Authorities is contemplating regulation to deal with current spate of income tax rescheduling

Manjiri Kamath (name changed), a senior executive who works at Rothschild India, received an income tax bill in the last week of April 2021. The notice related to the tax year (AY) 2014-15 and claimed that “… we” have reason to believe that your income has escaped assessment … “while asking them to file a revised tax return and the Amount to be paid before April 30th.

She turned to her certified public accountant (CA), who asked her to “quietly file the revised statement as there is no point in arguing with the tax department.” Barely three days before the deadline, a panicked manjiri (who knew she was not at fault) filed a revised tax return and paid the full amount of just over 19,000 rupees.

Thousands of companies and private individuals (including retired seniors) received instructions from the IT department between March and June this year to “reopen old certificates”. CAs say this is routine and happens every March.

While the notices received in March of this year are not discussed, the ones written between April 1st and 30th are petitions.

They question the legality of these notices issued by the tax department under old rules and claim that the IT department’s move was void and arbitrary, as action cannot be taken under the old provisions of the Income Tax Act.

The old tax law, which was changed with the passage of the Finance Act 2021 and was in force until March 31, 2021, allowed the reopening of assessments for the last six years. The new regulation that came into force on April 1 has reduced the period for issuing new assessment notices from six years from the end of the respective assessment year to three years. According to the amendment, serious tax evasion fraud cases of Rs50 lakh or more can be opened for up to 10 years.

The regulation should come into force on April 1, 2021, i.e. notifications for the assessment years before 2016/17 until March 31, 2021.

Tax professionals hoped revaluation notices would focus on high-value or large-mismatch transactions rather than pursuing smaller taxpayers, as it was naively expected that the department’s intent was to reduce tax disputes. Their hopes soon fell to the ground.

However, the tax office was valid until June 30th. extended and accordingly between 01.04.

However, not everyone has the means to contest the rulings in court. A competent authority pointed out that only corporations and high net worth individuals (HNIs) would have the money to fight such litigation.

He cited the case of an 85-year-old senior woman from Mumbai who had received a similar notice from the tax authorities for the reopening of her assessment for AY2014-15. Legal proceedings are usually expensive and time consuming. In all likelihood, she would have no choice but to bow to the hint calling for old reviews to be reopened. This is similar to tax bullying.

The CA continues: “The notices are completely wrong because the change in the law cannot be retroactive. If you have opened very old reviews – say AY2013-14 or AY2014-15 … these are statute-barred and cannot be reopened under the new law. Hopefully the court itself will remove the deadline extension provision, thereby removing any invalid revaluation notices ”.

The problem, however, is that government bureaucrats have blinders and are only focused on increasing revenue and may consider other legal ways to get around this.

The Tax Department firmly believes that taxpayers cannot challenge any particular step taken by the Department as various tax compliance deadlines have been extended in the wake of a deadly second wave of the COVID-19 pandemic.

The Central Board of Direct Taxes (CBDT) claims to have been informed of the extension because of the second wave of infections with the coronavirus.

The Government of India extended the deadline for the date of notification under Section 148 of the Income Tax Act 1961, a Follow-up Order to Order the Dispute Settlement Panel (DRP), and Processing of Equalization Tax Statements.

– Prakash W. Kamat (@PrakashWKamatPK) May 25, 2021

Due to the local lockdowns and the deadly second wave, the Union government had the issue date for the reopening of cases until Sept.

If taxpayers have been given additional time, the Treasury Department believes that government agencies should also be given additional time to review cases, the Treasury Department argues. The CBDT claims that assessees cannot choose which deadline extension to object.

Apparently, the IT department does not want such suspected cases to expire and has therefore given notice (from April to June 2021) in order to initiate measures.

However, it is extremely bizarre that on the one hand the government amendment says that the new tax law will come into force on April 1, while the tax office claims that the old law will go into effect until April 30.

How can the two laws co-exist from April 1 to June 30, 2021?

“The extension of the deadlines of the departments, which is entirely at the discretion of the government, is fundamentally different from the extension of the deadlines of a law that has been replaced by a new law,” emphasized Moneylife editor Debashis Basu in his column in Business Standard.

Narendra Goyal, president of the Direct Tax Professionals Association, also expressed concern about the rampant issuance of notices under Section 148 of the old provisions of the Income Tax Act. Last month, the direct tax trade association spoke to the union’s finance minister, Nirmala Sitharaman, and highlighted the issue.

“For the initiation of a procedure to reopen assessments in the period from April 1 to June 30, 2021, two pieces of legislation cannot be used for the same purpose, since the new regulations will come into force from April 2021. A termination issued according to the old regulations is legal not allowed, ”said CA Ameet Patel.

At least one court order has already pointed out that “the challenged communication contradicts the constant principles of the interpretation of the law, namely that all measures after a change in a procedural section must comply with the new procedural provisions in the amended version”. Law. It also takes the view that a notification which is delegated legislation cannot change or change the timing of the implementation of a legal provision ”.

The government should await the final judgment of the courts and examine all legal options available to it. The matter should now come up for negotiation in August and September.

Reportedly, despite all the logic and reasoning, the union government is considering the possibility of enacting an ordinance to resolve the issue of income tax cases related to re-assessment notices under old, statute-barred standards.

The Delhi High Court HC has ceased operations of IT revaluation notices issued after March 31st. Many assesses have received injunctions from the Supreme Courts in Mumbai and Kolkata to suspend these revaluation notices.

As if that weren’t enough, the complete failure of the new income tax portal is creating a gigantic chaos that frustrates auditors and citizens alike. Twitter is full of complaints about the non-working new portal.

“Submitted returns disappear. More than 8 lakh complaints were registered in less than 2 months. Only God can save us professionals and taxpayers, ”one such lawsuit said.

Infosys is now routinely looking for more time to get the portal in order and gives blank assurances almost every week that the portal will be fully functional “soon”.

While tax auditing may have declined slightly, the faceless reviews that are algorithm driven reject many tax calculations. This has led to a large number of complaints. “I’ve filed more appeals in the past two years than in the past seven,” said Nikhil Vadia, a tax advisor from Mumbai.

I received an income tax notice on June 1st with a due date to respond by June 7th. Don’t these income tax people know the site will be serviced until June 6th. Are they drunk before filing the ad, or are they doing so on purpose to harass income taxpayers?


The government has largely voiced its so-called efforts to achieve transparent taxation, the abolition of “tax extortion” and the honoring of honest taxpayers. It introduced a tax charter that obliges the department to “provide a fair and equitable system”.

However, as can be seen from the ground reality, very little has changed.

Two months ago, Earlyguard, the UK subsidiary of Japanese giant Mitsui, initiated arbitration on an income tax bill of Rs 2,400 billion. Mitsui has challenged the retroactive taxation under Vodafone, Cairn Energy and Antrix-Devas.

With international and domestic taxholders continuing to be haunted by draconian taxation measures, it is now imperative that the government somehow work together and deliver on its promise. Time is also running out for the impending submission deadlines for tax returns.