Tax systems prove taxing for taxpayers

livemint.com:

The income tax department's online tax return filing and processing system has proved to be a vast improvement over the old manual system. However, more than a decade after the online system was launched, taxpayers continue to face difficulties, best exemplified by a recent Supreme Court order.

In this case, the taxpayer received a demand of ₹2.01 crore from the Centralized Processing Centre due to an incorrect calculation of the surcharge on income tax at 37%. He challenged this incorrect demand in the Delhi high court, which dismissed the writ petition, saying the taxpayer had an alternative remedy of filing an appeal against the order. The taxpayer filed a special leave petition in the Supreme Court against the order.

The top court noted that the taxpayer had faced a similar demand of ₹1.33 crore for the previous year. In a writ petition to the high court that year, the tax department agreed to cancel the incorrect demand. Again, before the apex court, the tax department submitted that it had rectified the incorrect computation for the year in question.

However, the Supreme Court observed that the story did not end there. While the matter was pending before the top court, a demand of ₹63 lakh was raised for the following year, again due to an incorrect computation of the surcharge at 37%. The tax department explained that this error occurred because the Centralized Processing Centre had not adopted the mechanism of deleting excess calculation, as it was programmed to calculate and raise demand.

The apex court stated that the technological impediment could not be a reason for harassing a taxpayer year after year and that the income tax department must take immediate steps to update the software or take other steps to