Govt ponders Ordinance route for previous tax evaluation as income-tax litigation rises: Report

Govt ponders Ordinance route for past tax assessment as income-tax litigation rises: Report&nbsp

New Delhi: The Centre is reportedly weighing the possibility of bringing an ordinance to deal with the problem of income tax cases on reassessment notices under old, time-barred norms.

Recently, several companies and individuals have filed writ petitions challenging the legality of the notices issued by the income tax department between April 1 and June 30 and under the old rules, arguing that the department’s move was void and arbitrary as action cannot be taken under the old provisions of the Income Tax Act, according to a report in Business Standard.

Further, more than a dozen assessees in cities like Delhi, Mumbai and Kolkata received interim stay orders from the high courts on the notice of the department.

Citing two officials with knowledge of the matter, the financial daily mentioned that such legal remedy can be considered if the court rules against the department and wants the withdrawal of notices issued in that period. They further mentioned that the department was studying the interim orders and is also preparing a reply in the respective matters.

The old tax law, amended with the passage of Finance Bill 2021 and in effect till March 31, 2021, allowed reopening of assessments of the last six years. The tax department has, however, extended its validity till June 30 and accordingly issued notices to thousands of assessees between April 1 and June 30.

Worth mentioning here is that the new rules, which came into effect in April, lowered the time limit for issuing notices of reassessment from six years from the end of the relevant assessment year to three years. Serious cases of fraud involving tax evasion of Rs 50 lakh or more can be opened up to 10 years.

The tax department believes that taxpayers cannot challenge any specific move of the department as various deadlines related to tax compliance have been extended in the wake of a deadly second wave of the Covid-19 pandemic. The Central Board of Direct Taxes (CBDT) had informed about the extension because of the second wave of coronavirus infections.

As a result of the second wave and mini lockdown, the Centre had extended the date of issue of reopening of cases till June 30, and this was in line with various tax compliance-related relief provided to assesses. If the additional time has been given to the taxpayers, then the government machinery should also be given additional time to scrutinise the cases, the publication quoted one of the two officials as saying.

The government was awaiting the final verdict by the courts, and the matter is now to come up for hearing in August and September.