The Income Tax Settlement Commission, in an order on April 30, has asked Indiabulls Real Estate to pay Rs 300 crore, as tax and interest charges, on undisclosed income.
While the company had admitted to not disclosing income to the tune of Rs 400 crore, the Settlement Commission has found another Rs 405 crore in its own probe.
The Rs 300 crore includes 33.5 percent tax on the total Rs 805 crore of undisclosed income and the interest on the part that was not admitted by the Indiabulls.
But this is not the end of the issue. The income tax department may challenge the Settlement Commission’s order, say sources, as it expects the undisclosed income to be higher – at Rs 1,200 crore – than what has been unearthed till now.
The income tax department had raided 20 premises of the Indiabulls Real Estate on July 13, 2016, on suspicion of tax evasion to the tune of Rs 1,200 crore. The scale of the raid was massive: more than a thousand tax officials were involved and searches were conducted in Delhi, Mumbai and Chennai.
In October 2017, this case was transferred to The Income Tax Settlement Commission. As per rule, the Commission has 18 months to pass an order. The Commission passed an order on April 30, the last day of the deadline.
The Income Tax Settlement Commission is an alternative dispute resolution (ADR) body in India, and resolves income tax and wealth tax disputes between the Income Tax department and income tax assesses.
The Income Tax Settlement Commission allows taxpayers to disclose additional income before it over and above what has been already disclosed before the Income-Tax Department.
Its orders are not public but are directly made available to the income tax department and the company concerned.
When contacted by Moneycontrol for a comment, IBREL denied that such a development had taken place.
A senior official of Income tax department told Moneycontrol that Indiabulls admitted to Rs 400 crores of undisclosed income. “The settlement commission added Rs 405 crores in their investigation after seeing records of the company.”
Another source added that the company now has to pay 33.5 percent tax roughly on Rs 805 crore (about Rs 270 crore) and interest on the Rs 405 crore, which was found in the settlement commission’s probe. “So the company has to pay roughly around Rs 300 crores including interest.”
However, a third source in the department told Moneycontrol: “The Income Tax Department is exploring the option to challenge this order in the court. Since the department expects a higher tax collection, by 40 percent, if the undisclosed income is Rs 1,200 crore.”
IBREL was in the news recently after media reports said Blackstone and Embassy will jointly buy the promoters’ 39 percent stake for about Rs 2,700 crore.
Sources close to the company told Moneycontrol that the due diligence for the deal is already done and that the order will not impact the deal.