Author: Business So Simple

Income Tax Department carried out search and seizure operations on 06.07.2022 on two business groups of Tamil Nadu engaged in the business of Civil Contracts, Real Estate, Advertising etc. The search operations were carried out at more than 40 premises located in Chennai, Coimbatore and Madurai.

During the course of the search operations, various incriminating documentary and digital evidences have been seized. The preliminary examination of such evidences indicates that both these groups have been suppressing their taxable income by claiming bogus purchases and expenses in their books of account over the last few years.

In the case of one of the groups, it has been found that the payments made for these bogus purchases etc. were being received back in cash by the group. In addition, evidences have been found indicating suppression of huge income on account of sharing of profits in joint ventures, which is not reflected in the regular books of account.

In the case of the second group, it has been found that the group had created a number of bogus entities which were being used for claiming bogus purchases and sub-contract expenses. Secret hideouts, maintained by the group for keeping documentary and electronic records in respect of such unaccounted and bogus transactions, were also discovered by the search team. Evidences showing introduction of bogus capital and loan liabilities in the books of account of some group concerns have also been unearthed.

The undisclosed income of the groups detected so far is estimated at more than Rs. 500 crore.

Further investigations are in progress.

Income Tax Department carried out search and seizure operations on two leading real estate groups of Bengaluru and Hyderabad, engaged in the business of construction/sale/leasing of commercial/residential space, and educational and hospitality services. The search action covered more than 40 premises located in Bengaluru, Hyderabad and Chennai.

During the course of the search operations, several incriminating documents and digital evidences have been seized. The preliminary analysis of seized evidences has revealed that the land owners had entered into Joint Development Agreement (JDA) with a Bengaluru-based developer. They have received super built-up area from developer in lieu of the land given to the developer for the development of various projects. However, the land owners failed to declare the capital gains accruing from the transaction, though completion certificates for the projects have been obtained. The amount of such undisclosed capital gains is estimated at more than Rs. 400 crore.

The initial analysis of the seized documents has also revealed that these groups have suppressed income to the tune of Rs. 90 crore in respect of the revenue recognizable from the sale of units in real estate. Further, both the groups have indulged in tax-evasion by inflation of expenses in the construction and development business to the tune of Rs. 28 crore, having claimed bogus purchases and resorted to over-invoicing of the construction materials.

It has also been found that interest-bearing borrowed funds have been diverted to related entities/parties for non-business purposes by the main entities of both the groups. Instances of the transactions involving advances/loans between the group companies have also been found, which partake the character of deemed dividend and hence liable to be taxed as income.  

In the case of a trust covered in the search action, it has been found that the trust has failed to utilize, within the specified permissible time limit, the accumulated amount of Rs. 40 crore for the specified purpose as per the objects of the registered trust deed.

So far, the search action has led to the seizure of undisclosed cash of Rs 3.50 crore and gold, silver, jewellery worth Rs. 18.50 crore. 

Further investigations are in progress.

The Income Tax Department carried out search and seizure operations on a group engaged in the business of mining, processing and trading of black stones. The search operation covered more than 15 premises located at Bhubaneswar, Jajpur, Cuttack, Dhenkanal, Keonjhar, Hyderabad, Kolkata, Gurugram, Noida etc.

During the course of the search and seizure operations, various incriminating documentary and digital evidences, including hand-written books and loose sheets, have been found and seized. The seized documents contain systematic details of cash sales and bogus sundry creditors exceeding Rs. 80 crore. The analysis of seized documents indicates that these cash sales are undisclosed and are not recorded in the regular books of account of the group.

The group is found to have made huge unaccounted investments in acquisition of properties. The search action has led to seizure of unaccounted cash, jewellery & bullion exceeding Rs.1 crore.

Further investigations are in progress.

The Income Tax Department carried out search and seizure operations on 29.06.2022 on a group engaged in the business of manufacturing and distribution of Pharmaceutical medicines and Real Estate Development. The search action covered 25 premises in Delhi-NCR and Haryana.

A large number of incriminating documents in the form of loose sheets and digital data have been found and seized. These documents reveal that the group was involved in huge unaccounted sales of pharmaceutical medicines in cash. Large amount of purchases, payments of wages and other expenses were also found to have been made in cash.

This modus-operandi of unaccounted cash sales of pharmaceutical medicines, including cash receipts through hawala for sale of medicines to Afghanistan, has been admitted by a key person involved in such transactions. The preliminary analysis of the seized data indicates that such hawala cash receipts amount to Rs. 25 crore approximately. In the case of one pharmaceutical concern dealing in Active Pharmaceutical Ingredients (API), surplus stock valued at Rs. 94 crore has been found.

It is also found that the cash generated through unaccounted cash sales has been invested in purchase of immovable properties, and in expansion of manufacturing facilities of Pharmaceutical medicines. The real estate entities of the group are found to be engaged in out-of-books sale and purchase of properties in cash. The group has also been booking bogus Long Term/ Short Term Capital Losses in the securities market to offset the capital gains earned on such property transactions. The amount of such bogus losses is estimated to be around Rs. 20 crore. The search action has revealed that the group has also floated benami entities to purchase immovable properties in the State of Himachal Pradesh.

So far, unaccounted cash of Rs. 4.2 crore and jewellery/bullion worth Rs. 4 crore have been seized.

Further investigations are in progress.