An Indian entrepreneur wakes up to find bank a/c empty! Read on…

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An Indian entrepreneur whose startup provides food on Indian trains, woke up one day to find the company bank account, from which he used to pay out salaries to his 70 employees, emptied out.

He thought of complaining to government authorities – but wait…it was the government’s tax department which had appropriated the money without notice, freezing his company’s bank account.

The incident happened last week. It has sent shivers down the spine of startup entrepreneurs operating in India, and many are left wondering if they should take their domicile out of the country.

Here is the full account written in a blog post by Pushpinder Singh, CEO of TravelKhana, a startup that provides hot meals to passengers on board trains. Read on…

“There has been an explanation given by the CBDT for the case. I am also given to understand that the AO in question has been transferred — and I am pained to know this. I never wanted this in the first place, All I want to know is how will I run my business? More on this later.

TravelKhana CEO Pushpinder Singh

Additionally I want to thank some people here. Particularly Mr. Akhilesh Ranjan-Member CBDT who was all ears for me and helped in getting at least my account freeze removed. But that is not of much help with ZERO money in the accounts. I also thank the startup community, the media as well as my alumni/school from IIT/SPV with immense support pouring in from all the places.

I understand that this has become a political issue around “Startup India” — which was never my intention. I am not for or against any political party. I am an entrepreneur who is keen to have an environment where entrepreneurs can thrive. Where they can come up with new ideas and focus building on them. I used to stay in the SFO Bay area which is known to provide such an environment. I came back to the country as I saw that there is an immense opportunity on building new ideas and solving numerous problems where technology can help. That is the reason why Travelkhana is one of the rare Indian startup — without a precedence in the US or China. In fact what we started is now being emulated at 30+ Airports across US, Dubai, London and elsewhere. Recently I heard that Shuttl is also trying to do a similar pilot for its customers in buses. I can proudly take some portion of credit for the same.

Courtesy: TravelKhana.

Now on the CBDT statement. First of all there was no “CASH” transaction as investment with us (Sec 68 of IT act is being applied on us which is designed against “unexplained” cash deposits). Each transaction came through the bank transfers or equivalent. Each of our investors is valid with bonafide authenticated and we raised the round of fund on Letsventure.com (LV). LV is a reputed and respected platform for Angel investments. Additionally many of our investors in the round mentioned are highly respected PUBLIC figures.

While we can get into the technicalities of the case — which should be of concern to Lawyers, Chartered Accountants and Tax Officers, in the brief interactions I have had with the IT department and the understanding of the IT Act, I get that technically the Assessment Officers have immense and in many cases excessive powers.

It is not only about Section 56 or 68 but many more sections in the act with which the IT officer can round you up. You answer one question on one section and in response get a query on another. In our case we did provide valid valuation certificate for questions asked under Section 56.

Upon doing so we were asked the bonafide of the investors under section 68. While we asked for time for this, we got the Assessment Order. In each of the step there has been a particular zeal to round us up.

While we wait for the appeals process to take place the question for us is how to exist? Unfortunately for me or my 70 odd employees, we don’t have amassed wealth to continue running. Some of them are not very highly paid and I know of instances where they buy monthly supplies after we release the salary.

As an unfortunate incident one of such employees had a death in the family because of an accident.

He needed money for autopsy and funeral. What do I answer these people? Still they are sticking around and ready to bear with me is what makes me immensely proud of them.

Over and above we recently had a profitable month. We were building new revenue lines in travel and especially experiences. All of us were very excited to work on them. This was planned for 2019. All of this is now in jeopardy.

A chronology of events/interactions is presented below.

  • On 8th Oct-2018— We received a letter asking for information of financial transactions done in FY 2015–16.
  • On 1st Nov and 2nd Nov — 2018 we sent the response in two parts.
  • Again we got a letter asking for details of our investors and for us to prove their credit worthiness -this was on 23rd Nov 2018.
  • In the first week of Dec-2018 we gave a request asking for a month to get the details of all 49 investors. They wanted PAN, KYC, ITR details. In many cases the investors were reluctant to share the ITR with us but we asked them that they could share with the AO with a copy to us. The AO in this case is ACIT circle 7(2) — Delhi. The id of the uploaded request is 6448038775.
  • Without giving us time or denying our request for an extension to furnish details, on 11 Dec 2018 the AO passed an assessment order demanding a tax+penalty of over Rs 2.1 Crore
  • In the first week of Jan-2019 we filed for an appeal.
  • We also gave a request for stay of action on 15 Jan 2019 with the AO.
  • We followed with another request for stay of action on 4th Feb 2019.
  • We did not receive any response to (7) or (8) above. And against the principles of justice we found that accounts extracted of Rs 33 Lakh on 5th Feb 2019.
  • On 6th Feb we went to IT office. The AO was out on a search duty. We approached 2 of his seniors up to the level of PCIT- Circle 7. None did anything.
  • On the same day we went to Mr. Akhilesh Ranjan in CBDT. He helped by getting the account freeze and lien removed. However the money is not yet returned.
  • On 7th Feb 2019 we again approached the PCIT. The PCIT said that they can try and get the appeals process expedited will be a matter of 4 to 6 months as against 1 to 3 years.
  • During all this time any of our assurance and information to the AO that we are a valid recognized startup with accredited investors, MCA/RBI compliance done etc. fell on deaf ears.

(The author is CEO of TravelKhana. The blog post was first published here. Copyright resides with the author.) 

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