Last September, 10 months after demonetisation, the Finance Ministry said that it has deregistered over 2.09 lakh companies and initiated action to restrict their bank account operations with an aim to curb illicit fund flows and tax evasion. Now the Income Tax department is filing petitions for restoring these companies as it is an ‘aggrieved creditor’ to many deregistered shell companies.
The Central Board of Direct Taxes believes that the appeals for “restoration” of these firms are required to recover tax dues and “protect the legitimate interests of revenue”, PTI reported. The tax department is concerned that crores of rupees of its “legitimate” taxes are being stuck after these shell firms were deregistered.
Citing a letter written by the CBDT to all its regional chiefs stating, the news agency reported that the taxman should hence undertake all efforts to file these petitions to get its dues from them. The department is planning to petition at the National Company Law Tribunal to recover tax dues of crores of rupees, which the Ministry of Corporate Affairs said will not be opposed by regional directors and RoCs.
Under standard procedure, the tax department can file a petition in NCLT for shell companies against whom the department has pending cases of departmental appeal, penalty and prosecution among others. The government had last September struck off the names of these 2.09 lakh companies from the register of companies and barred the directors of these companies from operating the bank accounts. The government had also advised banks exercise enhanced diligence while dealing with companies other than the struck-off companies.
Earlier this year, the Economic Survey 2018 flagged concerns over the high rate of tax litigations in Indian courts with little success, saying that the biggest litigator is the tax department, which “unambiguously” loses 65% of its cases.