Tax officials can seek details of ITRs filed by investors in startups: I-T dept

Income tax officials can seek details about ITRs filed by startup investors to ascertain if the amount invested is commensurate with the income shown in their personal ITRs, the Income Tax department has said.

Replying to a post of former BharatPe co-founder Ashneer Grover on X on Friday, where he flagged that a number of startups have received tax notices in the last one month asking them to furnish information about their shareholders, the I-T department said the Finance Act 2012 mandates that the source of funds from a resident shareholder in a startup has to be explained by an investor.

"In the present case, it appears that the AO (assessing officer) 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.

"Alternatively, if the PANs of the investors are shared with the AO by the company, he can verify the ITRs of the investors," the I-T department said.

Section 68 of the I-T Act, under which the AO has made the enquiry about the creditworthiness of the shareholder/investor, places initial onus on the assessee-company (startup in this case) to prove the identity and creditworthiness of the investor and the genuineness of the transaction.

"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 venture capital fund or a venture capital company registered with Sebi) shall be treated as explained u/s 68 only if the source of funds from a resident shareholder is also explained by investor," the I-T department said.

Grover, in his post, had said that the I-T department is asking startup companies to furnish three-year ITRs of all shareholders.