A plan to detangle old tax disputes helobaba.com

The purpose of this move is to improve taxpayer services, she said in her interim budget speech. “There are a large number of petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962, which continue to remain on the books, causing anxiety to honest tax payers and hindering refunds of subsequent years.”

Vishwas Panjiar, partner, Nangia Andersen LLP, said the department would undertake necessary formalities to cancel such outstanding demands suo moto without requiring the taxpayer to make a formal application. “If the underlying tax demand is nullified, as a logical corollary, the tax department should withdraw all pending associated litigation as well.”

Several chartered accountants have informed Mint that the number of tax demands of previous years being sent to taxpayers increased manifold in the last year. In some cases, older demands that were already closed, either paid or dropped by the department after it was contested, are being re-issued. “This started happening after the online tax filing portal migrated from the old portal to the new one. These are generated electronically most likely as a result of technical glitches,” said Sambhav Daga, a practising chartered accountant. “The government has probably figured out this error and is rectifying it by withdrawing disputed tax demands,” he added.

While this measure will benefit those small taxpayers who are yet to pay the outstanding amount, it doesn’t provide relief to the taxpayers whose outstanding demand was adjusted against refund. Under Section 245 of IT Act, the Income Tax Department can adjust any previous year’s tax demand with the current year’s refund.

Panjiar said many times, taxpayers while appealing for the matter at a higher forum pay taxes in dispute as well. “The proposal by the finance minister is silent on these cases and hence it is unlikely that refund would be available in such cases where taxes have already been paid even though the matter is in dispute,” he said. “It is also not clear if for the purpose of computing the tax demand limit announced ( ₹10,000 /25,000), interest accrued on the demand would be considered or not,” Panjiar added.

Daga said taxpayers with a higher tax demand of over ₹25,000 continue to remain affected. “I know of cases who have received tax demands in several lakhs and some portion of it is adjusted against tax refund. In some of these cases, an older tax demand has popped up again, which means they have paid the tax twice,” he said.

Taxpayers can dispute outstanding tax demand under the ‘Response to Outstanding Demand’ option on e-filing portal by selecting between the options of ‘Demand is partially correct’, ‘Disagree with demand’ or ‘Demand is not correct but agree for adjustment.’

This year’s interim Budget did not see any major announcements on the personal tax front. “As for tax proposals, in keeping with the convention, I do not propose to make any changes relating to taxation,” finance minister Sitharaman said.

Tax slabs under both the tax regimes remained unchanged.

“Under the new tax scheme, there is now no tax liability for taxpayers with income up to ₹7 lakh, which is up from ₹2.2 lakh in the financial year 2013-14. The threshold for presumptive taxation for retail businesses was increased from ₹2 crore to ₹3 crore,” the finance minister said.

According to the FM’s budget speech, eligibility for presumptive taxation for professionals was increased from ₹50 lakh to ₹75 lakh and the corporate tax rate was decreased from 30% to 22% for existing domestic companies and it was further reduced to 15% for certain new manufacturing companies.

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Published: 01 Feb 2024, 11:29 PM IST