puts an obligation on specified persons to file AIR every year. This section was first inserted by the Finance Act, 2003 w.e.f. 1-4-2004. It was replaced by the present Section by the Finance (No. 2) Act, 2004 w.e.f. 1-4-2005. The detailed requirements for furnishing AIR are contained in Rule 114E which has come into force w.e.f. 1-12-2004. AIR is to be filed before 31st August in Form No. 61A. However, the requirement for furnishing the relevant information in the Return of Income has been introduced when the new Return Forms were introduced this year. It may be noted that only an Individual or HUF is required to furnish this information in the Return of Income for A.Y. 2007-08 in ITR-1, ITR-2, ITR-3 and ITR-4. Other assessees (viz. Company, Firm, AOP, etc.) are not required to give this information in their Returns of Income although such information is collected through AIR.
3. Cash deposits in savings account :
3.1 Information in AIR :
i.e., cash), total amount deposited during the year and name and address of the branch of the bank where deposit is made. CBDT Circular No. 7/2005, dated 24-8-2005 clarifies that only the figure of all the cash deposits aggregating to Rs.10 lacs or more in the savings account of a person during the financial year is required to be reported as one transaction. In other words, the intention is to specify cash deposits of Rs.10 lacs or more during the financial year in any one savings account of the person. If the person has more than one savings account in any one branch of the bank or has such savings accounts in different branches of the same bank, and the aggregate of cash deposits in each such account is less than Rs.10 lacs, the bank is not required to report even if the aggregate in all accounts is Rs.10 lacs or more. If, however, cash deposits in any one savings account are Rs.10 lacs or more, the bank will have to report only that account with name of the branch in which such deposit is made.(i) A banking company is required to submit AIR every year, stating “cash deposits aggregating to Rs.10 lacs or more in a year in any savings account of a person maintained by that bank”.
(ii) The prescribed Form No. 61A requires the bank to give information about the name and address of the depositor, his PAN, mode of deposit (
(iii) It is significant to note that there is no requirement to report about the savings bank account number in which the cash deposits are Rs.10 lacs or more.
3.2 Information in ITR :
(i) ITR 1 to 4, applicable to an individual or HUF, requires the assessee to give corresponding information about cash deposits aggregating to Rs.10 lacs or more in any savings account with a bank.
(ii) The space provided in ITR only requires the assessee to state the total amount of such deposits. There is no space to give information about name of the bank, details of branch, savings account no., etc. If the assessee has two separate savings accounts in the same branch or different branches of the same bank and the cash deposits in each such account is Rs.10 lacs or more, he can give only one figure i.e., aggregate of all accounts put together.
(iii) Similarly, if the assessee has savings accounts in different banks and cash deposits in each such account is Rs.10 lacs or more, he will be able to give only one aggregate figure of cash deposits in all such banks.
3.3 From the above, it will be seen that AIR gives information of cash deposits by the person bank branchwise and such information is collected from different banks, whereas the ITR will give total amount without any break-up. It is for consideration as to how this information in AIR and ITR will be matched by the assessing officer dealing with the case of the assessee.
4. Payment by credit cards :
4.1 Information in AIR :
(i) A banking company or any other Company/Institution issuing credit card is required to submit AIR in every year before 31st August stating “Payments made by any person against bills raised in respect of a credit card issued to that person aggregating to Rs.2 lacs or more in the financial year”.
(ii) Form No. 61A requires information on the same lines as stated in para 3.1(ii). CBDT Circular No. 7/2005 clarifies that only the aggregate of all the payments by a person to the credit card company is required to be reported as one transaction if such amount is Rs.2 lacs or more in the financial year. The bank or credit card company will report this information branchwise.
(iii) It may be noted that the credit card number is not required to be reported.
4.2 Information in ITR :
(i) As stated in para 3.2(ii), there is space in ITR (No. 1 to 4) to state only one figure if such payment is Rs.2 lacs or more. If the assessee is holding credit cards issued by different banks or credit card companies and the payment against each such card is Rs.2 lacs or more, he will be able to state only one composite amount in ITR.
(ii) It may be noted that the requirement is to give the above information only if the payment in a financial year is Rs.2 lacs or more against each credit card. Therefore, if the assessee holds more than one cards issued by different banks/credit card companies, and payment against each card is less than Rs.2 lacs, it is not required to be reported.
(iii) It is not clear from the ITR whether the assessee is required to give the above information only in respect of any credit card used for his personal or his own business purposes. It is the normal practice of corporate bodies to give credit cards to their officers. The officer can use this card for expenses/purchases relating to the corporate body. The payments are made by the corporate body. Such payments will not be reflected in the accounts of the assessee in whose name the card is issued. If the assessee has to give information about such payments made by his employer in his own ITR, it will be difficult for him to collect information about the amount from the company’s accounts and also difficult for him to reconcile with his own personal accounts.
4.3 From the above, it will be noticed that the information given in ITR will not match with the information collected through AIR if the assessee holds more than one credit cards issued by different banks or credit card companies. Further, the assessing officer will find it difficult to reconcile such payments with the accounts of the assessee if the credit card has been used for payments on behalf of the employer.
5.
Investments in units, shares, debentures, etc. :5.1 Information in AIR :
(i) The following entities are required to file AIR in Form No. 61A and give the following information in the same manner as stated in para 3.1(ii) :
(a) A Mutual Fund has to file AIR, stating “Receipt from any person of an amount of Rs.2 lacs or more for acquiring units of MF.”
(b) A company/institution issuing bonds or debenture has to file AIR, stating “Receipt from any person of an amount of Rs.5 lacs or more for acquiring bonds or debentures issued by the company/institution.”
(c) A company issuing shares through a public or rights issue has to file AIR, stating “Receipt from any person of an amount of Rs. one lac or more for acquiring shares issued by the company.”
(ii) In all the above cases, it may so happen that the assessee may pay more than the limit specified above at the time of making application for units, shares, debenture or bonds, but may be allotted such securities of less than the specified amount. CBDT has clarified in its Circular No. 7/2005 that in such cases, information should be given if the amount paid at the time of application is more than the amount specified above. In other words, if the applicant has paid Rs.2 lacs as application money for 20,000 shares applied for Rights Issue of shares of a company, but he is allotted only 8000 shares for Rs.80,000 and the balance of Rs.1.20 lacs is refunded to him, the company will have to report Rs.2 lacs as ‘Receipt’ in AIR. The company cannot consider the amount of Rs.80,000 for this purpose.
(iii) It may be noted that Form No. 61A does not require information about the number of units, shares, debentures, etc. applied for and allotted to the assessee. Again, in the case of a Mutual Fund, the investor may acquire units under different schemes of the MF. Form No. 61A requires that the aggregate of the receipts under all schemes put together should be reported if the amount is Rs.2 lacs or more.
5.2 Information in ITR
(i) As stated in para 3.2(ii), there is space in ITR (No. 1 to 4 ) to state only one figure of payment made for each of the following investments :
(a) Units of Mutual Fund — Rs.2 lacs or more
(b) Debentures/Bonds of a Company/Institution — Rs.5 lacs or more
(c) Shares issued through public subscription or as rights shares — Rs.1 lac or more
(ii) As stated earlier, information in AIR is to be given in respect of actual payment by investor for the above investments. Therefore, the information in ITR will have to be given for actual payment of more than the specified amounts at the time of application for units, shares, bonds or debenture, even if the allotment for such shares, etc. is of lesser amount.
(iii) It may be noted that the information to be given is for actual payment to the Mutual Fund or the company. Therefore, all payments during the financial year to a Mutual Fund for units of different schemes will have to be aggregated to ascertain whether the said amount is Rs.2 lacs or more. Similarly, in the case of a company, payment made to the company for equity or preference shares will have to be aggregated to find out whether the same is Rs.1 lac or more in a financial year.
(iv) Since only one figure of investment in each of the above categories is to be given in the ITR, the assessee will have to give a consolidated figure of investment in different Mutual Funds if payment to each MF is Rs.2 lacs or more. Similarly, a consolidated figure of investment in different companies for shares or debentures, etc. will have to be given if investment in each company exceeds the specified limit.
5.3 From the above, it will be noted that information given in ITR will not match with the information collected from different Mutual Funds, Companies and Institutions. There is no space for giving information about names of Mutual Funds, Companies, etc. in which investments are made. Further, the information to be given is for actual payment made and not for the amount relating to actual allotments of units, shares, debentures, etc. It may also be noted that information about units, shares, bonds, debentures, etc. purchased from the secondary market is not to be given in ITR. Therefore, the information in ITR about investment will not match with the actual investment made in units, shares, etc. during the financial year and shown in the accounts.
6. Purchase or sale of immovable property :
6.1 Information in AIR :
(i) A Registrar or Sub-Registrar appointed under the Registration Act is required to file AIR, stating “Purchase or Sale by any person of immovable property valued at Rs.30 lacs or more” in a financial year. It appears that in this case the word ‘value’ will mean the value determined for the purpose of stamp duty and not actual consideration stated in the document registered.
(ii) Form No. 61A requires the information on the same lines as stated in para 3.1(ii). However, information about each transaction of Rs.30 lacs or more is to be given. CBDT Circular No. 7/2005 clarifies that where there are joint owners of a property, the information about joint owners should be given. Further, even if the share of each joint owner is less than Rs.30 lacs, information should be given in AIR if the total value of the property registered is Rs.30 lacs or more.
(iii) It may be noted that particulars of property i.e., whether it is land or building or its location, area, etc. are not required to be given.
6.2 Information in ITR :
(i) As stated in para 3.2(ii), there is space in ITR (1 to 4 ) to state only one figure if the value of the immovable property purchased or sold is Rs.30 lacs or more. If the assessee has purchased more than one property and value of each property is Rs.30 lacs or more, he will have to give the composite figure for all such properties purchased.
(ii) It may be noted that information about purchase or sale of property is to be given separately. In the case of sale also, consolidated figure of all sales where value of each property is Rs.30 lacs or more is to be given.
(iii) There is no space for giving information about location, area, etc. of the property. It is not necessary to state whether the purchase or sale is of land or building. Therefore, if the assessee has purchased land for Rs.35 lacs and a building, at a different location, for Rs.40 lacs, he will have to state Rs.75 lacs in ITR.
(iv) As stated earlier, what is to be stated is the value of land or building, and not the actual consideration for purchase or sale. This will mean that value as adopted by the stamp duty authorities for registration will have to be stated. This will result in mismatch of information in ITR and consideration recorded in the accounts.
(v) In the case of property which is purchased or sold by co-owners, it appears that each co-owner will have to give this information in ITR even if his share in the value of the property is less than Rs.30 lacs if the value of the entire property is Rs.30 lacs or more. In this case, the assessee should declare the value of his share only, even if it is less than Rs.30 lacs.
(vi) Considering the above requirements, if an Individual or HUF has entered into a Property Development Agreement which requires registration, it will be necessary to give the information of this property if the value of the property is Rs.30 lacs or more. A question will arise whether such person will again be required to give information about the sale of flats by the developer if such person is described as vendor in the sale document of flat but the consideration is received by the developer. If so, the information in ITR will not match with the accounts of such Individual/ HUF.
6.3 From the above, it is evident that matching of the figures in the AIR-ITR and accounts of the assessee will be difficult. The ITR will give one figure of purchase or sale of more than one property, whereas AIR will give details of transactions in different AIR filed by different Registrars. Further, in actual practice, document for purchase or sale is executed in one year and is sent for registration much later. Therefore, assessee may show purchase or sale in ITR in one financial year, whereas the Registrar will show the said transaction in AIR of a subsequent financial year. This may result in mismatch of the information, resulting in a scrutiny notice from the Assessing Officer.
7. Investment in Bonds of RBI :
7.1 Information in AIR :
(i) Reserve Bank of India (RBI) is required to file AIR every year before 31st August, stating “Receipt from any person of an amount aggregating to Rs.5 lacs or more in a financial year for bonds issued by RBI”.
(ii) Form No. 61A requires the information on the same lines as stated in para 3.1(ii). CBDT Circular No. 7/2005 clarifies that only the aggregate of all the receipts from a person during the financial year is required to be reported as one transaction.
7.2 Information in ITR :
As stated in para 3.2(ii), there is space in ITR (1 to 4) to state only one figure if the payment made for the investment in RBI Bonds is Rs.5 lacs or more. Dates on which such investments are made are not to be given.
8.
To sum up :From the above discussion, it is evident that there are many grey areas in collection of information through AIR and collection of corresponding information through ITR. If the information collected through AIR is to be utilised for detecting evasion of tax, Income-tax Returns of all assessees should provide for furnishing information which can be matched with AIR. At present, this obligation is put on Individuals and HUFs only. Further, Form No. 61A prescribed for AIR should contain more details such as location, area, etc. of property purchased or sold, details of number of shares, amount, date, etc. Similarly, ITR should also provide for the above information, so that the Assessing Officer can match this information without issuing scrutiny notices to assessees. The threshold limits of reporting information also require to be revised upwards, so that small and medium-size entities are not required to report this information. At present, no guidance is available to assessees about the manner in which the information is to be given in ITR 1 to 4. This has created lot of confusion and different persons are giving different interpretations. If proper information is not given in ITRs, the objective of collecting the information through AIR will not be achieved. Therefore, CBDT should issue a clarification explaining how assessees should give information in ITR. If necessary, a separate sheet giving such information should be allowed to be attached to the return of income.
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