SC pulls up IT department for inaction in 2G scam

Taking a tough stand, the Supreme Court on Monday rapped the Income-Tax Department for its slow probe into the 2G spectrum allocation scandal.

Last Updated: May 16, 2011, 20:08 PM IST

New Delhi: The Supreme Court on Monday pulled up the Income Tax department for not initiating tax proceedings against those involved in 2G spectrum scam and moving in only after the court`s intervention.

The apex court bench of Justice GS Singhvi and Justice Asok Kumar Ganguly told Additional Solicitor General Vivek Tankha, who appeared for the department: "You (Income Tax department) started real investigation only in March 2011."

When Tankha referred to certain judicial proceedings, the court asked him to forget them and explain what the Income Tax department did and why it did not initiate the proceedings.

The court asked the department to share information in its possession or collect it in the course of its proceedings with the Central Bureau of Investigation (CBI) and the Directorate of Enforcement.

Describing the figures given by the Income Tax department in its status report on its tax proceedings as "mind-boggling", the court asked: "Why did you not move when you had inkling (of dealings) between the telecom operators and person (Nira Radia) under interception? You should have moved in (then itself)."

Tankha said, "Our taxable inputs in the (Niira Radia) intercepts were very few."

The additional solicitor general was once again at the receiving end when he described the telecom companies as "big" who field "big lawyers" to defend them.

The court wanted to know if the Income Tax department "did not give opportunity to junior lawyers”.

Damning the mindset of treating telecom companies as "big", Justice Singhvi asked: "How are they big? What is the mindset you have? Prima facie they are tax evaders. Don`t call them `big`. Don`t insult the word `big`.”

Appearing for the Centre for Public Interest Litigation (CPIL), senior counsel Prashant Bhushan told the court that the entire tax evasion was taking place due to "fraud treaty" for avoiding double taxation between India and Mauritius.

The court was told that under the treaty individuals and companies based in Mauritius would pay tax in that country only and not in India.

Bhushan told the court that companies headquartered in the US and operating business in India used to route their investments through as "post box" company based in Mauritius to avoid taxes.

"Two telecom operators - Essar and Vodafone - made their bulk investments through their post box companies in Mauritius", Bhushan told the court.

As Bhushan assailed the Income Tax department, for sleeping over the issue, Justice Ganguly said: "We are sure (but for our intervention) they would have slept otherwise also."