The CBDT has been criticized over alleged ‘tax terrorism’ of two award-winning start-ups named ‘Travel Khana’ and ‘Baby Go Go’. It is alleged that the AOs attached the bank account and withdrew funds, leaving the start-ups high and dry. It is claimed that nearly 2500 start-ups are in similar dire state over tax demands. The CBDT has issued a press release to clear the air and has claimed that all procedures were diligently followed by the AO and the start-ups are to blame for non-compliance
CBDT on Rs36 lakh seized from startup Travel Khana:Additions were made u/s 68 of I-T Act,1961 on account of unexplained cash credits¬ 56(2)(viib) on account of premium on shares as alleged(that it is violation of CBDT instructions regarding recovery of dues in Angel Tax cases) pic.twitter.com/ffER9tqy01
— ANI (@ANI) February 8, 2019
Startup ecosystem sent in shock as entrepreneurs continue to face the wrath of @IncomeTaxIndia. Rs 33 lk were withdrawn from the bank account of @TravelKhana as tax liability in #AngelTax issue. @pushpinder speaks to @DayamaRahul to share his concerns. Listen in! pic.twitter.com/VcqOw79XA1
— ET NOW (@ETNOWlive) February 8, 2019
Siddharth Ahluwalia, Co-founder, @babygogo_in says got Rs 70 lk tax notice 2 mths ago; got a message yesterday saying Rs 70 lk debited from co’s a/cs by IT dept. Communicated angel investors’ creds, pan cards etc to IT Dept when notice received; no intimation before a/c debited pic.twitter.com/voHATzXvoI
— CNBC-TV18 (@CNBCTV18Live) February 8, 2019
The IT department deducted on 6th Feb 2019 Rs 72 Lacs Angel Tax from our company bank account.(AddoDoc Technologies Pvt Ltd) @babygogo_in
Thankfully we didn't have much balance in it and the balance in account is now -Rs 72Lacs.@TVMohandasPai @amitranjan @RajanAnandan pic.twitter.com/9ssLear2Zc— Siddhartha Ahluwalia (@siddharthaa7) February 8, 2019
We raised angel round of 1Cr n 2015 now #IncomeTax dept want us to pay 40Lakh from that as tax. #startupindia won't fly with these policies . @arunjaitley @republic @TOIStartups @SharmaShradha @ShereenBhan @_sachinbansal @vijayshekhar
— Sreejith Moolayil (@sreejithmoolayl) January 4, 2018
How The Angel Tax Is Accelerating India’s Descent Into A Digital Colony
Why does India discriminate against us,why does the CBDT hurt honest young taxpayers,why do they harass our future entrepreneurs!They are accelerating our descent into a Digital Colony https://t.co/d8Aa9ykhuD— Mohandas Pai (@TVMohandasPai) February 8, 2019
I am suspending all angel investing till the time #AngelTax is abolished.
I will offer my one hour everyday free to a startup that requires mentoring till March 31
— Rajesh Sawhney (@rajeshsawhney) February 8, 2019
Over 70% of India’s startups are in tax trouble from angel investments https://t.co/twgOeDErnU
— Quartz (@qz) February 6, 2019
Hey startup founders and investors – you need to do Singapore/Delaware as a norm for Indian startups now.
The angel tax is now a lost cause – i don't see it getting fixed anytime until 2020 budget.
It's a spectacular time to be tapping into startup opportunities .. via SG/USA— Sandeep Srinivasa (@sandeepssrin) February 8, 2019
#CNBCTV18Exclusive | Govt may announce fresh measures with respect to start-ups, looks to hike exemption limit from ₹25 cr of investment by an angel investor: Sources
Alert: Govt exempts start-ups from tax if investor makes an investment up to ₹25 cr pic.twitter.com/MBOOn31fqZ
— CNBC-TV18 (@CNBCTV18Live) February 8, 2019
CBDT Press Release:
CBDT issues clarification on the @Travelkhana case – says director failed to provide requested record of funds @CNBCTV18News @ShereenBhan @amitranjan @rajeshsawhney @IndianVCA @sreejithmoolayl @Product_Nation @DIPPGOI @TVMohandasPai @RajanAnandan pic.twitter.com/c64W5Gvm42
— Young Turks (@CNBCYoungTurks) February 8, 2019
CBDT Press Release 08.02.2019
CBDT clarification
New Delhi: It has come to the notice of CBDT, through some media reports that Rs 36 lakh have been recovered from a start-up, namely, Travel Khana as part of recovery of outstanding demand on account of Angel Tax.
It has been alleged that this was in violation of the CBDT instructions dt 24th December, 2018 pertaining to recovery of dues in Angel Tax cases. On ascertaining the facts it is seen that the additions in the case were made u/s 68 of the Income-tax Act, 1961 on account of unexplained cash credits and not u/s 56(2) (viib) on account of premium on shares, as has been alleged.
During the assessment proceedings, the assessing officer requested for confirmation of the persons from whom deposits had been received. Wherever confirmations were submitted, the same were accepted by the assessing officer and no addition was made.
However, where no confirmations were furnished by the assessee, the assessing officer made the addition after issuing proper show-cause notice and obtaining reply in the matter. Thus, the addition was made only when the taxpayer failed to substantiate the source of the deposit resulting in demand of Rs. 2.22 crore approximately.
The assessee did not obtain any stay in respect of the demand raised. Had the stay been obtained, recovery proceedings would not have been instituted by the department. Since there was no stay against recovery and the demand had become due, the department recovered Rs. 36 lakh after attaching the bank accounts of the assesse.
Thereafter, all the bank accounts were released. It may also be noted that neither the assessee nor its Director submitted any certificate from DIPP to indicate its status of being a startup, either during the assessment proceedings or thereafter, which is a mandatory requirement as per extant instructions in the matter.
Had such a certificate been furnished, this situation would not have arisen.
Thus, it is clear that the case of Travel Khana is not covered by the instruction issued by CBDT dated 24th December, 2018 prohibiting coercive measures for enforcing recovery of outstanding demand 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 benefit of doubt should and 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.
Our agencies also have a duty to prevent and expose suspected evasion.
[…] Click here to download CBDT’s office order dated 30th August 2019 See also: CBDT Bails Out Start-Ups &Angel Funds From Tax Terrorism Of AOs See also: CBDT Press Release On ‘Angel Tax Terrorism’ Of Start-Ups […]