SC grants NewsClick relief by stalling tax recovery

The Supreme Court on Monday stayed further recovery of an outstanding tax demand from news portal NewsClick, directing the company’s banker not to release any more money to the tax department.

The Supreme Court on Monday stayed further recovery of an outstanding tax demand from news portal NewsClick, directing the company’s banker not to release any more money to the tax department based on a 2023 notice, and allowing the portal to use its two bank accounts for daily operations.

The application by NewsClick at the said that the inaction by the bank affected its business operations as salaries of more than 100 employees and dues of over 200 professional consultants could not be paid. (HT Photo)

The order was passed by a bench headed by justice BV Nagarathna on an application moved by PPK Newsclick Studio Limited, which alleged that ICICI Bank was not allowing the company to use its accounts despite a top court order to this effect passed on August 9.

The tax department had raised the demand against receipt of foreign remittances by the portal in previous years. The portal’s founder Prabir Purkayastha was arrested in October last year for allegedly receiving money for “pro-China propaganda” and was charged under the Unlawful Activities (Prevention) Act, or UAPA.

The company, represented by senior advocate Devadatt Kamat and advocate Rohit Sharma, pointed out that on August 22, when the company approached the bank with the copy of August 9 order, it refused to comply seeking further evidence on whether the order referred to the ICICI Bank accounts.

Taking exception to this conduct, the bench, also comprising justice N Kotiswar Singh said, “If they cannot understand our simple English, we cannot do anything.” Advocate Sameer Parekh, appearing for the bank, said that the order of August 9 will be complied with.

The application by NewsClick said that the inaction by the bank affected its business operations as salaries of more than 100 employees and dues of over 200 professional consultants could not be paid. Further, it was unable to run its operations as no money could be received into the two bank accounts.

Making a two-fold prayer, the application said, “By way of this application, the petitioner seeks setting aside of the notice (by Income Tax department) dated December 15, 2023 sent to ICICI Bank, Saket branch, and directions to the effect that there shall be no automatic debit from the petitioner’s bank accounts to the Income Tax Department and that normal banking operations shall resume in the bank accounts...”

The court disposed of the application by allowing the prayer requesting for no automatic debit and resumption of banking operations.

“We dispose of this appeal by directing that pending disposal of the appeal filed by the appellant (NewsClick) before the ITAT, there shall be stay of further recovery of the outstanding dues,” the August 9 order said. The order came to be passed as 30% of the demand stood recovered by the IT department.

The portal approached the top court after the Delhi high court in November 2023 turned down its appeal against the tax demand. The income tax department had issued notice based on an assessment order of December 30, 2022, demanding ₹14.8 crore after the assessing officer treated receipts of ₹15.53 crore received into the NewsClick account from US-based Justice and Education Fund (JEF) as “unexplained cash credit” taxable under Section 68 of the Income Tax Act.

Following the demand notice, the company had to make a “pre-deposit” to the department by paying the entire balance in its two ICICI Bank accounts to the tune of ₹1.22 crore and ₹2.82 crore.

The company has claimed that the assessment order was ex-facie perverse and illegal, and stated that the entire receipts of ₹15.53 crore received from JEF were through proper banking channel pursuant to an agreement signed in 2019 to provide original journalistic content to JEF.