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The Ruling Supreme Court Lets I-T Department Open Closed Cases

Many individuals and small businesses can now find the tax office gathering up old wounds and driving tax demands they believed had been long forgiven. To lessen the conflicts between the income-tax (I-T) department and small taxpayers, the revenue authorities had in the past decided that for tax demands below certain limits, the department will not make legal battles to recover dues. These limits were established in February 2011 and were lifted in December 2015.

A Supreme Court recently ruling will now change this for many. The apex court has ruled that the Central Board of Direct Taxes (CBDT) which cannot issue any circular having reflective operation.

Who all will the ruling impact?

Earlier, many small taxpayers who had faced tax demands of between Rs 4-10 lakh can be registered. These cases, which were removed by the tax tribunal, can now be recovered and attributed back to the tribunal. This will increase litigation and appraise too will have to cough up extra legal expenses.

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In 2011, the nodal tax authority CBDT had said in a notification that the I-T department will not file an application at the I-T Appellate Tribunal if the tax demand is Rs 4 lakh or less. These sensibly relate to cases where the Commissioner of Applications, which constitute the first stage of appeal and had ruled in favour of the tax payer. The same circular also stated that no application will be filed before the high court if the amount in question is Rs 10 lakh or less, and at the Supreme Court if the tax demand is Rs 25 lakh or less. On 10th of December, 2015, the fiscal limits for moving the tax tribunal and high court were lifted to Rs 10 lakh and Rs 20 lakh, thus, while the relevant limit for engaging before the Supreme Court was kept unchanged at Rs 25 lakh.

The notifications allowed reflective help to tax payers even if their conflicts with the I-T department had begun prior to the dates of the circulars. For example, between 2011 and 2015, the I-T department had moved appellate tribunals in numerous cases where the tax demand was between Rs 4 lakh and Rs 10 lakh, the limit for moving the tribunal was lifted from Rs 4 lakh to Rs 10 lakh. Therefore, these claims by the tax department were removed by the committees. Now, these tax payers face the risk of tax office reopening these cases.

With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.