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

The Economic Times - - Budget: Day After - Su­gata.Ghosh@ times­group.com

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.

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