In the past few weeks, several individuals have been slapped with notices from the Income Tax (I-T) department asking them to cough up the amounts within a week.
While the department’s records show the demands as ‘unpaid’, tax payers who have received the notices are confident they have no such outstanding with the tax office.
Some of the notices pertain to assessment years 2003-04 and 2004-05. Many are clueless how to go about handling the notices as the old payment challans and rectification orders, which can serve as proof of tax payment, have been misplaced. The errors, sources believe, are probably a consequence of the department migrating to a new system.
“This is troublesome for many. These old demands are further sought to be adjusted against refund receivable for the current year! In most cases these demands are either paid or necessary rectifications have already been passed several years back. But the new system does not recognise the updated position. Thus the taxpayers have to submit documents in support of deletion or payment of such demands. In several cases such old records are either not easily obtainable or just plain unavailable,” said Rutvik Sanghvi, Partner at Rashmin Sanghvi & Associates, a CA firm.
Some taxpayers are choosing to pay up without challenging the department, if the amount in question is small. For others it could mean going through the rigmarole of an appeal.While the tax office can go back up to ten years in reopening as assessment under the grounds that some income has escaped untaxed, there is no time limit in pursuing old demands with taxpayers. “It would be helpful if the department can recognise the hardships faced by taxpayers for no fault of theirs, and update and correct the internal system. Demands and adjustments should ideally be put in abeyance till the new system is fully updated,” said Sanghvi.
Some of the tax professional lobbies are planning to formally take up the matter with the I-T department. According to a CBDT spokesperson, “..there maybe cases in which refunds are due to the taxpayer, but previous demands may also be outstanding. Section 245(1) of Income-tax Act, 1961, mandates providing an opportunity to the taxpayer to make a representation before adjusting the refund against an existing demand. The taxpayer is required to agree, disagree or clarify the status of the demand. Accordingly, taxpayers with existing demand(s) in the previous years are being intimated of the same. “
Interestingly, some of the assesses who had asked for the details of such ‘demands’ have been told by the department that are no records of these old demands and how same had risen, said Rajesh P Shah
Partner at Jayantilal Thakkar and Company, another CA firm. “The department simply has the amounts and assessment years for which they relate to. Assessees will have a tough time to get the rectification done and nullify the demand,” said Shah. (The present development follows a similar situation in late August when the I-T department had accepted that there was “an erroneous adjustment communication. This time it pertains to ‘pending’ demands which have been cleared.)
In Whatsapp groups of tax professionals, the matter has cropped up in recent conversations. Narrating his experience, a member of one such group said: “..I had the chance to meet an (I-T) official for an incorrect demand. The man had around 500 such cases and said the situation was similar everywhere. Further, the demands are not automatically deleted even if the officer states that payment/rectification is done. The new system requires them to raise a ticket and then upload a manual order for deletion of such demands. Even after doing this the demands have not gone from the system.”
Most feel either tax officials had not uploaded the system when the tax due were cleared or the system is faulty. Either way, it’s the taxpayer who has to deal with it.
