With the recent amendment introduced in the latest budget, the income tax department ( IT ) cannot go back more than five years for the purpose of reassessing an assessee’s record if the escaped income is more than RS. 50 lakhs. Before the amendment, the IT department could open cases up to 10 years old. It is also vital to note that if the sum is less than Rs. 50 lakh, the time restriction is three years.
The income escaping assessment refers to income that is not mentioned by the assessee while filing income tax returns ( ITR ).
The Union Finance Minister, Nirmala Sitharaman, presented the full Union Budget for 2024 last month on July 23rd before the parliament. It was the first budget of the Modi 3.0 government.
So the tax department had more time in their hands to send notices for reassessment as the time limit was 10 years before the recent amendment introduced in the latest budget. Presently, tax officials have difficulty in gathering data on tax and income mismatches for the fiscal years 2013-2018 before the deadline, which is September 1st.
The IT department, generally sends out reassessment notices in March for the previous year, which was approaching the end of its validity period. However, since the latest amendment brought into the budget has reduced the maximum reassessment term to five years, the tax department has only less than one month, which is until August 31, 2024, to issue notices for the Financial Year 2017-18.
It is pertinent to note that the central authorities have been informed by the tax department that when the new amendment comes into effect, it is nearly hard to review old tax returns for several years before September 1, 2024. It’s a huge task being imposed on the tax officials.
Taxpayers should be ready to expect a flood of reassessment notices in August 2024. These notices are likely to be for the assessment year 2018-19.
Although capping the evaluation period at five years was an excellent option that would prevent difficulties and litigation, it is going to be a huge burden on the tax authorities for the time being . Thus, a surge of ( IT ) notices is expected during this month.
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