NEW DELHI: The Income Tax Department has intensified its scrutiny of tax filings for Assessment Year (AY) 2025-26, issuing a record number of communications to taxpayers regarding discrepancies in their returns. The department’s automated risk management framework has flagged a high volume of cases where refund claims are substantially high and do not align with official data. The department has put on hold processing of ITRs showing such discrepancies.
Tax professionals have noted a surge in alerts targeting specific areas where taxpayers may be misreporting information. Key triggers for these investigations include:
Form 16 mismatches: Significant gaps between exemption claims in the ITR and amounts reported by employers in Form 16 (Annexure-II).
Suspicious deductions: Claims related to fake political donations or donations to various trusts.
Asset non-disclosure: Failure to report foreign assets within the return of income.
General omissions: Possible incorrect claims or omissions identified by the department's risk framework.
While the department describes these communications as "alerts" rather than formal notices, the implications of ignoring them are severe. Taxpayers are currently being urged to review their filings and ensure all particulars are backed by supporting documents.
The situation has prompted calls for government intervention. With the holiday season approaching and a record number of alerts being sent, tax experts are urging the Ministry of Finance to extend the revision deadline from December 31 to January 31, 2026, to allow taxpayers sufficient time to rectify their filings.
The department has outlined three distinct paths for taxpayers depending on their response to these alerts.
1. File a revised return by December 31, 2025: Taxpayers can avail themselves of the opportunity to file a revised return within the due date. This allows for the correction of errors and ensures the accuracy of the return without incurring additional tax liabilities beyond what is legally owed.
2. File an updated return from January 1, 2026: If a taxpayer misses the December 31 deadline, they may still file an updated return. However, this option is subject to an additional tax liability as per the prevailing tax laws.
3. Take no action: Choosing not to act on these alerts may be construed by the department as a deliberate choice. This significantly increases the risk of the case being selected for a detailed investigation or audit, as the processing of the current return has already been placed on hold.