I-T department raises tax demand on them for unpaid tax deducted at source
Shock and helplessness was writ on Sanjay Bahadur's face, a former employee of the now-defunct Kingfisher Airlines, when he received intimation from the Income Tax (I-T) department, asking for taxes of about Rs 34 lakh (Rs 3.4 million) on the income he had earned between 2009 and 2012.
The fresh tax demand was raised with respect to assessment years 2010-11, 2011-12 and 2012-13. The notice, served to Bahadur on March 17 and reviewed by Business Standard, states that his return for assessment year 2015-16 would be adjusted against the outstanding demand raised for the assessment years.
"If no action taken by you immediately on this notice under Section 245, the demand as on that date will be considered for adjustment against your refund," read the notice.
This is the fourth notice Bahadur has received from the tax sleuths since 2013. The latest notice has details of the past three notices and highlights the non-payment of dues in the respective years.
"I resigned from the airline in 2013, and since then I am filing tax returns. When the second demand notice was raised against me in 2014, I wrote to the tax officer seeking the withdrawal of the demand made by the department," said Bahadur.
In his letter dated December 2014, Bahadur had informed the assessing officer concerned in New Delhi that the return on income was appropriately filed by him and there was no outstanding liability on his part. He said the demand appeared because the tax deduction at source (TDS) had not been deposited by Kingfisher Airlines.
Bahadur is not the only one; many employees of Kingfisher are getting such notices. Employees, who have already been grappling with a cash crunch because of unpaid salaries for the past three years, are now contemplating legal recourse.
"Amid concerns over fresh tax demands, we will soon file a petition in the Bombay high court against the tax authorities," said Pawan Kirtikar, former employee of Kingfisher Airlines.
The notices are being issued despite an order dated March 11, 2016 from the Central Board of Direct Taxes (CBDT) barring direct demand from employees.
"When tax is deductible at the source, under the foregoing provisions of Section 205 of I-T Act, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income," it read. An e-mail sent to CBDT seeking clarification on these tax demands did not elicit any response.
"The employees cannot get rid of the tax liability (not paid by Kingfisher) until the airline pays its outstanding dues. The balance amount will be shown in their returns as penalty," said a senior assessing officer.
The last salary drawn by Kingfisher employees was in July 2012 which was paid in April 2013. At that time, Kingfisher Airlines had over 5,000 employees across the world. Though defunct, the airline still has 650-700 employees.
"People have made written complaints to us, but there is not much that we can do because most of this is system generated," said an I-T officer. In such a situation, taxpayers can go for a 'stay of demand' under CBDT Instruction No 1914, which says a demand will be stayed if there are valid reasons for doing so.
"In this case, the defaulter was the airline, hence the employee can file an appeal against the assessment order to stay the recovery of the demand," added the assessing officer.
"Such aggrieved employees should look at courts to appeal against the tax demand rather than seeking a waiver. As far as the exchequer is concerned, the I-T department has already attached the bank accounts and the property of Kingfisher Airlines," said a tax expert.
In 2011, I-T department had served notice to Vijay Mallya and directors of the Kingfisher Airlines alleging that the airline had deducted TDS on salary payments but had not deposited the same in the I-T account.
The I-T department had begun proceedings against Kingfisher Airlines in 2011 for not depositing TDS collected from employees' salaries with the government.
Later, the tax department had demanded around Rs 302 crore (Rs 3.02 billion) towards TDS and Rs 70 crore (Rs 700 million) as interest for assessment years 2010-11, 2011-12 and 2012-13. The matter went to Karnataka high court, which had upheld the assessment order.
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