CBDT trashes TravelKhana claim that govt emptied their bank account in the name of angel tax

CBDT trashes TravelKhana claim that govt emptied their bank account in the name of angel tax

The CBDT says the money was deducted on account of unexplained cash credits due to premium on shares.

The Central Board of Direct Taxes (CBDT) has slammed start-up TravelKhana for its claim that the Income Tax Department deducted Rs 36 lakh from its accounts as part of its recovery action on account of Angel Tax. Travel Khana had earlier alleged that the department action was in violation of the CBDT instructions on December 24, 2018, related to the recovery of dues in Angel Tax cases.

The CBDT has explained the money was deducted under section 68 of the Income Tax Act, 1961, on account of "unexplained cash credits" and not on account of "premium on shares" (Section 56 (2) (viib)) as the start-up has alleged. Section 56(2)(viib) of the I-T law deals with angel tax.

In a statement, CBDT spokesperson Surabhi Ahluwalia said during the assessment proceedings, the assessing officer concerned had requested for "confirmation" of the persons from whom deposits had been received. "Wherever confirmations were submitted, the same was accepted by the assessing officer and no addition was made. However, where no confirmations were furnished by the assessee (TravelKhana founder), the assessing officer made the addition after issuing proper show-cause notice and obtaining a reply in the matter," he added.

The statement added the addition was made only when the taxpayer failed to substantiate the "source of the deposit", resulting in the demand of around Rs 2.22 crore. Also, the assesse (TravelKhana founder) did not obtain any stay in respect of the demand raised, Ahluwalia said, adding that had the stay been obtained, the recovery proceedings would not have been instituted by the department.

"Since there was no stay against the recovery and the demand had become due, the department recovered Rs 36 lakh after attaching the bank accounts of the assesse," said the CBDT, adding that all bank accounts were released following the deduction.

The statement added that neither the assessee (TravelKhana founder) nor its director submitted any certificate from DIPP (Department of Industrial Policy and Promotion) to indicate its status of being a start-up during and after the assessment proceedings, which is mandatory. "Had such a certificate been furnished, this situation would not have arisen," said the CBDT spokesperson.

Therefore, the case of Travel Khana is not covered by the instruction issued by the CBDT on December 24, prohibiting coercive measures for enforcing recovery of outstanding demand in Angel Tax cases, said the statement, reiterating the recovery was made under Section 68 of the IT Act.

The CBDT said the benefit of the doubt "must be given to our entrepreneurs". "However, when, after repeated reminders, records of funds received are not provided, the department is unfortunately left with no choice," the CBDT maintained.

On February 9, two startups called TravelKhana and Babygogo had alleged that the Central Board of Direct Taxes (CBDT) had withdrawn over Rs 1 core from their bank accounts without their permission. The IT department also recovered a sum of Rs 72 lakhs from Babygogo.

They had alleged that the department had not even given them a chance to respond to its tax notices.

TravelKhana alleged that the CBDT froze its account on February 5 and withdrew Rs 36 lakh on the income raised by it from its angel investors. Travel Khana CEO, Pushpinder Singh, also tweeted saying, "Four IT inspectors came and forced the bank manager to make DDs from all accounts. The bank manager said that this is commonplace these days."

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Edited by Manoj Sharma