Non-Filers Monitoring System (NMS)
The Income Tax Department’s ‘Non-filers Monitoring System (NMS)’ is used to identify non-filers of Income Tax Returns with potential tax liabilities under the Income Tax Act 1961 (the Act). The NMS sources its information from the AIR, CIB and TDS/TCS databases and through data analytics carried out by the Systems Directorate of Central Board of Direct Taxes (CBDT), identifies such non-filer persons.
Latest CBDT Press Release identifying Non-Filers for Assessment Year 2015-16
CBDT’s recent press release has stated that the Income Tax Department has identified an additional 67.54 lakh potential non-filers who have carried out ‘high value transactions’ in the financial year 2014-15, but did not file a Return of income for the relevant assessment year i.e. A.Y 2015-16. Some important details are as follows —
- The information relating to such identified non-filers have been made available in the ‘Compliance Module’ on the e-filing portal of the Income Tax Department;
- The said information is visible only to the specific Permanent Account Number (PAN) holder when they log into the e-filing portal;
- The concerned PAN holder will be able to respond electronically therein and retain a copy of the submitted response for record purpose.
Significance of NMS e-Reply and Potential Adverse Consequences
It is important to understand the significance of the NMS notice for an e-reply and the consequences of an inappropriate or non-reply, by the concerned PAN holder (Non-Filer), even though the fact that such a notice has been received, does not in itself lead to any adverse consequences.
However an inappropriate or non-reply and subject to the unique facts and circumstances of the concerned Non-Filer, may in all probability lead to such consequences, some of which have been very briefly mentioned below.
Failure or refusal to so reply may result in the concerned officer of the Income Tax Department undertaking an ex parte ‘Best Judgement’ assessment of the concerned Non-Filer and the relevant consequences of such assessment would flow-on from there.These could include potential income tax demand notice, penalty notice(s), prosecution, interest etc. and potential loss of grounds against such assessment, if subsequently appealed or subject to a Writ remedy before the jurisdictional High Court.
An ‘inappropriate’ reply and the contents therein, may also have significant adverse consequences, not only for the concerned Non-Filer, but also other person(s), who may or may not be Income Tax Return filers and PAN holders. On the basis of such ‘inappropriate’ e-reply and other information provided and/or collected through the NMS etc., legal grounds may be made out or so believed by the relevant Income Tax authority, to lawfully justify one or more such persons being subject to ‘scrutiny’ assessment or ‘re-assessment’ for ‘income escaping assessment’, and the relevant legal consequences would therefrom (some of which may be similar to as discussed above for ‘Best Judgement’ assessment).
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What would constitute an ‘appropriate’ reply cannot be generalised, given that the reasons for the said NMS notice would be different for different Non-Filers and so would the ‘appropriateness’ of the reply, based chiefly on the unique facts and circumstances of the said persons. It is therefore highly prudent and recommended that a tax and legal professional is consulted before such e-reply is sent and an ‘appropriate’ reply is drafted with such help.
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