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A Month Full of Notices from The Income Tax Department

Submitted by admin on August 7th, 2024

The income tax department only has a month till the new reassessment law will be implemented on 1st September 2024. The assessment officers are in a rush to send out tax notices to taxpayers who have not paid their taxes properly in the previous financial years. They do not have sufficient time to compile data and check for any mismatches in incomes and taxes paid for the financial years 2013 to 2018. Since, once the new law is implemented, they will no longer have easy access to these records. Not only is it daunting to comb through all the flagged records but issuing notices and then managing issues which are bound to arise has them stressed.

Officials at the Income Tax department have tried informing the central authorities that managing a task of this scale is quite difficult, that too within such a short time. They do not want anyone who hasn’t paid their taxes in the last ten years to get away with it.

Modified reassessment law

The new reassessment law once implemented will prevent the officials from checking the reports from financial years 2013 to 2018. This regulation has been amended and was announced during the budget. It limits the officers of the Income Tax department from gaining access to any tax payer’s tax and income information to the last five years. Before the 1^st of September 2024 they will be able to access up to ten-year older records of any tax payer.

According to the new amendment, the time limit is also adjusted, since the records of past five years for only those accounts will be accessible to the officials, which show inconsistency of amounts more than Rs 50 lakh. Below that amount, only records for the past three financial years can be accessed.

Lowering the maximum time limit for reassessing accounts has put tax officials under great pressure and a massive time crunch. As previously they had time till March for sending out these reassessment notices.

Mountain of issues

It is quite likely that there will be various issues cropping up because of this, and one of them will be misinterpretation. The accounts flagged for reassessment utilise information provided through their investigation teams’ input and findings, registrar of properties and information provided by banks. So, now all of these actions need to be performed within weeks so that the insight provided by tax reports from financial years from 2013-14 till 2017-18 to prove tax inconsistencies exist. Since, they will not be accessible from next month.

Not only do these accounts need to be analysed and notices sent, but the account holders also need respond and present their statement so that reassessment order can be finalised. However, expecting the overtaxed Income Tax department officials and assessing officers to complete all of these tasks is fairly difficult. Under sections 148 and 148A even the chief commissioner has to approve each of the cases before a notice is issued to the tax payers.

Lack of time

On one hand the assessment officers believe that there should not be such a rigid and specific date for implementing these laws, since the time taken to resolve each case with vary. On the other hand, wealthy individual tax payers and corporates will not be pleased if the dates are delayed or changed. Furthermore, CA and other financial experts believe that limiting the assessment period to the last five years is beneficial to all since it makes work easier for all parties involved. However, they also believe that if the Income Tax department believes that it could cause a major loss in revenue their opinions should be taken into consideration.

Unclear assessment regulations

It all started in April 2021, when the reassessment law was previously changed to increase maximum reassessment period. Before April, 2021 the assessment officers, could look back into records for the previous 6 financial years, even if there was an inconsistency of Rs. 1 lakh. Once the law changed in 2021, many old records for the last ten financial years were opened and thousands of notices were issued on this basis. In response to these notices, writ petitions were filed by numerous companies, stating that they were not given the time or opportunity to explain these inconsistencies.

Chances are a similar situation like that in 2021 will arise. The conclusion to the 2021 issues was based on a ruling and timely intervention by the Supreme Court that it would be handled on a case-by-case basis and several such cases are still ongoing in the courts.