Old income tax demands make comeback as digitisation throws up legacy cases: Report

The sudden appearance of these long-forgotten demands is believed to be linked to the tax department's ongoing effort to digitise and consolidate legacy records on the income tax portal

• Old tax demands from 2005-2011 are resurfacing on the income tax portal
• Interest on unpaid dues has grown to match or exceed original tax amounts
• Taxpayers contest validity, citing no notice or wrong delivery years ago.

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Old income tax demands dating back to assessment years such as 2009-11, and in some instances even earlier to 2005, are resurfacing on the income tax portal, leaving many taxpayers either unaware of their origin or disputing their validity.

The Economic Times reported that in several cases, accumulated interest on these unpaid dues has grown to match or even exceed the original tax amount.

The sudden appearance of these long-forgotten demands is believed to be linked to the tax department's ongoing effort to digitise and consolidate legacy records on the income tax portal.

As highlighted by The Economic Times, this development has created a delicate situation for both taxpayers and the authorities. While the demands themselves may be genuine, establishing that statutory notices and assessment orders were properly delivered years ago could prove difficult for the department.

For example, for the financial year 2009-10, the deadline under the rules prevailing at the time to issue a notice for income escaping assessment exceeding Rs 1 lakh was March 31, 2017. The assessment order had to be passed by December 31, 2017, after which a demand notice would typically be issued. Taxpayers then had 30 days from receipt of the order to file an appeal before the Commissioner of Income Tax (Appeals), the first appellate authority in the tax system.

However, as noted by The Economic Times, many assessees now claim they never received these assessment or demand orders - either because they were not delivered or were sent to an incorrect address. As a result, they were denied the opportunity to appeal in time, while interest on the alleged dues continued to accrue over the years.

In such cases, taxpayers are likely to seek proof of delivery from the income tax department, unless the outstanding amount is small enough to be paid to avoid prolonged litigation. "The onus lies squarely on the tax authorities to demonstrate that statutory notices were duly served and that assessment or demand orders were effectively communicated at the relevant point in time," Ashish Karundia, founder of Ashish Karundia & Co, was quoted as saying by The Economic Times.

The resurfacing of these legacy tax demands has once again brought attention to procedural lapses in the communication of tax orders and the challenges posed by retrospective digitisation of records, the report added.