In a shocker to the Visakhapatnam Urban Development Authority (Vuda), which is the next biggest in the state after Huda of the capital, the Income Tax department has frozen its bank accounts for non-payment of tax on the sale of valuable plots through auctions by the metro development authority during 2008-09.

Acting on the directions of the state government, Vuda conducted auctions to sell lands to mobilise funds to bridge the budgetary deficit of the state’s exchequer.

Against the set target of Rs.1,400 crore by the state government, Vuda earned Rs.1,180 crore in 2008-09 by auctioning plots at Madhu-rawada, Kapuluppada and other locations under its jurisdiction.

The I-T department had asked Vuda to pay Rs.350 crore as tax on the earnings through bulk land auctions. Since the urban development authority failed to pay this, the I-T department here sent notices 10 days ago to banks where the Vuda has accounts to freeze these.

All financial transactions of Vuda have come to a complete standstill. There are neither receipts nor payments since 10 days.

“Vuda was just a facilitator of the auctions which were done under the directions of the state government to support the state’s budget. Now after three years, the I-T department wants us to pay Rs.350 crore as tax. Not even a single rupee from the auctions is with Vuda. Each rupee was deposited in the state’s treasury. How can we pay income tax when Vuda earned nothing from the auctions,” Vuda vice-chairman K. Sasidhar told this correspondent.

Most engineering works undertaken by Vuda also came to a standstill as payments are not being made to the contactors.