Notices for India Inc; Govt must rein in Income Tax officials

The year 2024 has started on an unpleasant note for India Inc by way of notices to top corporations for discrepancies in the returns filed and short payment of the goods and services tax (GST) in 2017-18 and 2018-19 in addition to demands for Income Tax. The rush of notices has startled India Inc. This has led to considerable tumult in the corporate world—something that should never happen in an economy that is racing against time to become a developed one. The GST tax authorities have been sending tax demand notices for several months now, including to the state-run LIC, which got a demand notice of around Rs. 806 crore for supposedly falling short of payment of GST for 2017-18. LIC has also received a ‘communication’ for Rs. 3,528.75 crore from the Mumbai IT office. Five states have issued demands worth Rs. 447.5 crore from Hindustan Unilever (HUL) on a variety of issues. Among the companies that have received notices are Asian Paints, Nestle India, Eicher Motors and ICICI Pru.

Ironically, tax officials are loath to call the demands as ‘notices’, which they term as ‘communications’. The IT department even tweeted to elaborate this point: “It is not a notice sent to all taxpayers, but is an advisory sent in only those cases where there is an apparent mismatch between disclosures in the ITR & information as received from the Reporting Entity. The objective of the communication is to provide an opportunity to taxpayers & facilitate them to provide their feedback online…” But just as a rose by any other name will smell as sweet, any message from tax authorities will always stink. The reasons offered by tax officials cut no ice. According to a GST official, “The law came into effect in 2017. However, the government offered relaxation during the pandemic. But now, with the pandemic behind us and many cases getting time-barred, a slew of show cause notices (SCNs) were issued before September 30.” For 2018-19, the deadline was December 31, 2023, which has been extended to March 31, 2024. The government has claimed that thousands of notices have been sent to avoid litigation. The fact, however, is quite the contrary: the demands made are so humongous that no company would like to shell out money without taking legal recourse.

Top corporations have complained that the tax notices will lead to wastage of resources, which could have been used for productive purposes. Experts have pointed out that thousands of system-generated notices are without specific allegations, often on technicalities. As it is, many plans for mergers and acquisitions have been put on hold. An important question needs to be asked here: why is it that the top corporations, which employ best tax and finance experts, fail to assess the total tax liabilities that there are huge gaps in the payments they make and the total demands made by tax officials? Even if we assume that private companies are keen on shareholders’ profit, so they don’t try to pay less, what can possibly be the reason for the supposed short payment by LIC? It is time the government reins in the zeal of tax officials, who are ever eager to make excessive, even irrational, demands.