The Income Tax department Tuesday froze the bank accounts of Mahindra Satyam after the IT firm failed to pay a tax demand of Rs.616 crore (Rs.6.16 billion/$137 million)
Mahindra Satyam, the new brand identity of Satyam Computer Services Limited, has moved Andhra Pradesh High Court challenging the demand notice and seeking a stay on the proceedings.
The department moved after the Central Board of Direct Taxes (CBDT) dismissed Mahindra Satyam’s plea challenging the notice served last year.
“We have moved the high court seeking an injunction order. The case is yet to come up for hearing,” Mahindra Satyam Chairman Vineet Nayyar told reporters.
The Mahindra Group company said that it is surprising that the Central Bureau of Investigation (CBI) and other government agencies were prosecuting former Satyam chief B. Ramalinga Raju for showing fictitious income, but the CBDT made the same fictitious income a basis for demanding the taxes.
The development could hamper the recovery of the fraud-hit company , which was once the country’s fourth largest IT firm.
Earlier, the company, in a stock exchange filing, said the department issued notice to pay Rs.616.53 crore in taxes.
The demand notice was issued on the basis of the income declared by the company during the time of Ramalinga Raju. The department refused to buy the line that Satyam had fictitious income and insisted it was real income.
The CBDT under Section 119 of the Income Tax Act, 1961, rejected various petitions filed by the company, seeking reliefs for reopening of past assessments for the assessment years 2003-04 to 2008-09; determining the actual income based on the findings of investigating agencies; and granting a stay on recovery proceedings for the said assessment years.
“Notice under Section 226(3) has been issued by the Additional Commissioner of Income Tax, Hyderabad, for recovery of Rs.616,53,92,660. The company filed a writ petition before the Hon’ble High Court of Andhra Pradesh, Hyderabad, challenging the said impugned order and seeking stay of further proceedings,” the company said.
Satyam was hit by India’s biggest corporate fraud in January 2009 when its founder and then chairman Ramalinga Raju confessed to overstating profits for the past several years.
The government took over the firm. Later, Tech Mahindra bought Satyam in an auction in April 2009 and rebranded it as Mahindra Satyam.