Tax Officials Are Using An IDS Provision To Question Transactions Beyond 6-Year-Limit

Income tax officials are questioning  the assesses about the transactions which are older than the 6-year statute of limitations by summoning a provision that was put in place as the part of the just-concluded Income Disclosure Scheme (IDS) into turmoil.

A tax official said that there are no fresh notices being issued on such assets, some income tax officials believe t that the IDS-related provision allows them to raise such matters when they plan assessments of returns made within the 6-year ceiling.  It is not an immense power for the income tax department to go after whomsoever they want to go.

But the tax officers can raise the questions under the ongoing assessments, even about the properties bought nearly 20 years ago and the source of income. Under Section 197c, which was recently added to the Finance Act, allows the tax officials to examine the transactions much older than 6 years.

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This was believed to have been merely related to the IDS, the June-September programme planned at influencing people to reveal their black money holdings but the tax department has in the past week begun questioning people about their properties which is older than 6 years in some ongoing assessments.

Section 197c for the IDS was introduced by the government, but now the concern is whether the tax official can open the assessments which are older than 6 years, as per a tax partner of a firm.

There is a view that the tax official can do it which can lead to a lot of litigations going ahead as There is a view that the tax officials can do that, but this could lead to a lot of litigations going ahead as it opposes the  provisions of Income Tax Act. One example related to the New Delhi income tax department last week asking a tax payer for the documents which are related to a house that was purchased more than 6 years ago. 

According to the tax adviser, the officials said it will be included in the past year’s income and the penalties will be levied. It’s a damaging provision of IDS which allows the IT officers to go back several years to catch the unrevealed income and assume it as current year’s income. This is not limited by the time given under the income tax provisions as per the partner of Ashok Maheshwari and Associates. 

It cannot be individually verified whether this was a view held by the department or only a few tax officers. The income tax officers had raised this matter with the Central Board of Direct Taxed (CBDT) in July, with some point that litigation can follow as other regulations still bar assessments older than 6 years.

To be sure, the Prime Minister Narendra Modi has made it clear to all the tax officials that they should not uselessly trouble the bonafide tax payers and inspire voluntary compliance.

Another person close to the development said that the government has not come up with the clear regulations around using this provision but the thinking can be to go hard at the tax evaders. Some taxpayers are worried about their ancestral properties which are inherited by them which may also come under the tax net as per the experts.  

They will not have been so inspired by the statement of a top government minister at a public event in Mumbai about a month back. You want to enjoy the ancestral property but you don’t want to pay taxes on that. How can it happen?

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

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.