Income Tax adjusting Refunds with Unjustified Demands not Taxpayer Friendly

The Income Tax Department has issued notices to settle very old tax demands and has been adjusting refunds against dues that date back two decades or more.

Scared taxpayers have taken to social media to express their anger. Most of the taxpayers are helpless because they do not have the documents to prove that the claims of the department are wrong. Scared of the tax department’s fury, many are paying the amount demanded without any refusal.

Mean while the department remains undisturbed by the criticism, this action has only increased the mistrust between the taxpayers and the department. This also raises questions about the government’s claim of being pro-taxpayer and non-adversarial in tax matters. This also challenges the government’s claim of being pro-taxpayer and non-adversarial in tax matters.

The tax department has clarified its demands by saying that if the system brings up cases where taxes are due, the department will collect taxes or adjust them with the refunds. It says no law forbids the collection of unpaid taxes, regardless of how old these may be.

The justification of the tax department is that if a tax case from the period 2005-06 is now decided in its favor, the department will collect its dues. we have been given the opportunity to taxpayers to respond to the demand notice. But there is some error in the tax department’s system which resulted in numerous tax demands being raised in the past.

Even the tax department officials admit that there could be a possibility of some cases where taxes were paid but the details have not been updated or entered into the system.

In recent years, the government claimed that it is working towards a more accurate and non-adversarial tax policy. In cases where the tax owed is low, it has attempted to avoid unnecessary litigation by deciding not to appeal. It has also tried to clarify the income tax return (ITR) filing process by proposing a common ITR form rather than having seven different forms.

The department got some praise for faster payment of refunds. However, all these efforts by a tax department come to nil if taxpayers are harassed for such old tax ‘dues’.

If the tax department is not able to close cases that are 20 years back, it definitely cannot laud itself for being a pro-taxpayer. Be aware that, individual taxpayers will not have the resources and time to oppose the tax department.