‘Identity of the investor’, IT dept after Ashneer Grover raises questions over notices to startups

livemint.com:

startups for documents related to three-year ITR details of their investors and shareholders. In a post on X (formerly Twitter), the IT department wrote, “Dear @Ashneer_Grover, Section 68 of the Income-tax Act, 1961 (the Act) under which the Assessing Officer (AO) has made the inquiry about creditworthiness of the shareholder/investor, places the initial onus on the assessee-company to prove the following: Identity of the investor, Creditworthiness of the investor and Genuineness of the transaction." The Finance Act, 2012 mandated that the nature and source of any sum credited as share capital, share premium, etc., in the books of a closely held company (excluding a Venture Capital Fund or a Venture Capital Company registered with SEBI) shall be treated as explained under section 68 only if the source of funds from a resident shareholder is also explained by the investor, the post read.

“In the present case, it appears that the AO has sought to examine the genuineness of the transaction and source of investment by the shareholder-investor, to verify if the amount invested is commensurate with the income shown in the ITRs of the investors," the IT department said. It added, “Alternatively if the PANs of the investors are shared with the AO by the Company, he can verify the ITRs of the investors.

This has been the practice as reflected in various tweets in the thread." This came after Ashneer Grover again questioned the Income Tax Department's other notice. The notice asked startups to share the three-year ITR details of investors with the IT department.

Sharing the ordeal of a few startups, Ashneer Grover, said that they had received Income Tax notices that are asking to furnish information about shareholders. He