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 Income Tax Addition Made Towards Unsubstantiated Share Capital Is Eligible For Section 80-IC Deduction: Delhi High Court

I-T dept moves court over ITAT's Marico directive
March, 23rd 2009

The Income-Tax department is at loggerheads with the Income Tax Appellate Tribunal (ITAT), the ultimate fact-finding body on tax disputes, over the latters demand for verifying the reasons for conducting a raid on FMCG major Marico Industries.

ITAT had directed the department to produce the satisfaction note, which is an internal document prepared by income tax officers, who plan to conduct a raid. It is this note that ITAT wants to have a look at. The department sees this as an intrusion into its domain.

The Income-Tax department, which feels that the satisfaction note is a part of its administrative procedure, has moved the Bombay High Court challenging the jurisdiction of the ITAT to issue such directives to the department. The matter will be heard next month. The department apprehends that if ITAT is allowed to have its way, the department will lose its functional independence on tax raids and surveys, which, until now, has been its sole prerogative.

Checks and balances are built into the system, the department pointed out. A satisfaction note explains why an entity needs to be raided and the departments reasons for presuming that income has escaped the tax net or the possibility of that happening if not checked in time. It also gives reasons for why a raid is considered the best action under the given circumstances.

The note is then submitted to the additional director of investigation and then the investigation director. The ultimate authority that approves the note is the director general of investigation, an officer of the rank of chief commissioner.

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