Draconian I-T Powers Gone, No More Flashbacks to 1961
Taxman can’t review decades-old returns, can re-open accounts up to six years only
Mumbai: “Please note the department can even go back till 1961 to track untaxed income.” It was a grim warning sent out by an Income tax commissioner last year to a room-full of tax practitioners while hard-selling the first income declaration scheme (IDS). No one felt it was an empty threat as the law then had indeed given tax officers the power. But not anymore.
The 2017 Budget has proposed that this sweeping power of the assessing officer would now be taken back. The tax assessing officer can only reopen accounts which are not more than six years old — unless there is a search and survey by the department, which will then have the power to question the source of income generated as old as a decade ago.
the income of the assessee beyond the period of 6 years, being the time limited prescribed under Section 147 of the Income Tax Act, 1961,” said senior chartered accountant Dilip Lakhani.
“The validity of the said provision was doubted. It was apprehended that the Tax officials will use this clause to reopen the cases right from the year 1961. The finance minister has withdrawn the said Clause 197(c) with effect from June 1, 2016,” Lakhani added.
The general understanding, even after the IDS was over, was that if a notice for re-opening or regular assessment was received by an assesse, the escaped income could be taxable for the year for which the notice was issued.
According to Mitil Chokshi, Senior Partner Chokshi and Chokshi, “This could have resulted in tax being levied only in one year for accumulated income. Before that, one could not have been subject to re-opening for escaped income beyond sixyears unless there were foreign assets/income involved where the department could go back up to 16 years.”
“Now, in regular scrutiny they can go back up to six years as was the case earlier; but, in cases of search and survey it has been extended from six years to 10 years if the escaped income per year exceeds ₹ 50 lakh. This also means that those who did not opt for IDS and did not face an IT search cannot be questioned for any escaped income/assets beyond six years,” Choksi added.