While senior Income-Tax and Shrine Board officials were tightlipped about the matter, sources said the former have issued notice to the Jammu and Kashmir Bank under Section 194 (A-1) of the Income-Tax Act, asking it as to why it did not deduct income tax at source (TDS) in respect to the interest paid annually on deposits made by the Shrine Board. The notice pointed out that the bank was required to deduct income tax at source at the rate of 20 per cent in case of interest amount payable on any deposit exceeding Rs 1.20 lakh per annum.

Sources said the J&K Bank branch at Gandhi Nagar has paid Rs 1.14 lakh to the Income-Tax Department as TDS on interest payable to the Shrine Board on its fixed deposit receipts (FDRs). This followed when a team of Income-Tax officials visited the bank branch onJanuary 8 and threatened the staff to freeze the account in case of non-payment of the TDS, they added.

Not only this, the Income-Tax Department has also issued notices to the Shrine Board under Section 142 (1-A) of the Income-Tax Act, asking it to file returns.

Significantly, all this has been done when even donations made by people to the Shrine Board were exempted from the Income-Tax Act. A senior Income-Tax official, on terms of anonymity, admitted that the notice issued under Section 142 (1-A) was illegal as the Board, being a body constituted by the State Legislature, was not liable to file income-tax returns.

The Income-Tax and Board officials, however, denied any knowledge about issuance of notices.

Additional I-T Commissioner Ghulam Rasool Sofi also denied the issuance of any notice to either the Shrine Board or the J&K Bank, saying that the department was doing only a routine exercise to check cases of tax deducted at source by all the banks. Such an exercise has been undertaken in view ofthe upward fixation of the department's target for tax collection in the state, he added.

Significantly the denial by the Shrine Board and the I-T officials notwithstanding, sources said the Board's additional chief executive officer and the chief accounts officer had visited Sofi at his office here two days ago in the matter. However, the latter insisted on payment of TDS on the plea that the Board did not have any I-T exemption from the department.

Board officials said they were exempted from payment of Income-Tax vide a letter issued by the I-T Commission during 1992. The I-T officials, however, claimed that the Board was required to seek exemption from the department every year.

The Shrine Board, according to official sources, has a corpus of about Rs 100 crore deposited in the J&K Bank and various other nationalised banks. Pointing out that a major portion of this fund was deposited in the J&K Bank, sources said the interest received on it is being utilised for various development works by theBoard.

Sources said the I-T Department appears to have issued notices to the Shrine Board and the J&K Bank to meet its current year's target of tax collection. Interestingly, it has been unable to recover tax from the AHPC leaders despite the issuance of notices to them in respect to the donations received by them from abroad, they added.