Tax demand on old dues not very taxpayer-friendly
The income tax department has spooked taxpayers with notices to settle very old tax demands and has been adjusting refunds against dues that date back 20 years or more. Shocked taxpayers have taken to social media to vent their anger. Many are helpless as they do not have the documents to prove that the department’s claims are wrong. Scared of the tax department’s wrath, many are paying the amount demanded without any resistance. And while the department remains unperturbed by the criticism, this episode has only increased the trust deficit between the taxpayers and the department. This also raises questions on the government’s claim of being pro-taxpayer and non-adversarial in tax matters.
The tax department has justified its demands, saying if the system throws up cases where taxes are due, the department will collect taxes or adjust them with the refunds. It says no law prohibits the collection of unpaid taxes, regardless of how old these may be. The tax authority’s justification is that if a tax case from 2005-06 is now decided in its favour, the department will collect its dues. In its defence, it says taxpayers are given the opportunity to respond to the demand notices. But some blame possible ‘errors’ in the tax department’s system which result in numerous tax demands being raised from the past. Even the department admits there could be cases where taxes were paid but the details have not been updated or entered into the system. How can the taxpayer be made to pay again in such cases?
The government has in recent years claimed that it is working towards a more predictable and non-adversarial tax policy. It has tried to do away with unnecessary litigation by deciding not to appeal in cases where the tax outstanding is low. It has also tried to simplify the income tax return (ITR) filing process by proposing a common ITR form instead of having seven different forms. Faster payment of refunds has also earned the department some adulation. However, all these efforts come to naught if taxpayers are harassed for such old tax ‘dues’. If the tax department cannot close cases that are two decades old, it certainly cannot laud itself for being pro-taxpayer. Mind you, individual taxpayers will not have the resources and time to fight the tax department.