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Learning honesty, the hard way

Updated: Apr 1, 2020

This happened in the 90s. I won’t bore you with details but there was a period in my life when the following was the absolute truth.

I was without a job and didn’t have any income. My savings were depleting faster than I could count.

I was responsible for my family’s rental income coming down to near zero because I had got a rented property vacated. The income supported the parents.

The property that was once rentable was no longer because the person vacating it had damaged it (he broke walls while removing heavy machines) and didn’t repair the damage. There was no money to repair the property and no one was willing to put up the money to do it. In India business was generally poor in the '90s. There were good reasons for getting the renter out of the property. He could have claimed tenancy rights thus ensuring the property was lost forever.

Since my return from the US in 1987 I had been in many failed ventures. My own family didn’t let me forget what a big failure I was. I didn’t think things could get any worse when I was surprised by the Government. The Income Tax department sent me a Show Cause Notice. The notice asked for an explanation regarding the income declared, the expenses claimed and thus the tax paid. They stated that the net taxable income declared was wrong.

They disallowed a sizeable chunk of expenses claimed against the rent received. The notice asked for details of income of past years. The primary assessment was that against the rent received the family owed many hundreds of thousands in tax.

It wasn’t about one year that I was worried about, the ruling for the year in question would set the tone of many past tax returns especially those for the last 7 years. If for some reason the taxman found the returns wrong, the family would end up paying a huge sum in back taxes along with penalties and or face prosecution which could even result in a jail term.

Over the next few months the family Chartered Accountant (CA) and I made many representations before the tax authorities. I was the one whose signature was on the tax return and hence I was the best person to represent the case. In what was to be the last personal representation before the final order was passed, my CA and I showed up at the tax office.

At that point, I was an Indian who was angry and fed up. I had done nothing wrong. The rent was received by check and the expenses were paid for by check. There was a technical angle which was the result of a very narrow interpretation of the law. Within the anger and being fed up was the guilt that somewhere some wrong had been done. I couldn’t put my finger on what the wrong was but it surely was disproportionate to the amount of time spent on the matter and the sleepless nights I went through.

My CA had advised that we should try and “settle” the matter. But I had no means (read cash, income or money) to “settle” anything. It is in this frame of mind that both of us entered the office. The two officers looked at me with disdain and proceeded spelling out their take on the matter. They were convinced that we had evaded tax and as I recall the tax and penalty they wanted was around a million Indian rupees (Rs 10 lakhs). Then one of them asked me a leading question

“What would you like to do?” (or something vaguely similar). At that point something snapped inside me. I felt my anger rising and I felt my helplessness take the better of me. It was then that I spoke firmly yet politely. This is what I recall saying.

I asked them to raise the demand to around Rs 1.5 million or so which included an amount that would cover the trouble they had taken. Their eyes widened and my CA squeezed my hand to get my attention. I ignored him.

I would wait outside the office to receive the demand notice, I continued.

I would instantly respond in writing that I cannot pay this amount and not even contest it. I would waive the right to contest.

They would then have the option to form a raid party either the same day or the next day. They could come to the premises in question and verify that there is no activity generating income and that the once gleaming property was now uninhabitable.

They could if they wanted, raid my residence to verify that I didn’t have any money stashed away. I even volunteered to speed things up by taking them home. At my residence they would find jewellery that belonged to the women of the house. They couldn’t touch that. Any cash they found was theirs.

They would want to know if I had any safe deposit lockers in banks. The family did have one which basically had very little in it. I volunteered to take them to the bank, open the locker and give them full access to what was inside.

When finding that there wasn’t any cash, jewellery or assets that could be attached they would have to conclude that the property from where the rent came in was the only asset that was of value.They would then have no option but to take possession of the property.

They would by law have to auction the property to recover their dues. A conservative estimate of the property was that it was worth around Rs 15 million at that time. They were free to sell it at that price, I said. Once sold they could take the tax etc of Rs. 1.5 million and pay the balance 13.5 million to me, which I would happily receive.

When I stopped my monologue, there was pin-drop silence. My CA was sweating beads and the officers looked shell-shocked. I was a desperate man in desperate times and it needed something desperate to keep my sanity. The officers looked at each other, then they looked at me and then finally the CA.

Then the senior spoke and asked me to wait outside the room. When outside, my CA asked me if I had lost my mind. I told him that I probably had but I wasn’t going to change my stand.

After about 30 minutes that seemed to be more like a couple of hours, we were asked back into the room. The officer stated clearly that he had to show that he had taken some action. He agreed to concede on the main dispute but wanted a minor one to be accepted. He stated that given the circumstances that I had no income, he was willing to wait another 40 odd days (the legal time limit by which he had to close the case). The amount of tax was reduced to under Rs 30,000. I could ask for time to pay this in instalments. There would be some interest payable but no penalty. I stated that I didn’t know when I could pay this but I promised to pay. The senior categorically stated that no follow up notices would be sent because once I accept the amount, nonpayment only attracted interest for a period of time (a year or so) before they sent another notice to me.

We left that day with mixed emotions. My CA was concerned about my stand; he wasn’t convinced the department would let me go so easily. I was not elated at being victorious. I didn’t even feel I had won anything. I only knew that I had acted the only way I could have. I had to face the consequences if anything else came hurtling towards me. Thankfully nothing else came other than the notice of paying around Rs. 30,000. I paid the tax in a few months when the property was finally sold. I still have the receipt and I believe it is my certificate of honesty.

 When I reflect on the situation I know I was driven more by necessity than creativity or morality. I just didn’t have the money to pay taxes or to pay bribes. It brought home a very important point. I should walk the straight and narrow no matter how difficult it gets for me.

Since that day I can’t say I haven’t waivered or taken short cuts. But I have ensured I stayed on the straight and narrow. I have fought my own fight against corruption and I don’t think I made a dent in it. In my own way, I know I made a beginning.

I have long wondered that if I had the money would I have given in to a ‘settlement’? I am not sure that I wouldn’t have. Given my state of mind I would have succumbed to the easy path of settling the issue. The incident has many parallels to the demonetizing that recently happened in India. How many of us (India’s) citizens would voluntarily give up corruption? Would we as citizens have the courage to stand up and say “NO”? When you don’t have the cash, it is much easier to say no. The person in front of you is also aware that you don’t have the means to pay your way through. Perhaps this is a larger gain for India than all the jingoism on terror funding.

My fortunes changed and I became the CEO of a publishing house. Here I have ensured I have stuck to the straight and narrow. I have walked away from business that could be obtained through greasing wheels. I have led by example and echo the sentiments of Narendra Modi “Na Khaonga Na Khane Doonga” (loosely translated it means, I won’t accept bribes nor will I give bribes or let you take bribes). I lead by example and ensure that as a company we remain trustworthy.

There is a seriously good side benefit to the course of action I take, I sleep peacefully at night.

Thank God it’s Friday…

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