The Central board of Direct Taxes (CBDT) recently directed its officials to avid re-opening of past assessment merely invoking the increase in turnover due to use of digital mode of payment post demonetization.
This is in the light of the recent decision the Government banning Rs. 1000 and Rs. 500 currency notes with a view to remove black money from the economy, which subsequently resulted in forcing the people to use cashless transactions.
In the recent circular issued by the Board, it is pointed out that adopting digital mode of payment would result in recording of all financial transactions, which will reflect a higher turnover. The Board states that “an apprehension has been raised that increased turnover in the current year may lead to reopening of earlier year cases involving lower turnover under section 147 of the Income Tax Act, 1961 by the Assessing Officer causing undue harassment to tax payers.”
It is stated that “It is hereby clarifies that re-opening of cases u/s 147 of the Act is feasible only when the Assessing Officer has the reason to believe that any income chargeable to tax has escaped assessment for assessment years”and not merely on the basis of any reason to suspect. Mere increase in turnover, because of use of digital means of payment or otherwise, in a particular year cannot be a sole ground to believe that income has escaped in earlier years. Hence, Assessing Officers are advised not to reopen past assessments in cases merely on ground that the current year’s turnover has increased.”
Read the full text of the Circular below.
