Keep taxpayers in the loop before you act: Court to Income Tax dept
Mumbai, Apr 7, 2024
Synopsis
Quashing a November 2022 show-cause notice against Munjal BCU Centre of Innovation and Entrepreneurship, The Punjab and Haryana High Court said "it is essential that before any action is taken, a communication of the notice must be in terms of the provisions" of the law that provides for a method and manner of service of notice and orders. "The provisions do not mention communication to be "presumed" by placing notice on the e-portal," said the order given a month ago.
Senior citizens, technophobes, many NRIs, and the plain forgetful types may be blissfully unaware that the Income Tax department is coming after them without informing them by an email or letter. They are clueless that the tax office has initiated action by simply posting the show-cause notice or summon on the department's e-portal. Such assesses who don't check the tax portal regularly - in fact, few do - may be in for shock and penalty. But how fair is this?
According to a recent High Court ruling, this is no way for tax authorities to deal with either individuals or corporations who are not expected to keep the e-portal open all the time to figure out what the taxman is up to.
Quashing a November 2022 show-cause notice against Munjal BCU Centre of Innovation and Entrepreneurship, The Punjab and Haryana High Court said "it is essential that before any action is taken, a communication of the notice must be in terms of the provisions" of the law that provides for a method and manner of service of notice and orders. "The provisions do not mention communication to be "presumed" by placing notice on the e-portal," said the order given a month ago.
"The principles of natural justice ensure fairness in any legal proceedings, including tax assessments. One key principle is "audi alteram partem", which means "the other side must be heard". If a taxpayer doesn't receive a notice about an assessment, penalty, or other action, it can cause hardship. They might miss deadlines or be unaware of their rights to respond. This can lead to increased burden on everyone involved, including the taxpayer, tax authorities, and potentially the appeal courts if disputes arise," said Paras Savla, partner at the tax and advisory firm KPB & Associates.
The penalty is ₹10,000 for every default.
When the petitioner Munjal BCU, which promotes innovations and startups in and around Ludhiana, did not respond to the notice, the department issued two reminders but both were posted on the e-portal of the tax office. The court is of the view that the petitioner has not been given sufficient opportunity to put up his pleas.
Until 2009, physical post was the default option for service of communications by the tax department, and electronic service of notices or orders were adopted much later, Ashish Mehta, Partner at Khaitan & Co.
"Mere placing of communications on the income tax portal may be difficult to track as one does not access the portal regularly. Especially taxpayers like non-resident companies who don't have much activity in India, senior citizens or taxpayers from rural areas who may or may not be so tech savvy. While it becomes very convenient to access notices and communications if they are placed on the portal as these are then handily available whenever required, their placement should be coupled with an email and/ or physical post. These days a lot of updates are shared through text messages as well and hence it is very important that correct email ID and mobile numbers are updated on the income tax portal," said Mehta.
It is expected that the court ruling - particularly with the bench setting aside the I-T notice -the department would send emails for all kinds of communications such as notices, summons, orders, confirmations, or queries seeing information.
Tax practitioners also say that in some of the recent proceedings they have found out that notices sent by the department before the completion of proceedings were not visible on the portal.
"Further, there are times when notices have been sent with a requirement to respond within a very short time. There have been instances where notices were sent Friday evening and tax payers were told to respond by Monday morning," said a chartered accountant.
[The Economic Times]
