CBDT has issued a Circular No.40/2016 giving advice to
assessing officers of Income Tax Department not to reopen past assessments in
cases merely on the ground that the current year’s turnover has increased. As
the Govt is insisting on shifting to digital mode of payment for all financial
transactions so no financial transactions would remain undisclosed and
consequently an enhanced turnover of business might get reflected in the books
of accounts.
It is clarified by the Government that increased turnover
in the current year cannot be treated as the reason for reopening of earlier
years’ cases involving lower turnover u/s 147 of the Income tax
Act, 1961 as this will cause undue harassment by the Assessing Officer to tax
payers.
Further clarified that reopening of cases u/s 147 of the
Act is feasible only when the Assessing Officer “has reason to believe that any income chargeable to tax
has escaped assessment for any assessment year” 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 any year cannot be a sole reason to believe that income has escaped
assessment in earlier years.
