The government on Friday rejected allegations by start-up firms that Rs 36 lakh was recovered from it as part of a revival action on account of angel tax, a move that is now being disheartened in view of concerns raised by budding entrepreneurs.
The Central Board of Direct Taxes (CBDT), that frames policy for the Income Tax Department, issue a statement late night, saying the additions in the case of the company Travel Khana were made “under section 68 of the Income Tax Act on account of unsolved cash credits and not under section 56(2) (viib) on account of premium on shares, as has been supposed”.
Section 56(2) (viib) of the I-T law deals with angel tax. Certain start-ups have raised concern against notices being sent to them on this account and the management has assured that it will come out with solutions.
“During the assessment events, the assessing officer requested for corroboration of the persons from whom deposits had been conventional. Wherever confirmations were submitting, the same was accepted by the assessing officer and no addition was made.
“However, where no confirmations were furnished by the assessee, the assessing officer made the adding after issuing proper show-cause notice and obtain a reply in the matter,” the statement issued by CBDT spokesperson Surabhi Ahluwalia said.
Thus, she added, the adding was made only when the assessed failed to validate the source of the put resultant in demand of Rs 2.22 crore about.
She added that as there was “no stay” against revival and the demand had become due, the section recovered Rs 36 lakh after attaching the bank accounts of the assessed.
“Thereafter, all the bank accounts of the company were released,” it said.
“Thus, it is clear that the case of Travel Khana is not covered by the teaching issued by CBDT of December 24, 2018, leaving out coercive events for enforcing recuperation of exceptional command in angel tax cases, as the addition was made under section 68 of the IT Act and not under section 56(2)(viib).
“Therefore, the action of the assessing officer of enforcing recovery of demand is not in violation of CBDT’s instructions,” the spokesperson said.
She added the firm also did not furnish the obligatory certificate of being a start-up firm from the Department of Industrial Policy and Promotion (DIPP) under the Commerce Ministry.
Notwithstanding the above, the spokesperson said, the benefit of the doubt “should and must” be given to entrepreneurs.
“However, when after frequent reminders, records of funds received are not provided, the department is unfortunately left with no other choice. It is also our duty to prevent and expose suspected evasion,” she said.