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SC asks Income - Tax dept to go after big corporates evading tax
May, 17th 2011

The Supreme Court on Monday asked the Income Tax department to be tough in dealing with big corporate houses if they evaded tax.

Additional solicitor general Vivek Tankha explained to a Bench of Justices G S Singhvi and A K Ganguly that the taxmen could ill-afford to adopt a tough approach in assessing big corporate entities.

"These are big companies. They have to be dealt with as per law. They come with big lawyers," he said. The repeated mention of the word "big" snapped the court's patience and it sneered at the department's approach. "What is this mindset about big companies? Prima facie they are all tax evaders. Do not call them big to insult the word big," the court said.

The bench felt the I-T department had been rather slow in its moves to assess the tax liability of companies facing investigation relating to the 2G spectrum scam. The I-T department had intercepted the phones of corporate lobbyist Niira Radia for possible tax evasion in 2008 and some of the intercepts gave clues about 2G spectrum allocation irregularities.

"The interception of telephones happened in 2008. You (I-T department) had an idea who were the companies," the bench said accusing the department of being slow in getting its act together.

"If we had not asked for the status report, the I-T department would have slept on it," it said.

Tankha explained that under the I-T Act, the department statutorily had two years to complete the assessment and could even reopen it in the next four years if it stumbled upon any additional income of a company.

The bench said the I-T investigation has somewhat confirmed the apprehensions of advocate Prashant Bhushan, who had alleged that these investments in telecom companies were made through Mauritius-based post box entities.

"Now they (I-T department) have started looking into the tax evasion issue vigorously," the bench said. But, Bhushan said it must be carried to the logical conclusion and the government must pay attention to amend the flawed Double Taxation Avoidance Treaty (DTAA) with Mauritius as it exempted anyone based there from Indian tax laws.

The bench was reluctant to expand the scope of its monitoring the probe into 2G scam to touch the Indo-Mauritius DTAA. The court said it would on July 6 hear arguments on the issue of an independent supervisor to look into day-to-day investigations of CBI and ED.

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