Tuesday, December 27, 2011

Jet Airways's parent company on Income Tax department radar

MUMBAI: The Income Tax Department (IT) has sent two notices to Naresh Goyal, promoter and chairman of Jet Airways, asking for an explanation of overseas accounts held by him. These notices have been sent under Sections 148 and 131 of the Income Tax Act.

Goyal confirmed receipt of the notices and said that they were received about 10 days back. "We have complied with the notice received from the Income Tax Department under Sections 131 and 148 of the IT Act. There is neither any violation of Act nor any evasion of tax," Mr Goyal told ET. His accountant Rakesh Chaturvedi also denied any tax evasion charges. "The notices are not for tax evasion by Goyal," Mr Chaturvedi said. "All notices have been abided by," he added.

The IT department did not comment on the contents of the letter and the reason behind the notices.

Goyal, whose company Tailwinds owns 79% stake in Jet Airways and is based in the Isle of Man, the UK, also told ET NOW, this newspaper's business channel that he has received two notices and that they have been dealt with. "I have received two notices under section 131 of and under Section 148 of the Income Tax Act. I have replied and adequately dealt with the same," he said.

Goyal, as a non-resident Indian, is allowed to hold accounts in overseas banks, his office told ET on Monday.

The Income tax department has been sending notices to several people whose names appear on a list of HSBC account holders submitted to India by the French government. It is not known whether Mr Goyal's name figures in that list but other account holders of the bank have already been sent notices.

Tax experts say that because Goyal earns his income from India he is liable to pay tax here and can be summoned for assessment by income tax officials.

Section 148, according to tax experts, allows the re-opening of the assessment done in the past six years while Section 131 gives the power to tax officials to summon the assessee for any assessment related queries to be made by them that will further help to determine the extent of the tax.

The notice to Jet's promoter comes at an unpalatable time when the sector as well as the airline is doing badly.

Jet Airways had its worst second quarter ever with losses amounting to Rs 713 crore and analysts do not forecast troubles to be over for airlines soon with crude prices refusing to relent and Brent crude prices sticking to or near a $100 mark and rupee not really firming up against the dollar and Indian carriers still selling tickets below price with average fares coming down by 10%-15%.

Tax officials have also been cracking down on companies and their promoters in an attempt to increase their recovery at a time when revenues are dipping due to the ongoing economic slowdown. In the beginning of the month the service tax department sent notices to two other large Indian carriers, the financially troubled Vijay Mallya promoted Kingfisher Airlines and state owned airline Air India and froze their accounts for non-payment of Rs 250 crore.

The freeze was lifted after a partial payment was made. The IT department is also likely to scrutinize Kingfisher's accounts for non-payment of TDS.


Jet Airways has been served notices by the Income Tax (I-T) department over a Swiss bank account in the name of Tailwinds, the Isle of Man-based parent of Jet Airways, which holds 79.99 per cent stake in the airline. The I-T department has served two notices to Jet's co-founder, Naresh Goyal , a move by the government to unearth black money stashed abroad.

The first notice to Goyal was issued under Section 131 of the Income Tax Act seeking production and examination of books of accounts and other relevant documents. The second notice, served under Section 148, sought to reopen assessments of Tailwinds' books for 2006-07, a leading news television has reported.

According to sources, Goyal immediately responded to the first notice, stating that the Tailwinds accounts were officially disclosed to and approved by the Reserve Bank of India (RBI), Foreign Investment Promotion Board (FIPB), and the ministry of civil aviation and that there was no tax evasion. In an email reply told the TV channel Goyal said, "I have received two notices under section 131 of and under section 148 of the Income Tax Act. I have replied and adequately dealt with the same."

However, Goyal's response to the second notice which sought clarifications on Tailwinds' income from India is not known. The airline did not respond when contacted.

The I-T notices are part of a wider probe by the tax department into bank accounts held overseas by non-resident Indians (NRIs) such as Goyal. The tax department received inputs on Tailwinds' account in HSBC, Geneva, from French authorities.

The list of NRIs with overseas bank accounts came from a former HSBC employee, who stole the data from the bank and handed it over to French authorities. Such a list has to be certified by Swiss authorities before it can be used as evidence in any court of law. Faced with a number of cases of denial of secret foreign bank account holdings, the Income Tax department has re-opened past tax returns of such individuals in Mumbai and Delhi, among other places, in order to unearth black money stashed abroad.

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