MUMBAI/AHMEDABAD: The ghost of angel tax may continue to haunt startups for some time despite New Delhi’s assurances against potential coercive measures.About a week after the government sought to calm an agitated industry, the tax authorities have started issuing demand notices to startups to pay the angel tax by end-March.The latest notices specify the exact amount startups are required to pay along with the calculation of the taxes, said people with direct knowledge of the matter. ET spoke to startup promotors, who have received the tax demand orders over the past few days, and their tax advisors.Last week, the Central Board of Direct Taxes ( CBDT ) had issued a notice asking tax officers not to use “coercive measures” to recover the outstanding amount from the startups. The Department of Industrial Policy and Promotion ( DIPP ) is also looking into the angel tax issue and assured that the government would not harass the angel investors and startups.Tax experts point out that the government intervention means little now as tax officers had already served notices, and there was no option but to issue final demand notices by December 31. “The CBDT has only asked the revenue officers to refrain from taking coercive steps to recover the demand. This does not change the fact that demands continue to be raised and the issue itself is being litigated at various forums,” said Amit Maheshwari , Partner, Ashok Maheshwary & Associates.The demand notices had to come in before the deadline of December 31, and delayed notices could have been seen to be diluting the stand of the tax authorities.The controversy surrounds the valuations during various rounds of startup funding. In several cases, the revenues at start-ups kept reducing or remained stagnant, but their valuations increased. The taxman is questioning the premiums paid by the investors and wants to categorise them as income that would be taxable at 30%.In most cases, the investments made by angel investors, venture capital funds or any other investor have been challenged by the taxman.Industry trackers say that last year, tax officers had even written to banks and attached the bank accounts of several start-ups. “Such coercive measures may not be taken this year,” said a person with direct knowledge of the matter.“As per instructions by CBDT…, the AO (assessment officer) cannot enforce the recovery of demand in these particular cases….The startups can challenge the demand with the commissioner (appeal) within 30 days of demand,” said Amit Singal, Co-Founder, Start-up Buddy Services, a Gurgram-based company that serves early-stage businesses.The tax department has started questioning the valuation experts. ET had on December 25 first reported that CAs and tax experts have been served notices for the methodology used in computing the valuation premiums for startups that often weren’t making any money.“Notices specifically mention disallowing the valuation done by VCs and their chartered accountants and ask (start-ups) to pay tax. But one has to get money from existing investors or it has to shut down,” said Munir Thakor, angel investor at Ahmedabad Angel Network (ANN).One of Thakor’s investee start-ups has recently received a demand notice from the IT authorities.Income-tax officers claim that the scrutiny on start-ups is mainly due to concerns over money laundering. “We are investigating if some of these investments were for converting black money (unaccounted money) to white (legal money). Why would someone pay a high amount in investments when the real value is much less?” a tax officer asked.According to insiders, the government may have to either amend the rules, or the notices to start-ups will continue. “A tax officer questioning a start-up’s valuation in one year cannot do otherwise the next year. This would mean that he’s not convinced of his own assessment,” said a person in the know.Tax experts are now hopeful that the government may seek to resolve the issue in the months to come, but that too may not have a retrospective effect on the angel tax controversy.“The government is looking into it and formed a committee especially for this issue and it seems that genuine start-ups can expect some relief from this draconian tax. Whether it will be retrospective to quash the existing litigation is a question that remains unanswered,” said Maheshwari.