Income tax department can reopen old cases, even upto ten years, in case of big deals

As per the memorandum of the Finance Bill 2017, the Income tax department can reopen old cases and the books of accounts of an assessee that are ten years old in case black money is suspected. In other words the department is now empowered to reopen files since 2007 if search operations discover undisclosed income and assets amounting to more than rupees 50 lakh.

Presently, the Income Tax Department department can reopen cases  up to a period of six years to check the books of accounts of an assessee.

The proposed amendment in Income Tax Act to reopen old cases:

As per the memorandum of the Finance Bill 2017, the amendment to the Income Tax Act will be applicable on and from 1.4.2017.

The amendment aims to control tax evasion where “tangible evidences” in connection with undisclosed investment in assets are discovered in an operation involving search or seizure.

The amendment empowers the income tax officers to issue notices to assessees up to the 10th assessment year, which is far beyond the 6th assessment year that was earlier provided for in the Income Tax Act.

When a notice to reopen old cases can be issued as per amendment?

According to the amendment, notices can be issued if the assessing officer has books of accounts or other evidence which indicate that an income that has escaped assessment amounting  to more than Rs. 50 lakh in one year or in total four assessment years.

Notices can also be issued if the income, that had escaped assessment, is an asset. The memorandum states that amended provision of Section 153A shall be applied where a search operation under Section 132 is initiated under the provisions of Section 132A on or after 1.4.2017.

Provisions relating to undisclosed foreign assets:

However, in case of undisclosed foreign assets, the government had empowered the department to reopen cases back up to 16 years.

The government had earlier provided disclosure schemes for foreign as well as Indian black money holders.

Reopening of the Old Cases- Object of the amendment to Income Tax Act:

The step to extend the period for reopening of tax cases has been taken by the government to unearth black money through such new initiatives.

In the month of November last year, the government demonetised high-value bank notes and gave black money holders an opportunity to disclose their unaccounted cash in Pradhan Mantri Garib Kalyan Yojana scheme.

The present limit that has been provided in connection with the scrutiny of earlier returns of income is six years.

The Finance Minister, Mr. Arun Jaitley has proposed to increase this period in the Budget for 2017-18 in the Parliament in the last month.

The Chairman of the Central Board of Direct Taxes, Mr. Sushil Chandra stated in a post-Budget seminar that it has been said that if during a search any asset or income worth over Rs 50 lakh which was not disclosed is found and that is older than a period of at least four years, the Income Tax department can go back to ten years.

Fighting the war against black money, the Department can now reopen returns of the previous 10 years to unearth black money  if any search reveals undisclosed deposits or property of worth more than Rs 50 lakh.

So, it is high time for the assessees to check their transactions in the previous years to keep themselves clean and free from unaccounted deals involving black money.

Also read: Time Limit for reopening of Old Cases