The state housing authority recently received a jolt when the Income Tax office served it a notice to recover Rs 160 crore, saying it is an organisation engaged in business and is making a profit. After a preliminary hearing with the Commissioner, the Income Tax office directly debited the entire amount the same day that the Maharashtra Housing and Area Development Authority (MHADA) appealed against the order to the appellate authority.
“The assessee has to be informed before debiting the amount. We had filed a stay application in the Income Tax Appellate Tribunal last Monday morning. We were surprised to know that the Income Tax office debited the concerned amount from our bank account the same afternoon,” said Satish Gavai, chief executive officer at MHADA.
In its hearing on November 25, the Income Tax Appellate Tribunal pronounced that the action of debiting the amount before the stay application could be heard was against the basic rule of law and that the amount be refunded in 10 days.
The order said, “The Assessing Officer has misused his powers and the action of recovery from the bank amount of the assessee is a gross violation of the directions as well as the basic rule of law and principle of natural justice. Accordingly, we direct the refund of the entire amount of Rs 159.84 crore to the assessee within 10 days from the dated receipt of this order.”
Officials from the Income Tax office were unavailable for comment.
However, the tribunal did not immediately decide on whether the claim by the Income Tax office is justified.
Gavai said the Income Tax office had last year served a notice for the recovery of tax. It had also argued that though MHADA is registered as a charitable trust, it cannot be classified as one and is hence liable to pay tax. The authority had approached the appellate tribunal to appeal against the order and had a ruling in its favour.
“Now they are saying that we may be a charitable trust, but we are engaging in business and making profit, so we are liable to pay commercial tax. We charge a minimum profit only for houses that we sell to the middle-income group and the higher-income group category. Even that surplus is used only to further the cause of affordable housing, so we are not making a profit as such,” Gavai added.