The Income Tax department on Friday took cognisance of Ashneer Grover’s questions over notices being issued to startups for documents related to their investors and shareholders.
On Friday, September 8, Ashneer Grover, best known for his time as a shark on Shark Tank and for co-founding the fintech platform BharatPe before losing his job, requested that the finance ministry investigate the list of papers and proofs requested by the Income Tax Department under Section 142(1) of the Income Tax Act 1961.
Section 142(1) of the I-T Act authorizes the I-T department to publish a notice to seek additional clarification or details about the returns, as well as their filing in the prescribed way.
“In the last 1 month, a number of start-ups (a few in my portfolio as well) have received Income Tax notices asking to furnish information about shareholders,” Grover said attaching the requirements of furnishing 3 years of ITR from all shareholders.
In the last 1 month, a number of startups (a few in my portfolio as well) have received Income Tax notices asking to furnish information about shareholders.
— Ashneer Grover (@Ashneer_Grover) September 8, 2023
Bahut interesting hai – they are asking start-up companies to furnish 3 year ITR of all shareholders. 1) How and why will… pic.twitter.com/f48593uE4T
“How and why will companies have ITR of shareholders? Why would a shareholder/individual share their ITR with a private company? The reason mentioned here is to establish the creditworthiness of shareholders. Why? Companies are not giving loans to shareholders. Instead, shareholders only are investing their equity in the company. Finance Ministry please look into it,” he tweeted.
Further, he also questioned the IT department saying that why can’t it pull ITR from its own system by punching in PAN?
The Income Tax department took cognizance of the event and responded to Grover saying, “Section 68 of Income-tax Act, 1961 (the Act) under which the Assessing Officer (AO) has made the inquiry about the creditworthiness of the shareholder/investor, places the initial onus on the assessee-company to prove identity, the creditworthiness of the investor and genuineness of the transaction.”
According to the Finance Act of 2012, the nature and source of any sum credited as share capital, share premium, etc., in the books of a closely held company (excluding a Venture Capital Fund or a Venture Capital Company registered with SEBI) shall be treated as explained u/s 68 only if the source of funds from a resident shareholder is also explained by the investor.
Dear @Ashneer_Grover,
— Income Tax India (@IncomeTaxIndia) September 8, 2023
1.Section 68 of Income-tax Act, 1961 (the Act) under which the Assessing Officer (AO) has made the enquiry about creditworthiness of the shareholder/investor, places initial onus on the assessee-company to prove the following:
a) Identity of the investor…
“In the given case,” as said by the IT department, “it appears that the AO has sought to examine the genuineness of the transaction and source of investment by the shareholder-investor, to verify if the amount invested is commensurate with the income shown in the ITRs of the investors.”
The document that he furnished requests the standard documents, such as the shareholders’ name, address, and PAN card, as well as the number and shares allocated to the shareholders, the total value of the shares allotted to the shareholders, and the payment received from each shareholder throughout the financial year in question.
Ashneer Grover, the co-founder of BharatPe, who was also one of the investors on the TV program Shark Tank, resigned from the fintech firm on February 28 last year amid a probe that was underway to investigate financial fraud at the company. Ashneer’s resignation came a week after the firm sacked his wife, Madhuri Jain, who was the company’s head of controls, for alleged financial irregularities including creating bogus invoices and billing the company for personal beauty treatments and vacations overseas.
