"This issue requires a reexamination. The provision had been introduced primarily to prevent misuse following the abolition of gift tax. The provision should be reexamined to balance the interests of genuine startups and also that of revenue.
Maybe such cases are referred to a panel to examine the requirement of issuing a notice in the first place itself and subsequently to examine the genuineness of the response from the taxpayer, before taking any penal action. In any case, there are enough provisions in the Income Tax Act to evaluate any transaction or arrangement like GAAR (General Anti-Avoidance Rule) etc. and take necessary corrective action.”
Partner, Grant Thornton India LLP
This article appeared in Economic Times on 28th December, 2018.