Rupees 43 trillion Income Tax Demands to Make India Richer and Indians Poor

Yes; The total budget for 2024-25 has failed to generate tax revenue of Rs 43 Trillion, but the faceless assessments have made that.

Don’t be surprised. This is a new method of creating trillion dollar economy, as a first step to make India a trillion dollar economy, the income tax department has raised Rs 19.4 Trillion demand against Indian Income Tax Assessees, in one single financial year 2023-24. This one of the world records, though the government seems to have not applied for such a Guinness record.

FACELESS ASSESSMENTS & SURGING INCOME TAX ARREARS

The word 43 lakh crore arrears is in many news items over the last fortnight. The department has started to set up special tax forces to collect the income tax demand raised. The assess of tax collectible upto 31.3.23 was Rs 24,51,099 crore and it has suddenly jumped to Rs 43,00,000 crores in one financial year. India has grown. The people have become rich. They are paying more taxes over the years. One must be happy with the news.

YEAR WISE ACTUAL INCOME TAX COLLECTION IN THE RECENT PAST

NET DEMAND RAISED DURING THE FINANCIAL YEAR 23-24 ALONE IS Rs. 18,49,133 CRORES

The above demand is based on scrutiny and other assessments. The income tax arrears from the beginning of Income Tax Act till 31.3.2023 is Rs 24,51,099 Crore. This Rs 24.51 lakh Crore was raised over a period of nearly 60 years and is net of collections. The Financial year 23-24 is exceptional as it has raised demand equal to demand raised over last 60 years, in the year . If we go into the anatomy of the demands as analysed by the CBDT

The above classification is based on assessment made by the AOs recently. But there are large number of cases where the assessee is still not aware of the demands due from them. This status is due to blind adoption of Section 282 of the Income Tax Act read with IT Rule 127. This section contains many options to communicate notices and orders with the assessee, but the department has intentionally or unintentionally stuck to a single option (i.e sending Notices, Orders etc. only through e-mail and uploading them in the IT Portal). Though section 282 read with the Rule contains various other options, the Department strictly followed only through the e-mail option. Even where the demand is more than Rupees 10 crore no Notice was sent by Speed post/Registered post at a cost of Rs 50/- sometimes this creates a suspicion that intentionally the department kept the Assessee  unaware & in dark. Is it not natural justice to call somebody in person before slapping tax demand of Rs 1,00,00,000/-?. The orders shamelessly carry the details of un-responded notices in a table format. The Notices were earlier served in person. Now everything is faceless/ online.

I expect that the department has treated these type of cases, where the assessee had not responded & has not filed appeal even long after the passing of the Assessment Order as recoverable, in fact they will not be. I have a slice of these cases with me, through the same is not a sufficient size of sample.

The CBDT is concerned above collecting cash and reducing the demand, but concern of CA’s like me are different. The tax ecosystem is getting damaged without concern for the financial health of Assessee. I am not sure how many Tax Audit cases (i.e cases having turnover of more than 50 lakh for professionals and more than 1 Crore for others) are there in India. I expect it to be around 20,00,000 ( as of 30.09.2023 there were 29.5 lakhs Tax Audit Reports were  including 44AD & 44ADA cases) and if tax demands are raised recklessly on at-least one lakh assesses every year and they close down their business or run away or lose their assets and discontinue their businesses, will the tax base be not eroded over the years ?.

The financial year 23-24 is not going to be year raising of exceptional demands, but will become first year of such high pitch demands. If we analyse the causes for such high-pitch demands then we will understand that such demands will continue to raise year after year.

The reasons for high pitch demands in financial year 2023-24 are

• Introduction of faceless assessment from August 2020
• Amendment of section 282 and Rule 127 ( 02.02.2015 ) and changing the method of sending Notices and Orders.
• Amending section 149 to increase time to re-open Assessments up to 10 years.
• Treating all cash deposits / all deposits into bank accounts as Income, even though there are clear indications that the Assessee is doing business and only profits are his Income and not the Entire bank deposits.
• Treating all deposits during demonization as un-explained Income
• Taxing all deposits/Incomes under section 68,69,69A,69C etc., and consecutively demanding tax and surcharge at 72% as per Section 115BBE.
• Even when the Assessment Order has not been appealed by the Assessee, with our making him aware of the pending demand, preceding to issue penalty Notices and confirming penalties also ex-parte. The demand also includes penalties raised up to 200 % of the Income assessed under various penal provisions.
• One of the motivations behind such orders appears to be to collect 20 % of the demand for Granting stay. If the government is able to collect 20% it can get un-budgeted revenue of 8.6 lakhs crores. State Governments where doing this under GST for long, Now Income tax has stooped too.

We can go on listing out the reason, but the underlying theme is no body care for the income tax assessee. Whether or not the Central Action Plan (CAP 2024-25) will help government to raise its revenue by achieving targeted collection of Rs16,69,663 Crores by 31,325 cases, it will surely create sufficient nightmare in the lives of many Assessees.

The Assessee and their Representatives have to wake up and swing in to action to avoid such a catastrophe by filing appeals in time and also following up the Notices. In appropriate cases hi-pitch Assessment committee has be approached to avoid attachment of bank accounts.

V. ALAGAPPAN FCA, LLB