Abhishek Singhvi moves IT settlement commission over undeclared income

The additional income had not been included in the returns as there was an error in computation and laxity on the part of those who maintain my accounts, Singhvi told The Indian Express.The Income Tax Department,however,has said the additional income disclosed by Singhvi is not true and complete and has estimated the amount at Rs 22.86 crore,taking his total tax liability to Rs 7 crore. But Singhvi has contested this.

Also,the IT Departments notices which were sent starting in late 2011 and its estimate of Rs 22.86 crore additional income is for just the one assessment year of 2010-11 financial year 2009-10. Income Tax Department sources said investigators looking into his returns for other years suspect that his undeclared income could be much higher. Singhvi,however,has said that the Rs 11 crore he has disclosed as undeclared income is for three assessment years starting 2010-11. I have paid around Rs 3.26 crore towards tax liability and my application is held to be valid. The investigation report for the one year 2010-11 talks about income to be added back,subject to final investigation,is Rs 22.86 crore,which means additional tax of Rs 7 crore,but denied by us. The investigation report itself is indicative and asks for further investigation, Singhvi said.

But the Commissioner of Income Tax,Jodhpur,where Singhvi is assessed,has told the ITSC that the additional income declared by the applicant is much less than likely to be computed. There are also doubtful nature of various expenses claimed in the light of huge cash withdrawals sic. The disclosure is not true and full and therefore his application should be rejected,the commissioner has said.

Singhvis troubles with income tax authorities,sources said,started after the Financial Intelligence Unit of the finance ministry in 2011-12 generated 17 suspicious transaction reports related to what were said to be huge cash withdrawals of over Rs 120 crore that were traced to Singhvis bank accounts. The Income Tax Department,after receiving the reports and a complaint,investigated the case and issued a notice to Singhvi,seeking his clarification on the withdrawals. Sources in the Central Board of Direct Taxes also alleged that investigation of the huge withdrawals showed irregularities in billing/expenses which were not explained. A major part of these expenses is shown as having been paid in the last three months of each financial year,they said. They also said that they are looking into Singhvis agriculture income and payments to lawyers and have decided to reopen his income tax returns for six years starting with the assessment year 2006-07 under section 148 of the Income Tax Act. This provision gives the department power to reassess returns if it feels taxable income has escaped assessment and accordingly,notices have been issued to Singhvi.

But Singhvi has countered the claims in his ITSC application.Huge withdrawals do not ipso facto amount to suspicious transaction in the light of definition of the term STR under Prevention of Money Laundering Act, Singhvi has said. He also told The Indian Express that he has questioned his returns for six years being reopened. We have questioned and objected to that,there is no reasoning for reopening of IT returns and I will challenge that, he said.

Under income tax guidelines,the penalty for failing to make a full and true disclosure could go up to 300 per cent of the tax which was sought to be evaded along with rigorous imprisonment of seven years.

The ITSC is a quasi-judicial body for alternate dispute resolution. It allows a one-time tax evader or an unintending defaulter to make a clean breast of his or her affairs and the benefit of the settlement mechanism can be availed by a tax-payer only once in a lifetime,the commission says.The settlement mechanism allows taxpayers to disclose additional income over and above what has been already disclosed before the Income Tax Department. The applicant has to pay full tax and interest on the additional income disclosed before the commission,before filing the application. The commission then decides on the admissibility of the application.

On May 10,the ITSC declared Singhvis application to be valid for seeking a report from the Income Tax Department. The ITSC is required to pass the final settlement order within 18 months of the application.The matter is still unadjudicated,unproved and contentious. There will be full investigation,only then orders shall be passed, Singhvi told The Indian Express.