‘Reward for intel on tax evasion only after recovery’

MUMBAI: The Bombay high court (HC) has held that the sales tax department is not bound to pay a monetary reward to an individual who provides information on possible tax evasion unless that amount is either recovered fully or is proved unrecoverable.

The observations were made during the hearing of a contempt petition filed by a man claiming a reward of ₹29 lakh from the sales tax department for informing them about a firm’s tax evasion. He alleged even though the court directed the department pay him a reward, he had not received anything.

In his petition, the informer claimed he was deemed eligible for a reward by the sales tax department under a scheme adopted by them.

It was also backed by an HC order in 2005. However, the reward amount of ₹29,89,606 was only calculated in 2015. It was conveyed to the additional chief secretary of the state’s finance department.

The petitioner said he filed the VA SONPAL, special counsel for the state

› It is true that some amount of tax evaded has been recovered [as per petitioner’s information]. But the assessee has filed several appeals. At this stage, the reward cannot be released as the tax has not become irrevocably due to the government.

contempt petition against both departments for their failure to reward him even after the HC directed them to do so.

However, the special counsel for the state, VA Sonpal, argued

this amount was due only if all tax disputes ended in favour of the government.

While some amount of the evaded tax was recovered, Sonpal argued, the assessee had filed several appeals. “At this stage, the reward cannot be released since the tax has not become irrevocably due to the government,” wrote Sonpal in an affidavit.

In light of these submissions, the division bench of justices Akil Kureshi and MS Sanklecha observed there was no disobedience of the HC order and closed the contempt petition.

It directed the state and the sales tax department to provide details of all pending tax appeals to the petitioner by January 15, 2019.