The income tax department adjusting 20-year-old tax demands with the current year’s refunds has shocked both taxpayers and tax consultants. According to the Gujarat Chamber of Commerce and Industry (GCCI), thousands of assessees have experienced this this year.
GCCI said it will raise this issue with the chairman of the Central Board of Direct Taxes (CBDT).
Notices are being issued by the I-T department for assessment years 15 to 20 years ago for which no documents or records are available with the taxpayers. According to sub-section (3) of Section 44AA read with Rule 6F of the Income Tax Act, 1961, books of accounts must be maintained for a period of six years from the end of the assessment year.
GCCI direct tax committee chairman Jainik Vakil said, “While the department’s records show the demand as ‘unpaid’, taxpayers who have received notices are confident that they have no such outstanding with the tax office. Some notices are even for AY 2003-04 and AY 2004-05, or 20 years ago. Taxpayers are clueless about how to handle the notices as old tax paid challans and rectification orders, which serve as proof of payment, may be unavailable.”
GCCI direct tax committee members said, “In many instances, these demands have either already been settled or the necessary corrections have been made. These demands or adjustments to refunds could often be attributed to the transition to a new system within the department. It is possible that in the previous manual systems, even when the demand was nullified after payment of tax or submission of a rectification request, the updates from the officer’s end were not carried out or are still pending. Thus, the demand continues to reflect in the system.”