Katrina Kaif gets clean chit from income-tax tribunal on cash ‘deal'

How will taxmen who have been let loose in the hunt for black money, nab those dabbling in undisclosed cash? It appears that a diary scribble or laptop record of cash deals — even by a confidant or aide — may not be enough to nail a person.

Bollywood’s leading lady Katrina Kaif was given a clean chit by the income-tax tribunal even though records fished out from her agent’s computer talked about cash payment to the actress.

While dealings in Mumbai’s tinseltown have turned far more kosher compared with the days of underworld finance, it’s a widely shared perception that some cash still changes hands, even though volumes have dramatically dipped. So, when tax officers stumbled upon the laptop of an employee of Matrix — the talent management firm hired by Kaif — and the computer spreadsheet mentioned a cheque payment of Rs 2.07 crore and cash payment of Rs 58 lakh against the actress’ name, they concluded that the respective amounts capture the split between white and black money.

But according to the tax tribunal, which gave its ruling about a week ago, it was not a direct evidence. The documents and the laptop, belonging to Sandhya Ramchandra (who worked for Matrix) were seized in the course of a search. Clients of Matrix, which is run by Reshma Shetty, include Kaif, Kareena Kapoor, Alia Bhatt and till recently Salman Khan, among others.

“Under Income-Tax Act, income can be taxed only when it is conclusively proved that it has been received by the assessee. Evidence from a third party, even a connected person, in the absence of any concrete proof is not adequate to sustain the addition (of income) —unless the department makes great efforts to bring on record some extra evidence,” said senior chartered accountant Dilip Lakhani. Tax practitioners like Lakhani believe that the government’s measures to nab tax evaders would be successful only if the department is in a position to correlate or corroborate any evidence on cash payment.

For instance, any handling of undeclared cash would subsequently entail transactions to launder the money — converting black into white. This would involve eventually handing over a cheque to the person in question. Tax assessing officers will have to correlate the cash amount and the cheque details in the records of bookkeeper or agent or business partner with any cheque deposited by the client in the bank.

Thus, an assessing officer will have to establish the fact that entries made in the seized document are correct. Here, the evaluation sheet found from the computer of Ramchandra cannot prove that cash of Rs 58 lakh has actually moved from Matrix to the actress. Kaif, however, had acknowledged having received Rs 2.07 crore in cheque.

In the Jain diary case in ‘91, which listed out hawala entries against names of top politicians and bureaucrats in a diary maintained by a family of money laundering agents, the court was not convinced by the evidence produced by the enforcement authorities.

The recent tax tribunal ruling in the feud between Katrina and the tax department, has brought to the fore that even records run by an assistant or a regular service provider is not good enough evidence unless backed with more facts.