The income tax department has imposed tax penalties of at least Rs 10,000 crore (Rs 100 billion) on companies and banks for concealment of incomes, department officials told Business Standard in Mumbai on Wednesday.
According to income tax department sources, the tax penalties have been imposed for concealing income details over the past seven to eight years.
Many companies in the country have been sent penalty notices. Among them are ICICI Bank, Industrial Development Bank of India, HDFC Bank, Gujarat Ambuja and Deepak Fertilisers, the sources said.
The department has imposed a penalty of Rs 621 crore (Rs 6.21 billion) on ICICI Bank for 2000-2001 onwards. IDBI faces a penalty of Rs 600 crore (Rs 6 billion) for the assessment years since 1992-1993.
Gujarat Ambuja has also been slapped a penalty notice of about Rs 300,000, though this relates to only one assessment year, 1996-97, and the figure is likely to go up. Deepak Fertilisers has been sent a penalty notice of around Rs 4 crore (Rs 40 million) relating to the last two to three years.
Most of the issues, which have been selected for concealment of income, are in various stages of appeal, and are awaiting final orders.
Confirming the development, an ICICI Bank spokesperson said, "ICICI Bank has been granted a 100 per cent stay on the entire dues by the commissioner of income tax till the disposal of ICICI Bank's appeal against the penalty order."
Income tax department sources said the bank had already paid Rs 200 crore (Rs 2 billion) under protest, but an ICICI Bank source said, "The facts are not correct. The bank has not paid any demand on account of the penalty. We have obtained a full stay on the entire dues from the commissioner of income tax, City 3, till the disposal of the appeal filed before the appellate authority, in view of the merits of our case. The levy of penalty is not at all justified and the appeal filed by the bank is still pending before the commissioner (appeals) and has not been heard as yet."
"For the assessment year 2000-2001, the penalty at 150 per cent, amounting to Rs 621 crore, has been imposed on contentious additions made by the assessing officer in respect of disallowance of depreciation on leased assets, withdrawal of special reserve, non-cash writebacks and expenses apportioned for earning exempt infrastructure and dividend income."
"All these issues are legal issues, wherein appeals filed by the bank before the tribunal are pending and are likely to be disposed of favourably in accordance with the view of legal experts. In any case, penalty can be imposed only in cases of concealment or filing of incorrect particulars relating to income, which is clearly not the case. The bank has obtained legal advice that the appellate authorities will delete the penalty."
An IDBI official said the penalty had been slapped mainly because of Section 271 of the Income Tax Act, which was inserted in June 2003 and was implemented on March 31, 2005.
The Section required a penalty to be imposed within a year of the receipt of the order. Earlier, the assessing officer could impose a penalty only after the income tax appellate tribunal confirmed the additions made in the assessment order.
An HDFC Bank spokesperson said the bank had not yet received any penalty order, but an executive of Gujarat Ambuja confirmed the company had received the notice.
A Deepak Fertilisers official said, "Unlike in earlier years, this year the income tax department has put a penalty. We are confident the interpretational difference or errors will be ratified by the existing appeal mechanism."
A penalty is imposed at a rate of 100-300 per cent on the total tax demand for issues relating to concealment of income. A tax demand is raised on various issues. Of these, the tax department selects certain issues which suggest that income has been concealed.
Some of the issues, which companies and banks are contending, include the tax treatment of depreciation of leased assets and deductions under Section 80M.
Blanket fine Most companies have been sent penalty notices; they include ICICI Bank, IDBI, HDFC Bank, Gujarat Ambuja and Deepak Fertilisers
Why: The penalty has been mainly because of Section 271 of the Income Tax Act, which stipulates fines for concealment of income
High penalty: A penalty is levied at the rate of 100-300 per cent on the total tax demand for issues relating to concealment of income