Income Tax dept emails flag cash deposits, property deals: What to do

Emails about high-value transactions in Annual Information Statements nudge people on compliance processes, say experts

Some taxpayers have received emails from the Income Tax Department flagging high-value transactions in their Annual Information Statement (AIS). Such communications nudge people to fulfil compliance processes and are not tax demands, said experts.

 

Not every large transaction reported in AIS results in tax liability. AIS contains information shared by banks, registrars and other reporting entities under the Statement of Financial Transactions (SFT), which tracks financial activity linked to a PAN.

 

“High-value entries such as large bank deposits, mutual fund purchases or redemptions, or property transactions are often capital movements and not income,” said Niyati Shah, vertical head, personal tax, at 1 Finance. What matters is whether the transaction generated taxable income during the year and whether that income was correctly disclosed in the return.

 

 

Hari Raheja, advocate at D.M. Harish & Co., said several commonly flagged transactions are not taxable under the law. These include gifts from close relatives, inheritance, gifts received at the time of marriage, redeposit of cash withdrawn earlier, agricultural income, and capital receipts from asset sales. However, the taxpayer must be able to prove the source, genuineness, and capacity of the payer, he said.

 

AIS feedback versus revised return

 

Experts warned against rushing to file a revised return solely because an AIS entry appears. “AIS feedback should be the first step when the data itself is wrong, duplicated, or wrongly attributed,” Shah said. Examples include duplicate mutual fund entries or transactions belonging to another PAN.

 

Ritika Nayyar, partner at Singhania & Co., said a revised or belated return is required only when the AIS data is correct but the taxpayer failed to report income, such as interest, dividends or capital gains. “One common mistake is marking ‘information is correct’ on AIS but not revising the return, which keeps the legal mismatch unresolved,” she said.

 

When alerts escalate into scrutiny

 

Ignoring compliance emails can have serious consequences. “If discrepancies are not addressed, the department may initiate reassessment or scrutiny proceedings,” Raheja said, adding that continued non-compliance can lead to tax demands, interest, penalties, and in extreme cases, prosecution.

 

Nayyar said early warning signs include repeated “significant mismatch” alerts, refunds stuck due to pending responses, or new entries in the e-proceedings tab of the tax portal. These usually indicate that the case has moved beyond automated nudges to manual review.

 

Experts advise taxpayers to promptly review AIS entries, reconcile them with their records, provide portal feedback where required, and revise returns within the December 31 deadline to avoid escalation.