Why Forgotten Income-Tax Demands Are Not Automatically Payable

Over the last few weeks, income-tax demands dating back 15–20 years have suddenly started appearing on the Income-tax portal.

As a Chartered Accountant, it’s important to separate portal disclosure from legal enforceability.

What Is Actually Happening?

• These are old assessment / demand orders, some going back to FY 2005–06
• They are resurfacing due to digitisation and consolidation of legacy records
• In many cases:
  • Taxpayers were never served the original orders
  • No prior reflection appeared in Section 245 intimations
  • Interest has accumulated for years without taxpayer knowledge

This is an administrative upload, not a fresh assessment.

The Real Issue Is Not Tax — It Is Service of Notice

Under settled law:

• An order is valid only when it is properly served
• Limitation periods start from date of service, not date of upload
• If service cannot be proven, the demand does not crystallise

The burden of proof lies squarely on the department to demonstrate:

• How the notice was served
• When it was served
• That it reached the assessee

Digitisation cannot retrospectively cure defective service.

Why Compounded Interest Is Legally Fragile

• Interest is consequential, not independent
• If the taxpayer never had an opportunity to appeal:
  • Interest accumulation becomes unjustifiable
• Courts have consistently taken a liberal view on condonation where service is disputed

A liability that grows silently for a decade fails the test of natural justice.

Section 245 Adjustments Don’t Settle Legality

Yes, refunds can be adjusted against old demands.

But:

• Section 245 is a recovery tool
• It does not validate an unenforceable demand
• Recovery cannot replace due process

Why This Matters

• Taxpayers are being forced into:
  • Defensive payments
  • Partial deposits for stay
  • Litigation for demands they never knew existed
• This impacts:
  • Individuals
  • Businesses
  • Successor entities after mergers or closures

Compliance cannot be built on procedural opacity.

Bottom Line

Not every demand visible on the portal is legally payable.

• Validity depends on proof of service
• Interest cannot survive without opportunity to appeal
• Digitisation improves efficiency, not enforceability

Disclosure on a portal is not the same as a lawful tax demand.

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