NEW DELHI: The Income Tax department has refuted allegations made by industry leaders Kiran Mazumdar-Shaw and Mohandas Pai of taxmen harassing businesses, a criticism that has become louder in the wake of the recent death of Café Coffee Day founder VG Siddhartha.
Pai, a former director at Infosys Ltd, has told The Quint on 1 August that tax officials who have to meet their annual tax collection targets put pressure on companies to pay up even if they do not concur with the amounts demanded, which leads to litigation. Mazumdar-Shaw, chairperson and managing director and founder of biopharmaceuticals firm Biocon Ltd, told The Telegraph in an article published on Sunday that “a government official" called her recently and told her not to speak about issues such as ‘income tax harassment’.
“There is no merit in these claims," said an official of the Central Board of Direct Taxes (CBDT), who spoke on the condition of anonymity. The official declined to go into details about how specific cases are handled. Every year, the tax department makes a strategy on how officials should go about optimising tax collections including recovery of tax arrears. Senior field officers of the department in charge of specific regions often informally speak to big assessees under their jurisdiction ahead of important deadlines for paying advance tax, urging them to pay.
Often, officials are constrained to adopt innovative ways of recovering dues when they are faced with companies resorting to aggressive tax avoidance measures exploiting loopholes in the law. This puts the department and businesses on a collision course.
One of the first steps the Narendra Modi government did in its second term in office was to forcibly retire 25 senior officials of direct and indirect administrations facing charges of corruption and illegal gratification. The officials have cases pending against them filed by various central agencies like the Central Bureau of Investigation (CBI) and the Directorate of Revenue Intelligence (DRI).
Pai questioned in his comments to The Quint the power given to tax officials to arrest. He also demanded an independent inquiry into the death of Siddhartha, whose body was recovered from the Nethravathi river in Mangaluru. A letter attributed to the Café Coffee Day founder had shown that he was under pressure from one of the private equity investors and had also faced harassment from a tax department official. Mint had reported on 30 July quoting an unnamed income tax official that there was no harassment and that the department had followed due process under law in the case.