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E-mails for facilitating faster refunds cannot be inferred as taxpayers harassment

By gkkedia Dt. June 9th, 2020

The Central Board of Direct Taxes (CBDT) on 21.04.2020 responding to some observations being circulated on social media alleging that the Income Tax Department is pursuing recovery proceedings and using arm-twisting methods by adjusting outstanding demands of the startups, today stated that these observations are completely unfounded and are total misrepresentation of facts. The CBDT said that its email seeking clarification from all those who are entitled to get tax refund but also have outstanding tax to pay cannot be misconstrued as harassment.

These computer generated emails have been sent to almost 1.72 lakh assessees which includes all classes of taxpayers – from individual to HUF to firms, big or small companies including start-ups and therefore to say that start-ups are being singled out and harassed is total misrepresentation of facts. The CBDT said that these emails are part of the faceless communication which protects public money by ensuring that refunds are not released without adjusting against outstanding demand, if any.

These emails are auto-generated u/s 245 of the Income Tax Act in refund cases where there is any outstanding demand payable by the assessee. In case the outstanding demand has already been paid by the taxpayer or it has been stayed by the higher tax authorities, the taxpayers are requested through these mails to provide the status update so that while issuing the refund, these amounts are not held back and their refunds are released forthwith. The CBDT said that such communications are just a request for seeking an update response from the assessee for the proposed adjustment of refund with the outstanding demand and cannot be misconstrued as a notice of recovery or be perceived as so-called arm-twisting by the Income Tax department because the department is duty bound to protect public money by adjusting the outstanding demand before releasing the refund.

The CBDT further said that in order to provide hassle-free tax environment to the start-ups, a consolidated Circular no. 22/2019 dated 30 August 2019 was issued by the CBDT. Apart from laying down the modalities for assessment of start-ups, it also stipulated that the outstanding income tax demands relating to additions made under Section 56(2)(viib) would not be pursued. Any other income tax demand of such start-ups would also not be pursued unless the demand was confirmed by ITAT. Furthermore, a start-up cell was also constituted to redress grievances of start-ups and address other tax related issues of such concerns. Explaining the extant procedure pertaining to recovery of outstanding demands in the case of an assessee, the CBDT said that an opportunity is provided by the department to the assessee to either clear the demand or intimate the status of said demand to the Income Tax Department. Invariably, such communication is made by the department by sending an email to the assessee informing it of the quantum of outstanding demand and providing an opportunity to pay the demand or respond with evidence regarding payment of the same if already made, or update the status of any other action on it.

Thus, following the existing procedure of recuperation of outstanding demand, similar mails have also been sent to 1.72 lakh assessees including start-ups to intimate to the Income Tax department, the status of the demand outstanding and whether it has been stayed by the competent authority so that appropriate action can be taken for release of refunds without delay to the start-up. However, not providing such a response to the emails of Income Tax department and raising false alarm is contrary to the spirit of the Circular 22/2019 of CBDT and is totally unjustified.

The CBDT reiterated that pursuant to the 8 April 2020 declaration vide an earlier Press Release of the Government, the CBDT has till date issued nearly 14 lakh refunds involving an amount of over Rs. 9,000 crore to various taxpayers including individuals, HUFs, proprietors, firms, corporate, startups, MSMEs in order to help taxpayers in the COVID-19 pandemic situation.

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