Ajay Devgn Turns ‘Singham’ To Battle ‘Unfair Tax Demand’ By Income Tax Department

Ajay Devgn, the celebrated actor, who has delivered block-buster movies like Singham, Dilwale, Shivaay etc is the latest to fall victim of the heightened scrutiny of the Income-tax department.

According to a report in India Today, Ajay Devgn has been slapped with a demand of Rs. 6 crore for AY 2014-15.

Alleged “suspicious transactions” by Ajay Devgn

The Assessing Officer has claimed that he came across alleged “suspicious transactions” while making the assessment of Ajay Devgn’s income tax return for FY 2013-14 relevant to AY 2014-15 and that the same were not “tallied” by the assessee.

This fact was confirmed by DS Saksena, the Principal Chief Commissioner of Income Tax (CCIT) – Mumbai Region. He candidly admitted that Ajay Devgn is “having an issue with the department” though he understandably did not divulge further details.

Off-shoot of Panama Papers Leak?

Prima facie, what appears to have triggered the inquiry is the fact that Ajay Devgn was identified in the Panama Papers leak as having bought a British Virgin Islands (BVI) company named Marylebone Entertainment Limited in 2013. Ajay Devgn claimed that all legal procedures were followed to set up the company and that no illicit or unaccounted money is routed there.

Time to turn into real-life ‘Singham’ (“Lion”)

Ajay Devgn shot into prominence for his award-winning role as an honest and non-corrupt police officer in the block-buster movie ‘Singham’. Ajay Devgn plays the role of a fearless officer who exposes the rampant corruption in various Government departments. The role was much appreciated by the Citizens.

In keeping with his character as a non-nonsense person, Ajay Devgn is not taking the allegation of the Income-tax department lying down. Instead, he has launched an offensive and termed the assessment as “unfair” and “high pitched”.

Department has reputation for making high-pitched and frivolous additions

Unfortunately, the Income-tax department has developed a notorious reputation for harassing taxpayers by making bogus and high-pitched assessments. Huge additions are made by Assessing Officers on frivolous grounds and the assessee is forced to file an appeal to have the same deleted.

Strictures by the ITAT

In fact, things reached such a sorry state of affairs that the ITAT had to pass severe strictures against the department in Bharti Airtel Limited vs. ACIT where a mammoth addition of Rs. 5,700 crore was made on utterly frivolous and unsustainable grounds. The Tribunal observed:

“if an action of the AO is so blatantly unreasonable that such seasoned senior officers well versed with functioning of judicial forums, as the learned DRs are, cannot even go through the convincing motions of defending the same before us, such unreasonable conduct of the AO deserves to be scrutinized seriously. At a time when evolving societal pressures demand greater degree of accountability in the governance also, it does no good to the judicial institutions to watch such situations as helpless spectators. If it is indeed a case of frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer -rather than being allowed to walk away with a subtle, though easily discernable, admission to the effect that yes it was a frivolous addition, and, if it is not a frivolous addition, there has to be reasonable defence, before us, for such an addition.”

The Tribunal also suggested that a strong institutional framework has to be set up to prevent abuse of power by the AOs. It held:

“… While we delete the impugned addition of Rs 5739,60,05,089, we also place on record our dissatisfaction with the way and manner in which this issue has been handled at the assessment stage. Let us not forget that the majesty of law is as much damaged by not rendering justice to the conduct which cannot be faulted as much it is damaged by a wrongdoer going unpunished; not giving relief in deserving cases is as much of a disservice to the cause of justice and the cause of nation as much a disservice it is , to these causes, by granting undue reliefs. The time has come that a strong institutional check is put in place for dealing with such eventualities and de-incentivizing this kind of a conduct.”

Directives by the Finance Minister and the CBDT

The Finance Minister and the CBDT have themselves realized the seriousness of the issue and the need to rein in Assessing Officers from running amok with high-pitched and frivolous assessments.

Shri Arun Jaitley, the Finance Minister, issued clear-cut directions to the department to refrain from making bogus additions (see Acche Din! No More Tears For Taxpayers. No More Bogus & High Pitched Assessments: Arun Jaitley, FM, To Dept Top Brass).

The CBDT has issued Instruction No. 17/2015 dated 09.11.2015 in which it has admitted that the tendency of the AOs to frame high-pitched and unreasonable assessment orders reflects harassment of taxpayers and leads to generation of unproductive work for the Department (see Diwali Gift! CBDT Acts On NAMO’s Promise And Sets Up Committee To Punish AOs For Harassing Taxpayers With High-Pitched Assessment Orders).

Even earlier, the CBDT had issued an Office Memorandum in which it set out 12 steps and virtually pleaded with the Assessing Officers to adopt a “non adversarial tax regime” (see No More Frivolous Or High-Pitched Assessments Allowed: CBDT To AOs).

However, whether any of these directions are being followed in letter or in spirit by the Assessing Officers is anybody’s guess.

Test of credibility for the ‘high-pitched assessment’ Committee

Whether the committee of high-ranking officials set up by the CBDT to probe “high pitched assessments” takes any meaningful action will be known from its’ response in Ajay Devgn’s case. According to the press report, Ajay Devgn has filed an application before the said Committee and pleaded for justice.

The Committee should establish with fool-proof and conclusive material that there has been tax evasion by Ajay Devgn as alleged by the Assessing Officer. The AO should be rewarded for his diligent efforts. If such material is not there, the Committee should unhesitatingly delete the addition and at the same time take administrative action against the AO for harassing the taxpayer by making the frivolous addition.

However, if the Committee mechanically confirms the addition and the same gets deleted later by the CIT(A) or the ITAT, there will be serious loss of credibility for the Department. It will seen by the citizens as yet another “Jumla” (Gimmick) of the Government!