[Opinion] 15 FAQs on Remission or Extinguishment of Old Small Demands Related to Direct Tax

Navneet Singal – [2024] 159 taxmann.com 623 (Article)

Introduction

On February 1, 2024, Hon’ble Finance Minister Smt. Nirmala Sitharaman made an announcement in her speech to withdraw direct tax demands up to Rs. 25,000 pertaining to the period up to financial year (FY) 2009-10 and up to Rs.10,000 for FY 2010-11 to FY 2014-15. The objective of such action is to improve tax payer services, ease of living and doing business. This proposal will withdraw the number of petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962.

If these demands had remained on the books, it would have caused anxiety among honest taxpayers and impeded the processing of refunds for subsequent years. Many of these demands are outstanding in the records of the Income Tax Department on account of transmission from manual records to digital records/computer data and the manual records were not updated despite many of such demands having been paid by the taxpayers. These demands are accordingly still reflecting as outstanding in the digital data of the Income Tax Department. Since these demands are very old, neither the taxpayer has any evidence having made payment of such demand, nor the Department having records on the basis of which such demands were created. Thus, this is good step by the CBDT to clean its books and move forward.

The Central Board of Direct Taxes (CBDT) has issued an order dated 13.02.2024 to implement the aforementioned proposal. This order pertains to the remission and extinguishment of tax demands that are outstanding as of 31.01.2024 for assessment years up to FY 2014-15. In addition to putting the announcement into action, this order has answered several questions that taxpayers and consultants had about the proposal’s viability.

In this article, the author has endeavoured to understand the order passed by the CBDT with the aid of examples and frequently asked questions (FAQs). This order will provide relief to about one crores taxpayer as stated by the Hon’ble Finance Minister in her Budget Speech.

Frequently Asked Questions with Example (FAQs)

We will try to understand the scheme of waiver/remission and extinguishment of demand in respect of direct tax, with an example to get clarity in a better manner.

Example:

In the below example, all the Demand entries are related to different matter where separate demand notices have been issued to the Assessee. All of these demands are o/s as on 31.01.2024.

Further, these demands are net of refund or any other credit adjusted in respect of that FY or any other FY. These demands also include any interest, cess or surcharge, if any, till the date of the demand notice issued/created/modified.

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