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Experts flay proposal to allow reopening of tax cases of 16 years
October, 10th 2011

Concerned over the CBDT panel's proposal to allow reopening of tax filings of the past 16 years, experts and lawyers said it would only result in harassment of assessees without yielding any substantial gains to the exchequer.

At present, taxmen can reopen cases of suspected assessees of the past six years only

"It (the proposal) is like opening a can of worms. This step will lead to more negative handling of cases, fear psychosis among tax payers and increased litigation," said Diljeet Titus, senior partner of law firm Titus & Co.

Expressing a similar opinion, KPMG Executive Director Rahul Garg said, "Many companies don't even have information for the last six years. So, if you suddenly increase it (time limit) to 16 years, it would pose major problems for the person or firm which is expected to provide details of returns filed."

According to another tax expert Neeru Ahuja, Partner, Deloitt Haskins, "I don't think it is a practical idea. Economy has grown over the past many years. I don't think it will result in substantial gains to the exchequer. It will only added to the problems of assessees. It will cause hardship to tax payers."

The experts were responding to the suggestion of a high-level panel headed by Central Board of Direct Taxes (CBDT) Chairman that taxmen be allowed to dig into income tax filings of past 16 years of suspected assessees.

The panel was constituted in May to examine ways to strengthen laws to curb generation of black money, its illegal transfer abroad and its recovery.

According to a CBDT official, the extension of period is aimed at empowering tax official to go deeper in income and expenditure details of suspected persons and firms.

Pointing out that the six-year period has served the country for decades, Titus said, "Though the proposal would provide some flexibility to the revenue department to deal with tax evasion cases, it will add to the problems of assessees. More than than the tax liability, interest could be killing."

Moreover, he added, the proposal would lead to increased litigation between the assessees and the revenue.

According to Garg, "We should retain the six-year limit and try to utilise information technology to enhance processes to gather information more succinctly about tax evaders.

"Introducing any such changes suggests that confidence of government in risk assessment is lacking," he added.

The changes in tax laws, said Ahuja, "should be progressive keeping in view the changes that have taken place in business and economy. Six years was a considered view."

On the other hand, she added, there should also be a time limit for reopening of Tax Deduction at Source (TDS) cases as has been suggested by courts.

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