New Delhi: The government is exploring legal options to deal with the old cases of tax review. These include adding an ordinance to the Income Tax Act. In these cases of tax review, notices were issued between April 1 and June 30 under the old rules. This move of the Income Tax Department has been challenged in the High Courts by several companies and individual taxpayers. They have filed petitions challenging the validity of these notices. They argue that this step of the department is illegal and arbitrary as action cannot be taken under the old provisions of the Income Tax Act.
Dozens of taxpayers in cities like Delhi, Mumbai and Kolkata have got interim stay orders from high courts on the notice of the department. Two officials with knowledge of the matter said that such legal remedies can be considered if the orders of the courts are not favorable and the notices issued in that period are asked to be withdrawn. Officials said the department is studying the interim orders of the high courts and is also preparing a reasoned reply in the respective matters. The old income tax laws were effective only till March 31 and under them tax cases for the last six years could be reopened for review. But after the passage of the Finance Bill, 2021, these provisions came to an end. But the tax department declared it valid till June 30 and accordingly issued notices to thousands of taxpayers between April 1 and June 30.
The new income tax law has come into effect from April. In this, only the cases of the last three years can be opened for review. Serious cases of fraud involving tax evasion of Rs 50 lakh or more can be opened up to 10 years. The tax department is of the view that taxpayers cannot challenge any specific move of the department as various deadlines related to tax compliance have been extended amid the second wave of the COVID-19 pandemic. The Central Board of Direct Taxes (CBDT) had informed about the extension due to the situation arising out of the second wave of the pandemic.