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Show cause for AY20 to cos across sectors question source, valuation of investments
Indian tax authorities have issued show cause notices to several foreign companies, including some that have been operating in the country through their subsidiaries for a long time, questioning the source and valuation of their investment in the country.
The income-tax authorities have in some cases even sought passport and travel details to India for the past four years, date of arrival and departure from India, and the number of days of stay in the country of key personnel.
Multinational companies across sectors were served show cause notices under Section 148A in the latter half of March. These notices relate to the assessment year 2019-20. India received $44. 36 billion in foreign direct investment in FY19, the relevant financial year.
The Insight portal of the Central Board of Direct Taxes (CBDT) provides information to assessing officers, who then send out notices under Section 148A seeking an explanation.
The section deals with the reopening of assessments, if tax authorities have a reason to believe that income chargeable to tax has escaped assessment. The assessee is given a chance to discuss the issue with the assessing officer. No further action is initiated if a satisfactory response is given by the assessee and a reassessment is carried out only in the absence of a response altogether or an unsatisfactory one.
Companies have also been asked to furnish tax residency certificates.
Thousands of such Section 148A notices have gone out, including to individuals, seeking explanations.
Section 148A of the Income-Tax Act, 1961, was introduced by the Finance Act, 2022, which requires assessing officers to conduct an inquiry while providing an opportunity to the taxpayer before issuing a notice under Section 148.
This was done to allow taxpayers to explain transactions and thereby avoid unnecessary litigation.