The Madras High Court has dismissed a writ petition filed by ETA Star Infrastructure Limited, Mumbai, challenging the recovery proceedings initiated by the Income Tax Department against the company for an unusual transfer of Rs.380.80 crore from the Mauritius-based Al-Waha Investments Limited.
Dismissing the petition filed by the company, Justice K.K. Sasidharan upheld that the recovery proceedings initiated by the Income Tax authority on November 7 and also pointed out that the statute gives an authority to the assessing officer to issue garnishee order if the assessee failed to pay the tax.
The IT Department found that during the assessment year 2009-10, the ETA Star received a sum of Rs.380.80 crore as share application money from Al-Waha Investments Limited, a company incorporated in Mauritius. From the bank account of ETA Star, Rs.380.50 crore was transferred to the account of Genex Exim Venture Private Limited and again the money was invested in Swan Telecom as share application money.
The assessing authority found that ETA Star acted as a pass-through intermediary for the passage of money for unknown purposes. Treating the entire investment as income, the assessing authority passed an assessment order last March.
When the appeal preferred by ETA Star was pending before the Commissioner of Income Tax (Appeals-II), Deputy Commissioner of Income Tax, Chennai initiated recovery action by issuing garnishee notice on November 7.
Counsel for ETA Star contended that the violation of the provisions of Foreign Exchange Management Act (FEMA) 1999 was condoned by the Reserve Bank of India on November 17, 2011. The Deputy Commissioner of Income Tax, Chennai, without considering the merits of the matter, initiated proceedings for recovery.
Rejecting the contentions of ETA Star, Mr.Justice Sasidharan said, “I do not find any merit in the contentions raised by the petitioner (ETA Star) with the respect to violation of principles of natural justice.”
Similar petitions dismissedMeanwhile, the court also dismissed writ petitions challenging the similar proceedings initiated by IT Department against PVP Ventures Ltd, Chennai. Platex Ltd, Mauritius, invested Rs.377.72 crore in the debentures of PVP Ventures by borrowing money from Deutsche Bank.
Suspecting the bona fides of the transaction during the assessment year 2008-09, the Income Tax Department had initiated recovery proceedings.
