Tag: AI for auditors

Income Tax Department is checking the return information with the help of AI

Now only 1-2 days are left for the deadline to file income tax returns. Taxpayers can file income tax returns till July 31 without paying penalty. Meanwhile, it is being claimed that the Income Tax Department may take time to issue refunds this year.

The deadline will be crossed in just two days
If we look at the figures first, a new record can be made for filing income tax returns for the financial year 2023-24 or assessment year 2024-25. Taxpayers are filing income tax returns at a rapid pace and the figure has reached close to five and a half crores. Although taxpayers are also getting upset with the glitches in the income tax return filing portal, even after that, lakhs of ITRs are being filed every day.

Five and a half crore returns filed
According to the dashboard of the income tax filing portal, 12.45 crore taxpayers have registered themselves so far in the current season. According to the data till the morning of July 29, more than 5 crore 43 lakh income tax returns have been filed so far. Taxpayers have verified more than 4 crore 91 lakh ITRs out of them, while about 2 crore 36 lakh ITRs have been processed by the Income Tax Department.

There is a possibility of delay in refund this time
Taxpayers are now waiting for the refund to be sent by the Income Tax Department. Usually, it takes 5 to 10 days for the refund amount to arrive after the return is processed. Meanwhile, ICWAI gold medalist chartered accountant Anand Luhar has claimed that taxpayers may have to wait longer to get refund this year.

AI-ITR program being implemented for the first time
According to Luhar, the Income Tax Department is using AI to process returns this time. The software developed based on AI will access the information related to the taxpayer’s PAN card and Aadhaar card and then match all the information with the information given in the return. After preparing the AI-ITR program, the department has successfully tested it and for the first time this year it is being implemented.

What is Income Tax’s AI-ITR program?
Luhar says that with the help of this program, the department will investigate the details related to the taxpayer’s Aadhaar and PAN card, as well as all declared and undeclared bank accounts, FD-RD, investments in other savings schemes, purchase and sale of properties, purchase and sale of vehicles, foreign travel, credit card transactions, etc. After scrutinizing all this information, income tax returns, S26 data, etc. will be matched. He claims that all ITRs will be processed by the department in the last week of July or the first week of August.

Chartered accountants may soon have to file tax returns for robots

More work for chartered accountants as they soon may have to file more tax returns as robots are likely to be taxed in the future. Pinakin Desai, a practising chartered accountant, mentioned at the Reimagine Summit organized by the Bombay Chartered Accountants’ Society that within two years, there could be a law requiring robots to file tax returns.

During the summit, Advocate Nishith Desai, founder of Nishith Desai & Co., discussed whether robots should be considered a separate entity just like humans, and even citizenship is being offered to robots in some countries.

He further added that robots in India will also be taxed, which would result in more work for chartered accountants. However, the industry is uncertain about whether CAs would be excused if an artificial intelligence tool is used to file tax returns and errors are introduced in the tax return. Currently, due diligence must be thorough when submitting tax returns, as there is no escape from tax litigation in case technological tools introduce errors.

The provisions of Section 273B of the Income Tax Act, 1961, state that penalty should not be imposed in certain cases, but this only applies if sufficient due diligence has been done,” explains Nishit Desai. However, tax professionals are facing the dilemma of whether AI-based evidence will be presented during tax litigations and whether legal courts will only rely on past cases to make their decisions.

This is especially challenging since the Income Tax Department now uses data collected from various sources, including banks, mutual funds, customs, property registrars, social media, and satellite imagery. For instance, during a tax dispute over agricultural income, the Income Tax Department used satellite images of the taxpayer’s barren land from the last five years to question how agricultural income was earned from that land, as Pinakin Desai pointed out.

Apart from satellite imagery, the Income Tax Department also uses technological tools for its pre-filled returns. However, if errors are made while using government-based software, taxpayers can still be protected, according to Shariq Contractor, a partner at CNK & Associates. Nevertheless, it is essential to be cautious and double-check the returns, whether the software is government-based or private software used by a chartered accountant.

Another aspect of AI and technology-led development is the need to safeguard against legal disputes. Auditors should carefully analyze insurance contracts to protect themselves from legal battles that may arise due to the use of AI or unintended technological mistakes.

For example, a US lawyer lost his bar license for quoting a non-existent judgment. The lawyer had used AI-based tools during research, which provided results of cases that were never filed in court. Professional indemnity insurance cover for Chartered Accountancy firms should provide extensive protection against litigations related to AI and different jurisdictions,” suggests Nishit Desai.

AI’s Impact on Auditors and Accountants: A Finance Secretary’s Perspective

Union Finance Secretary and senior IAS officer T.V. Somanathan on Saturday said Artificial Intelligence (AI) can replace the work being done by auditors and accountants.

He was delivering the CA S. Hariharan memorial lecture here.

Somanathan said that AI has specific implication for the economy and added that automation for business process can be much more potent with Artificial intelligence than it was without it.

He said that this can quite a bit replace the work that was being done by auditors and accountants.

The finance secretary also said that he can foresee an expansion of credit lending in the Indian economy.

T.V. Somanathan said, “In India credit to the private sector is approximately 55 per cent of the GDP while in China it is above 180 per cent. I would not say the Chinese level is healthy or desirable .. it is not. This is not a goal we should see, but one can argue that India’s level is too low. It has

to rise to 100-120 per cent of the GDP which will accelerate investment and growth.”

He said, “Projects that would not start will start if they get enough credit. But the challenge is to expand the volume of credit without bad debts which we politely call as NPA’s. This expansion of credit will expand demand for accountants.

The Union finance secretary also said that in the future to come the number of Income tax payers in India will increase continuously for many years to come. He said that he could see an annual expansion of 6-7 per cent in the number of Income tax payers and this would increase the demand for good accountants.