In a major setback for startups, the Income Tax department has taken money from bank accounts of many companies in the name of angel tax, at a time when the government is trying to resolve the issue.I-T department had frozen four bank accounts of TravelKhana and withdrew about Rs 33 lakhs on a pretext of tax liability on investments raised by the company from angel investors.
The government has frozen three accounts of the company with ICICI Bank and one in State Bank of India, TravelKhana co-founder Pushpinder Singh said.
“We have received the scrutiny notice on October 8, 2018, and we were duly replying to the information that was asked. Amongst the set of information, ther was one under section 68 which meant that we have proved the genuineness of the investors," Singh told CNBC-TV18.
Primarily all the angel tax-related issues are under section 56 and section 68 and the company replied to it, he said, adding that on December 11, it got an assessment order stating that TravelKhanna has a tax liability of Rs 2.5 crore.
On February 5, four people went to the bank and they withdrew all the money using a demand draft and friezed the account, Singh said.Similarly, child healthcare website Babygogo's CEO and co-founder Siddharth Ahluwalia in a tweet alleged that his company has also left with no money after the tax department has deducted Rs 72 lakh as angel tax.
"Two months ago we received a notice from the income tax department saying that Rs 72 lakh is payable as tax and yesterday (Thursday) what happened was Rs 72 lakh was debited from the bank account of Babygogo and it has been debited through a demand draft in the name of assistant commissioner of income tax, said Ahluwalia.
"We had communicated with the income tax department and there was no mention of any deduction. They just needed information on all the angel investors, their statement of account and what was the source of income and we provided all the documents to them. So, the I-T department said this is the amount which is payable by you, that was the final conclusion,” he added.
Refuting the allegations Central Board of Direct Taxes (CBDT) said, "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 assessee failed to substantiate the source of the deposit resulting in demand of Rs. 2.22 crore approximately."
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 assessee, it said in a statement.
The CBDT also said the director of TravelKhana did not submit any certificate from DIPP to indicate its status of being a startup, either during the assessment proceedings or thereafter. "Had such a certificate been furnished, this situation would not have arisen," it added.
"When after repeated 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," CBDT said.
Touted as an anti-abuse measure, angel tax was introduced in 2012.
Last month, the government eased the procedure for seeking income tax exemption by startups on investments from angel funds and prescribed a 45-day deadline for a decision on such applications.
The new procedure says that to seek exemption, a startup should apply, with all documents, to the Department for Promotion of Industry and Internal Trade (DPIIT). The application of the recognised startup shall then be moved to CBDT. A startup recognised by DPIIT would be eligible to seek exemption, subject to certain conditions.Startups will have to provide account details and return of income for the last three years. Similarly, investors would also have to give their net worth details and return of income.