Narayan Jain, Advocate

The scope of Statement of Financial Transactions (SFT) under sec. 285BA has been expanded to widen the tax base. The Finance Act, 2020 has introduced section 285BB w.e.f. 1.6.2020 to provide that in addition to the information relating to TDS and TCS, advance tax, self-assessment tax, refund etc. the taxpayer shall be provided additional information such as sale/purchase of immovable property, share transactions etc. for computing correct tax liability. CBDT has granted extension of time for furnishing various reports vide Circular No. 16 of 2021 dated 29.08.2021. The notified persons will have to report the specified transactions in their SFT. Section 285BB, inserted by the Finance Act, 2020 w.e.f. 1.6.2020, provides for uploading in the registered account of assessee Annual Information Statement. The Finance Act, 2022 has substituted section 285B w.e.f. 1.4.2022. The provisions are explained in this article.

1. Transactions for which statement of financial transaction or reportable account is required to be furnished: Under section 285BA, “statement of financial transaction or reportable account” is to be furnished as per Rule 114E in e-Form No. 61A for the Specified Financial Transactions registered or recorded by the concerned person/ party. The items to be reported by the specified persons are mainly the following:
   1. A banking company or a co-operative bank or banking institution to which the Banking Regulation Act, 1949 applies:
      1. Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to Rs.10 Lakhs or more in a financial year.
      2. Payments made in cash aggregating to Rs.10 Lakhs or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India
      3. Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to Rs.50 Lakhs or more in a financial year, in or from one or more current account of a person.
   2. A banking company or a co-operative bank or banking institution to which the Banking Regulation Act, 1949 applies and / or Post Master General: Cash deposits aggregating to Rs.10 lakh or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.
   3. A banking company or a co-operative bank or banking institution to which the Banking Regulation Act, 1949 applies and Post Master General; Nidhi referred to in section 406 of the Companies Act, 2013 and Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act: One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to Rs.10 lakh or more in a financial year of a person.
   4. A banking company or a co-operative bank or banking institution to which the Banking Regulation Act, 1949 applies or any other company or institution issuing credit card: Payments made by any person of an amount aggregating to (i) Rs. One lakh or more in cash; or (ii) Rs.10 lakh or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.
   5. A company or institution issuing bonds or debentures: Receipt from any person of an amount aggregating to Rs.10 lakh or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company).
   6. A company issuing shares: Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.
   7. A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013: Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to Rs.10 lakh or more in a financial year.
   8. A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be authorised by the trustee: Receipt from any person of an amount aggregating to Rs.10 lakh or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).
   9. Authorised person as referred to in section 2(c ) of the Foreign Exchange Management Act, 1999: Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to Rs.10 lakh or more during a financial year.
   10. Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act: Purchase or sale by any person of immovable property for an amount of Rs.30 lakh or more or valued by the stamp valuation authority at Rs.30 lakh or more.
   11. Any person who is liable for audit under section 44AB : Receipt of cash payment exceeding Rs. 2 lakh for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10, if any.).
2. Annual Information Statement: Sec. 285BB was inserted in Income Tax Act by the Finance Act, 2020 and Rule 114-I was inserted in Income Tax Rules, 1962 w.e.f. 01.06.2020. The purpose is to promote transparency and simplification in filing of Income tax returns. The new Form 26AS (e-form) is an Annual Information Statement or AIS inserted w.e.f. 1.6.2020, will provide a complete profile of the taxpayer for a particular year. The CBDT may authorise the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or any person authorised by him to upload the information received from any officer, authority or body performing any function under any law or the information received under an agreement referred to in section 90 or section 90A of the Income- tax Act,1961 or the information received from any other person to the extent as it may deem fit in the interest of the revenue in the Annual Information Statement. The taxpayers are advised to properly go through the details of transaction contained in Form 26AS to ensure that no transaction is left out while preparing the computation/ return of income.
   1. Information in Annual Information Statement: The following information will contain in the Annual Information Statement:

      Part A: Permanent Account Number, Aadhaar Number, Name, Date of Birth/ Incorporation/ Formation, Mobile No., Email Address, and Address.

      Part B of Form 26AS will contain the following Information:

      1. Information relating to tax deducted or collected at source.
      2. Information relating to Specified Financial Transactions (SFT)
      3. Information relating to payment of taxes
      4. Information relating to demand and refund
      5. Information relating to pending proceedings
      6. Information relating to completed proceedings
      7. Any other information in relation to Rule 114-I(2)
   2. Objectives of Annual Information Statement: The main objectives of AIS are: Display complete information to the taxpayer; Promote voluntary compliance and enable seamless pre-filling of return and Deter non-compliance.
3. Main Features of new AIS : These are the following:
   1. Inclusion of new information regarding Interest, Dividend, Securities transactions, Mutual fund transactions, Foreign remittance etc.
   2. De-duplication of information and generation of a simplified Taxpayer Information Summary (TIS) for ease of filing return (pre-filling will be enabled in a phased manner).
   3. Use of Data Analytics to populate PAN in non-PAN data for inclusion in AIS.
   4. To enable Taxpayer to submit online feedback on the information displayed in AIS and also download information in PDF, JSON, CSV formats.

   AIS Utility will enable taxpayer to view AIS and upload feedback in offline manner.

   AIS Mobile Application will enable taxpayer to view AIS and upload feedback on mobile.

4. Important Steps for information processing steps for AIS Preparation are:
   1. PAN Population: In case no valid PAN is available in the submitted information, the PAN will be populated on matching Aadhaar Number and other key attributes.
   2. Information Display: Generally, the reported information is displayed against the reported PAN holder. The information display logic for specific information such as property, bank account, demat account etc. aims to show information to relevant PAN holders to enable review and submission of feedback
   3. Information De-duplication: In case where similar information is reported under different information types (e.g. reporting of interest/dividend in SFT and TDS) the information with lower value will be marked as “Information is duplicate / included in other information” using automated rules.
5. Taxpayer Information Summary (TIS) preparation: The information category wise aggregated information summary for a taxpayer is prepared after deduplication of information based on pre-defined rules. It shows processed value (i.e. value generated after deduplication of information based on pre- defined rules) and derived value (i.e. value derived after considering the taxpayer feedback and processed value) under each information category (e.g. Salaries, Interest, Dividend etc.). The derived information may be used for pre- filling of Return.
6. AIS Feedback: The taxpayer will be able to view AIS information and submit following types of response on the information:
   1. Information is correct
   2. Information is not fully correct
   3. Information relates to other PAN/ Year
   4. Information is duplicate / included in other information
   5. Information is denied or Customized Feedback

   Taxpayers are advised to furnish proper feedback to avoid complications in assessments.

7. AIS Feedback Processing: The AIS Feedback processing approach is as under:
   1. The feedback provided by assessee will be captured in the Annual Information Statement (AIS) and reported value and modified value (i.e. value after feedback) will be shown separately.
   2. The feedback provided by assessee will be considered to update the derived value (value derived after considering the feedback from taxpayer) in Taxpayer Information Summary (TIS)
   3. Information assigned to other PAN/ Year in AIS will be processed and information will be shown in the AIS of the taxpayer using automated rules.
   4. In case the assigned information is modified/denied, the feedback will be processed in accordance with Risk Management Rules and High Risk

   feedback will be flagged for seeking confirmation from the information source.

8. Date for furnishing Form 61A: Form 61A is required to be furnished by 31st May of the immediately following year from the end of Financial year.
9. Whether the annual information return now known as “statement of financial transaction or reportable accounts” once filed can be rectified: Section 285BA(4) provides that where the prescribed IT authority considers that the statement of financial transaction or reportable accounts (earlier known as annual information return) furnished u/s 285BA(1) is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within a period of 30 days from the date of such intimation or within such further period, which, on application made on this behalf, the concerned Income tax authority may extend. If the defect is not rectified within the said period, the provisions of Income Tax Act shall apply as if such person had furnished inaccurate information in the statement”

   Upto 31.8.2019, if the statement was not rectified within the time prescribed, such statement was treated as an invalid statement and the provisions of the Income tax Act would apply as if such person had failed to furnish the statement.

10. Can a notice be served for filing of statement of financial transaction or reportable accounts: Section 285BA(5) as amended provides that where a person who is required to furnish a statement of financial transaction or reportable account has not furnished the same within the prescribed time, the prescribed IT authority may serve upon such person a notice requiring him to furnish such statement within a period not exceeding 30 days from the date of service of such notice.
11. Whether an assessee, while filing his income tax return, is required to furnish information relating to statement of financial transaction or reportable accounts: Form No. ITR-2, 3, 4, 5 and 6 require an assessee to furnish information relating to statement of financial transaction or reportable accounts in Schedule AIR of the Return form, and the assessee is obliged to furnish such information, in view of the provisions of section139(6).
12. Penalty for failure to furnish statement of financial transaction or reportable accounts: U/s 271FA, if a person who is required to furnish an annual information return now known as “statement of financial transaction or reportable accounts” u/s 285BA(1), fails to furnish such statement within the prescribed time u/s 285BA(2), the concerned I.T. authority may direct that such person shall pay by way of penalty, w.e.f. 1.4.2018, a sum of Rs.500 for every day during which the failure continues.

    Further as per proviso to section 271FA,

    w.e.f. asst. year 2014-15, if a person who is required to furnish annual information return now known as “statement of financial transaction or reportable accounts” fails to do so and assessing officer issues a notice requiring him to furnish the said statement within the time specified in the notice u/s 285BA(5), but the person does not file the said statement within the time specified in the notice, w.e.f. 1.4.2018, a penalty of Rs. 1000 for every day during which the failure continues may be levied u/s 271FA from the date specified in the notice till the date of filing of such statement.

13. Rules prescribed regarding furnishing of the statement of financial transaction or reportable accounts: As per rule 114E,

    the “statement of financial transaction or reportable accounts” is to be furnished in Form No. 61A (e-form) within the prescribed time after the end of each financial year, to the agency authorised by the CBDT.

    The Form No. 61A shall be furnished electronically.

14. Furnishing of correction statement if such person discovers any inaccuracy in the information provided in the Statement of Financial Transaction or Reportable Account u/s 285BA: With effect from asst. year 2015-16 as per section 285BA(6) provides that if any person having furnished a Statement of Financial Transaction or Reportable Account u/s 285BA(1), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a period of 10 days inform the Income tax authority or other authority or agency referred to in sec. 285BA(1), the inaccuracy in such statement and furnish the correct information in such manner as may be prescribed.

    Section 285BA(7) provides that the Central Government may by making rules require certain class of persons referred to in section 285BA(1) to get them registered and the manner in which the information should be maintained by such persons and the due diligence to be carried out.

15. Additional information provided in Form 26AS as per section 285BB: In addition to the information relating to TDS and TCS, advance tax, self-assessment tax, refund etc. the taxpayers are being provided additional information such as sale/purchase of immovable property, share transactions etc., dividend, interest etc. for computing correct tax liability.

    For this purpose, w.e.f. 1.6.2020, section 285BB has been introduced to mandate the prescribed Income-tax authority or the person authorised by such authority to upload in the registered account of the assessee, a statement in such form and manner and setting forth such information, which is in the possession of an Income-tax authority, and within such time, as may be prescribed. Consequently, section 203AA has been omitted w.e.f. 1.6.2020.

16. Whether constituent entity of an international group is required to maintain and furnish specified records: With effect from asst. year 2017-18, a constituent entity of an international group, referred to in section 286, shall also keep and maintain prescribed information and document in respect of the international group and shall furnish the same with the prescribed authority in the prescribed manner within the due date of filing of return of income u/s 139(1). However for the asst. year 2017-18, the date of filing such report has been extended till 31st March, 2018. Failure to do so shall attract penalty u/s 271AA.
17. Whether non-resident having a liason office in India is required to file any document with Income Tax authorities u/s 285: With effect from 1.6.2011, as per newly introduced section 285, a non-resident person having a liason office in India is required to file a statement in prescribed form providing details of activities carried out by the liason office in India within 60 days from the end of the financial year.
18. Whether Indian concern is required to furnish information for transfer of its capital asset due to transfer of shares of a foreign company: The Finance Act, 2015 with effect from 1.4. 2016, has inserted Section 285A which provides that where any share or interest in a company or entity registered or incorporated outside India derives directly or indirectly its value substantially from the assets located in India as referred to in the Explanation 5 to section 9(1)(i) and such company or as the case may be, entity holds such assets in India through or in an Indian Concern then any such Indian concern for the purpose of determination of income accruing or arising in India, u/s 9(1)(i) is required to furnish within prescribed time to the prescribed income tax authority the relevant information or document in prescribed form and manner.
19. Statement to be submitted by producers of cinematograph films or persons engaged in specified activity: As per sec. 285B, as substituted, w.e.f. 1.4.2022 any person carrying on the production of a cinematograph film or engaged in any special activity that is event management, documentary production, production of programmes for telecasting on television or over the top platforms or any other similar platform, sports event management, other performing arts or other notified activities during the whole or any part of any financial year shall, in respect of the period during which such production or specified activity is carried on by him in such financial year, furnish within the prescribed period, a statement in the prescribed form to the prescribed income tax authority in the prescribed manner, containing particulars of all payments of over Rs.50,000 in the aggregate made by him or due from him to each such person as is engaged by him in such production or specified activity.

Prior to the amendment only person carrying on production of cinematograph film were required to furnish such statement within 30 days from the end of the FY or within 30 days from the date of completion of the production of the film.

(Narayan Jain is former Secretary General and National Vice President of AIFTP and also member of NEC for 2022 & 2023. He is author of the books “How to Handle Income Tax Problems” and “Income Tax Pleading & Practice” with CA Dilip Loyalka.