The Income Tax Department arrested Selvaraj, a businessman from Tumakuru, for defaulting on tax payment, and sentenced him to six months’ imprisonment on Friday. He has been lodged in Parappana Agrahara Central Prison.
The businessman had an outstanding of ₹7.35 crore, which he failed to pay despite losing appeals at the Income Tax Appellate Tribunal and evading tax recovery officials for over a year.
This is the second case in Karnataka in which a tax defaulter has been arrested and sentenced to a civil prison by the I-T Department.
Another defaulter, Deepak Gupta, a businessman who was about to leave the country, was arrested at Mumbai airport and was sentenced to a prison term on February 12. “This is part of a tough and uncompromising drive against recalcitrant tax evaders and defaulters,” said a statement from the I-T Department.
After losing appeals at the Tribunal, Selvaraj was given several opportunities to clear his dues, but he failed to appear before the Tax Recovery Officer (TRO) on 17 different occasions following which a show cause notice as to why a warrant to arrest should not be executed was issued in October 2018. The businessman appeared before the TRO and promised to pay the outstanding tax demand after he recovers money he had loaned to people. He made the same claim when he appeared before the TRO in January 2019.
“Subsequent enquiries revealed that the defaulter had already received ₹1 crore from the above referred debtor before January 2019, but still did not pay any part of the taxes and utilised the amount for other purposes, thereby dishonestly transferred his monies and neglected to pay the taxes due. The debtor also confirmed the fact of payment made to the defaulter, and claimed that no further amount is payable to the defaulter,” said a statement from the I-T Department.
When Selvaraj appeared before the TRO on February 14, 2019, he accepted that he had recovered the debt but had not paid the tax. Thus the defaulter had violated Section 222 of the IT Act, and the defaulter failed to make satisfactory arrangement for payment of the tax arrears during the hearing, leading to his arrest and being sentenced to six months in a civil prison, according to a statement.