Steps Taken to Reduce Litigations for Tax Payers

Steps taken to reduce litigations for tax payers

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Steps taken to reduce litigations for tax payers

Tax Litigation

If you have been entangled in a tax dispute then the end of the tunnel may be nearing as many proposals to reduce tax litigations, suggested in Budget 2016, have been accepted and are in the process of implementation.


March 31st deadline has just passed but some people can still have some pending tax issues. Paid lower taxes, slapped charges of concealment of income, served a notice for errors in returns, forced to take leave to resolve tax disputes? If you have been facing these troubles and are looking to resolve the issues, then the celebration may be just around the corner.

Through a number of initiatives, the government has decided to take a step forward and offer a friendly hand to end the woes of disputed cases. The dispute resolution scheme aims to reduce the 3 lakh tax cases involving a tax amount of Rs 5.5 lakh crore.

One of the measures announced for resolution is to waive off the penalty on the disputed tax amount for cases involving an amount lower than Rs 10 lakh. Don’t be dismayed if your disputed tax amount is higher than Rs 10 lakh, as the case can be settled by paying 25% of the imposable penalty.

Apart from the disputes there are cases of concealment of income where currently 100-300% of the tax evaded is levied as penalty. After implementation of Union Budget 2016-17, a graded system of penalty, wherein 50% penalty would be applicable for under-reporting of income and 200% penalty wherein facts have been misreported.

If you had sought a waiver of interest and penalty and pay the rest of the amount, then you are likely to see a resolution in the near term as the government has set a time limit of one year for clearing such disputes.

If your case has been lodged with the Commissioner (Appeals), then it can be settled by paying the disputed tax and interest up to the date of assessment and not the snowballing interest for the years of disputes involved.

Also, the moment the taxpayer pays off 15% of the disputed tax demand, in cases with Commissioner (Appeals), the assessing officer would mandatorily have to grant stay of demand. If there is any discrepancy with respect to the stay order, the taxpayer has been granted the option to approach superior officer.

In a move that would reduce the number of rounds taxpayers have to make for returns taken up for scrutiny, e-assessments have been brought into the picture. In the years to come, all assessments in 7 mega cities would be done electronically.

“The cases selected for scrutiny will be scrutinized in e-environment whereby unless the assesse himself wants to be heard, or for special reasons to be recorded, the assessing officer wants to hear the party, there will be no face to face contact of IT Department with assesse,” Finance Minister Arun Jaitley had said during his Budget 2016 speech.

The Income-tax Department (ITD) will expand the pilot initiative of ‘e-Sahyog’ – which provides an online mechanism to resolve mismatches in Income-tax returns without requiring taxpayers to attend the Income-tax office – with a view to reduce compliance cost, especially for small taxpayers.

Inordinate delays in dispute resolution too are likely to be reduced as the penal interest that the government pays for delays has been hiked to 9% per annum against the normal rate of 6% per annum, if there is delay in giving effect to Appellate order beyond ninety days. The officers who delay it, will be accountable for the loss to Government.

The time line for completion of assessment under various sections has been reduced drastically from two years to 21-months, from one year to nine months.

Moreover, if there are any arithmetical errors or incorrect claims then starting June 1, 2016, assessing officers have been requested to make adjustments while processing the return, so as to avoid litigation and also collect taxes at the earliest point of time. Data points from audit report, past income tax returns, 26AS statement, Form 16 and Form 16A can be used. But, the assesse must be notified about the mismatch and the adjustments made through a letter or electronically. “The response received, if any, will be duly considered before making any adjustment,” says the notification. So, ensure that you respond to these communication letters as the return would be processed with the adjustments if you do not respond within 30 days.

However, before making an assessment under Section 143(3) of the Act, a return would have to be processed under Section 143(1) of the Act, effective 1st day of April, 2017.

With an aim to give a compliance window to those who have evaded taxes, but wish to come clean, special waivers have been announced for those who declare their past undisclosed income between June 1, 2016 to September 30, 2016. The Finance Minister promised, no prosecution, no scrutiny and no enquiry for such tax payers provided they pay a tax at 30%, apart from surcharge at 7.5% and a penalty of 7.5% (totalling to 45% of the undisclosed income.)

The e-filing portal of the Income Tax Department has also provided a facility for online filing and tracking of rectification requests. Taxpayers who are not satisfied with the outcome of processing of their Income Tax Return by the Centralized Processing Centre, Bengaluru can avail of the facility of online filing and tracking of rectification requests available on

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

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