Can The Tax Department Seize Your Bank Account And Withdraw Money?
Last week, TravelKhana—a food delivery service for railway passengers—found that its bank account balance was zero. The tax department had frozen all four bank accounts of the company and had withdrawn the entire balance amounting to Rs 33 lakh from them.
Founder Pushpendra Singh in December last year said the tax department had raised a demand of more than Rs 2 crore under Section 68 of the Income Tax Act that deals with unexplained cash credits.
“Section 68 is draconian. If you are not able to explain your investments in your company, including loan, it will be treated as unexplained investments and therefore (tax body) will tax you,” Tax Expert TP Ostwal told BloombergQuint. Tax officers, he said, invariably apply Section 68, which is prima facie defective.
Singh argued that even as the company was in the process of providing the tax department details of the investors, the revenue authorities proceeded to freeze the accounts and withdraw the amount.
The revenue department, however, clarified that had the company filed for a stay on the tax demand and submitted a start-up certification from the Department of Industrial Policy and Promotion (now Department for Promotion of Industry and Internal Trade), this action wouldn’t have been taken.
So, can the revenue department proceed against taxpayers’ bank accounts on grounds of alleged tax liability? And what remedy is available to such companies? TP Ostwal explains the process on BloombergQuint’s special show The Fineprint.