1 lakh notices sent for not filing return, misreporting income: FM
Union Finance Minister Nirmala Sitharaman announced that the Indian government has issued one lakh notices to individuals and entities for various tax-related issues. These notices were sent to address cases of non-filing of tax returns, under-reporting of income, and misrepresentation of income.
The notices were primarily directed at cases where the income was identified to be close to Rs 50 lakh. The Finance Minister expressed the expectation that these cases would be resolved and cleared by the end of the current fiscal year.
By taking such measures, the government aims to ensure tax compliance and address instances where individuals or entities may have evaded taxes or not accurately reported their income. The efforts are part of the government’s initiative to boost tax revenue and maintain fiscal discipline.
During the 164th Income Tax Day celebrations, Finance Minister Nirmala Sitharaman provided further details on the one lakh notices sent by the government. She clarified that these notices pertain to old tax returns that were filed 4 to 6 years earlier. The notices were sent in cases where the government had information suggesting that the reported income was higher than what was actually filed.
Additionally, the notices were issued in situations where there were reasons to suspect that the income had been understated or where individuals or entities had not filed their tax returns despite the presence of information indicating that they should have done so.
By addressing discrepancies in old tax returns and enforcing compliance, the government seeks to ensure that individuals and entities pay the appropriate amount of taxes based on their actual income and financial activities. This helps in maintaining tax revenue and fostering a more transparent and accountable tax system.
Finance Minister Nirmala Sitharaman emphasized that the government’s issuance of one lakh notices was not done thoughtlessly. The notices were sent over the course of the last 14 months and were primarily targeted at individuals with annual income exceeding Rs 50 lakh.
According to the income tax law, officers have the authority to reopen past assessments for a period of up to six years. Sitharaman mentioned that in May 2023, the Central Board of Direct Taxes (CBDT) completed scrutiny assessments for 55,000 notices, which were sent in response to a Supreme Court judgment.
The Finance Minister assured that the CBDT is actively working on resolving these cases and has set a target to clear the entire block of notices by March 2024. She reiterated that the board is not passively handling the notices and is not allowing individuals to manipulate or exploit the system. Instead, there is a clear-cut approach in dealing with the tax-related matters to ensure compliance and accountability.
During the same session, Finance Minister Nirmala Sitharaman highlighted changes in the tax assessment process. Previously, taxpayers were required to maintain records for 10 years, but now tax assessments cannot be reopened after six years. However, tax officers may reopen assessments in the 4th, 5th, and 6th years, but only under specific circumstances.
Central Board of Direct Taxes (CBDT) chairperson Nitin Gupta provided updates on the current income tax return (ITR) filing status for the fiscal year 2022-23. He mentioned that more than 4 crore ITRs have been filed so far, and the government has processed over half of these ITRs, resulting in Rs 80 lakh in refunds being issued to taxpayers.
Gupta also acknowledged that the Income Tax department is facing challenges due to a shortage of manpower, leading to a backlog of work that needs to be addressed. This shortage may be impacting the department’s efficiency in handling tax-related matters and processing returns in a timely manner.
During the session, the CBDT chairperson urged Finance Minister Nirmala Sitharaman to approve the cadre restructuring proposal at the earliest. This proposal likely aims to address the manpower shortage in the Income Tax department, which was mentioned earlier as a factor contributing to pending work.
The finance ministry shared some data in Parliament regarding Income Tax Return (ITR) filings for the fiscal year 2022-23. The data indicated that a record 74 million ITRs were filed during this period. However, a significant portion, around 70 percent (51.2 million), of these ITRs were classified as “zero-tax ITRs,” indicating that the taxpayers claimed nil tax liability.
Although the number of ITR filings increased by 14 percent over the span of four years until FY23, the number of zero-tax ITR filers saw a substantial increase of 77 percent during the same period, reaching 51.2 million. This suggests a significant rise in individuals or entities with no tax liability, possibly due to various factors, including tax exemptions, deductions, and other tax benefits claimed by taxpayers.
The CBDT’s call for cadre restructuring aims to address operational challenges and ensure efficient tax administration despite the increase in tax filings and the prevalence of zero-tax ITRs.
