Tax Shock For Baba Ramdev As Delhi HC Allows Tax Investigation Against Patanjali; IPO In Trouble?

Patanjali have recently reported their 1st sales in drop in 5 years.

Tax shock for Baba Ramdev
Tax shock for Baba Ramdev

Patanjali suffered their first sales drop in the last 5 years, and things are gloomy for them right now. Now further adding to their misery is a recent verdict by Delhi High Court, which has now allowed tax auditors to examine Patanjali’s tax returns, for an old case.

Does this mean that Patanjali’s IPO is in trouble?

Delhi HC: Let Tax Auditors Examine Patanjali

For the fiscal year 2010-11, Tax authorities wanted to examine tax returns by Patanjali, and check whether the company has evaded tax or not.

Till now, the special tax audit was avoided, as Patanjali had filed a petition to stop it in 2013. But now, this petition has been rejected by Delhi High Court.

Giving full authority to taxmen, the recent Delhi HC verdict states: “Undoubtedly, the AO has a duty to apply his (or her) mind and not fall back upon the provision of special audit in all routine cases,”

In 2013, Patanjali had countered Tax authorities’ showcase notice by filing a petition at Delhi HC, requesting them to stop taxmen from examining Patanjali’s tax assessment for 2010-11. Patanjali had argued via 9 pointers that this special tax audit is not needed, and their tax filings are all ok.

The bench of Justice S Ravindra Bhat and justice Prateek Jalan said: “The assessee (Patanjali) is directed to co-operate with the special auditor. The period during which the interim order operated shall be excluded for the purpose of calculation of the period for completion of such special audit. The writ petition is dismissed…”

IT Department had argued that:

  • Books of accounts of Patanjali were incomplete and not correctly maintained
  • Cash flow statements didn’t match the standard accounting practice

Patanjali IPO In Trouble Now?

Last week, Baba Ramdev, co-founder of Patanjali hinted that his company may file for an IPO this year. When asked whether Patanjali is planning to list their company in the stock market or not, he said that a ‘good news’ will be shared shortly.

Now, as tax auditors begin their examination of Patanjali’s accounts with a fresh perspective, their plans to list their IPO seems in trouble.

Note here, that in August this year, taxmen found severe irregularities in tax filings of the company, and discovered that Rs 325 crore was infused into companies having zero transactions.

This year, Patanjali reported a drop of 10% in annual revenues.

We will keep you updated, as more details come in.

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