Managing High-Risk Non-Filer Cases: Insights from RMS Cycle 5

Introduction

The Directorate of Income Tax (Systems) releases a list of high-risk non-filer cases under Risk Management Strategy (RMS) Cycle-5. These cases are now available to Assessing Officers (AOs) via the Insight Portal for further action, including proceedings under Section 148A/148 of the Income-tax Act, 1961. This initiative aligns with the government's data-driven compliance strategy, leveraging third-party and financial data to improve tax administration. The move also complements the upcoming transition to the new Income Tax Act, set to take effect from April 1, 2026, as per the Income Tax Bill, 2025.

Overview of RMS Cycle-5 and Non-Filer Identification

Who Is Required to File Returns?

As per Section 139 of the Income-tax Act, any individual whose income exceeds the prescribed threshold, or who meets specified conditions, is mandated to file a return of income.

Data Sources for Identification

High-risk non-filers are identified through:

SFT (Statement of Financial Transactions) data
TDS/TCS statements
Import-export data
Other third-party information

This data is analyzed along with the taxpayer's overall profile to assess potential tax liabilities.

Objective of RMS Cycle-5

RMS Cycle-5 targets non-filers with potentially significant tax liabilities. These parameters have been approved by the Board and aim to enhance risk-based selection. Key policy updates such as the omission of Sections 206AB and 206CCA (effective April 1, 2025) also reflect a shift toward reducing compliance burdens.

Recent amendments now restrict search assessments to undisclosed income only, reinforcing the government's "trust-based" compliance approach.

Accessing Cases on the Insight Portal

Case Category

Assessing Officers can access disseminated cases under the category:

"RMS – Non filing of Return PAN cases"

Navigation Path:

Insight Portal → Verification → Taxpayer → Verification → Case Type → RMS – Non filing of Return PAN cases

Insight Portal Features for Case Analysis

Assessing Officers can view a comprehensive taxpayer profile, including:

Return Profile (TRP): Comparative ITR data
Financial Profile (TFP): Key financial ratios and values
Master Profile (TMP): Address, email, and contact numbers
Asset Details (TAD): Bank accounts, immovable property, etc.
Relationship (TRL): Key persons and shareholders
Taxpayer Annual Summary (TAS): Aggregated TDS, GST transactions, and third-party data

Available Actions on Case Detail Screen

By selecting “Initiate Activity,” users can:

Mark Case as Untraceable – For undelivered communications
Mark Case as Non-Responsive – If the taxpayer does not respond to received queries
Enter Comments – Record case-level remarks
Reassign Case – Transfer cases to another officer
Mark as ‘No Return Required’ – If response evaluation shows return filing is not needed
Initiate Proceedings u/s 148A/148 – Launch reassessment processes where applicable

Additional Tax Rates

Filing Period	Additional Tax Payable
Within 12 months	25% of tax + interest
12–24 months	50% of tax + interest
24–36 months	60% of tax + interest
36–48 months	70% of tax + interest

Action Under Section 148A/148

Assessing Officers may initiate proceedings under Section 148A/148 of the Income-tax Act, 1961 for relevant RMS Cycle-5 cases. Actions must align with applicable legal provisions, CBDT guidelines, and notifications.

The Income Tax Bill 2025, set to replace the Income-tax Act, 1961 from April 1, 2026, also introduces an extended window for filing updated returns (ITR-U) — now up to 48 months from the end of the relevant assessment year.

Updated returns cannot be filed if a Section 148A notice is issued after 36 months, unless the order under Section 148A(3) determines no further action is needed.

Conclusion

This data-driven compliance initiative aims to enhance tax administration by identifying and following up on high-risk non-filers through the Insight Portal. Assessing Officers are encouraged to leverage available information and tools to ensure proper enforcement in accordance with the Income-tax Act and updated CBDT instructions.