The director-general of Income Tax moved the Supreme Court alleging that the reward paid to an informer for furnishing information about black money of any taxpayer cannot be claimed as a matter of right.
A Bench headed by Justice SH Kapadia issued notice to one such informer, who had sought higher quantum of reward, the chief commissioner of income tax, the Central Board of Direct Taxes (CBDT) chairman, the Centre (through the I-T) and the directorate of Income Tax Vigilance. It also stayed the Kerala High Court’s decision till further orders.
The department has challenged the high court order that held that quantum of reward to the informer was low on the ground that an assumption that 10% of the tax collected to be paid as reward was, in fact, the upper ceiling and the actual amount had to be decided by the committee for sanction.
Additional solicitor general Mohan Parasaran submitted that reward to an informer was not a payment governed by the Income Tax Act, 1961, but an exgratia payment which cannot be claimed as a legal right. He said the high court erred in holding that 10% of the tax collected had to be paid as reward whereas the fact is that this is the upper ceiling and the actual amount was to be decided as per the ‘Guidelines for Reward to Informants 1993’.
Pursuant to MK Surendram’s furnishing information with regard to the undisclosed income of one NP Santhosh Kumar, the department had conducted a search in March 2003 and determined the income at Rs 1.62 crore and tax payable at around Rs 97 lakh.
Thereafter, the local committee for grant of reward to informants had determined the quantum of award payable to the informant at Rs 2.75 lakh.
Both, the director general of foreign trade, Kochi, and the CBDT chairman had rejected Surendram’s demand for enhancement of reward on the ground that the reward, being an exgratia payment, was subject to the guidelines and granted on the absolute discretion of the authority and the same cannot be claimed by anyone as a matter of right.