Author: Business So Simple

The Income Tax Department carried out search and seizure operation on 18.12.2021 on various persons and their business entities, engaged in the business of civil construction and real estate and running educational institutes in UP and Karnataka. A Kolkata based entry operator has also been covered in the search operation.

The search action covered more than 30 premises spread over various locations including Lucknow, Mainpuri, Mau, Kolkata, Bengaluru and NCR. Large number of incriminating evidences including hard copy documents and digital data have been found and seized during the search. Preliminary analysis of the same has revealed the following modus-operandi of tax evasion:

1. It was found that several entities, engaged in the business of civil construction, were involved in claiming of bogus expenditure running into crores of rupees. Various incriminating documents including blank bill books, stamps, signed cheque books of bogus suppliers have been found and seized. In case of one company, undisclosed income of over Rs. 86 crore of the directors of the company has been detected. Out of it, the person concerned has admitted a sum of Rs. 68 crore as his undisclosed income and offered to pay tax thereon. In the case of a proprietary concern, books of accounts relating to its turnover exceeding Rs. 150 crore during the last few years could not be produced. In another concern, it was detected that it used the conduit of shell companies to route its unexplained income and investments. Such unexplained investment to the tune of Rs. 12 crore has been identified. In case of another person, unexplained investment of Rs. 11 crore in a shell company and investments in benami properties worth Rs. 3.5 crore have been identified.
2. Further, a Kolkata based accommodation entry provider was also covered in connection with providing accommodation entries to these persons. It was found that the entry operator formed various shell companies to provide accommodation entries of bogus share capital to the tune of Rs. 408 crore and bogus unsecured loan of Rs. 154 crore through these shell companies. Substantial amount of digital data evidencing hawala transactions has also been found & seized during the search operation. The entry operator has admitted to the above modus-operandi, and also disclosed unaccounted commission income of Rs. 5 crore.
3. In respect of a Bengaluru based Trust and its related entities covered in the search action, it is revealed that substantial amounts of trust funds amounting to Rs. 80 lakh have been transferred, in the guise of donation, for non-trust purposes, to certain Kerala based entities including Markazu Saquafathi Ssunniyya Trust and Markaz Knowledge City Trust, connected with Gulf countries, for the personal benefit of the trustees. This, prima-facie indicates violation of relevant provisions relating to registration of trusts under the Income-tax Act, 1961 for claim of exemption, as well as, FEMA provisions. Evidences with regard to collection of capitation fee of about Rs. 10 crore in cash, and expenses to the tune of over Rs. 4.8 crore incurred from the account of the Trust, for the trustees’ personal benefit, over the last 3 years, have also been gathered.

The search action has resulted in seizure of unaccounted cash of Rs. 1.12 crore.

Further investigations are in progress.

The Income Tax Department carried out search and seizure operation on 16.12.2021 on a Neyveli based group, engaged in the business of chit funds, finance and real estate. The group also runs educational institutions through its trusts. The search action covered around 30 premises located at various places like Neyveli, Chennai, Coimbatore, Nilgiris, etc.

During the course of the search operations, a remotely located cloud server containing parallel set of books of account secretly maintained by key persons of the group has been unearthed. Various documentary and digital evidences have also been seized. The preliminary analysis of these digital evidences and other related evidences clearly reveals the details of unaccounted money generated through under-reporting of income from chit fund business and deposits received in cash from various parties. The seized evidences also indicate that the unaccounted money, so generated, has been utilised to make ‘on-money’ payments for investments in real estate business. Prima facie analysis indicates the quantum of unaccounted cash transactions in immovable properties to be to the tune of Rs. 250 crore.

The search action has led to seizure of unaccounted cash of more than Rs.12 crore.

Further investigations are in progress.

The Income Tax Department carried out search and seizure operation on 16.12.2021 on two prominent Asansol based groups, engaged in business of iron and steel products, infrastructure, cement, poly fabs, agro-tech & food processing, etc. The search action covered more than 30 premises spread over West Bengal.

 A large number of incriminating evidences in the form of documents and digital data stored in SD cards, WhatsApp chats, etc. have been found and seized. The search team has detected that SD cards have been used to keep details of a parallel set of unaccounted sales, excel sheets of actual production data, parallel tally accounts files, cash payment details made to various parties etc.

 A preliminary analysis of seized SD cards and related evidences reveal that these contain unaccounted cash handled by key employees of the directors and owners of the entities. The key persons of one of the groups have admitted that unaccounted income of more than Rs. 66 crore has been generated through unaccounted cash sales from its manufacturing units during the financial year FY 20-21. In certain other entities, evidences have been found relating to claim of unsubstantiated purchases, out of which purchases to the extent of Rs. 20 crore have also been admitted by the directors as undisclosed income.

Further, analysis of seized evidences of another group reveals that many paper companies, which are run by entry operators, have been used to provide accommodation entries to its flagship concerns. These shell entities have been found to have routed back the unaccounted money of the group in the guise of share capital/unsecured loan into the books of account of these entities. It has been corroborated, with admission by directors of these entities concerned, that, quantum of such routing exceeds Rs. 40 crore.

Thus, the search action has unearthed various methods of tax evasion adopted by the groups such as unaccounted cash sales, inflation of expenses through claim of bogus purchases and routing of unaccounted income through accommodation entries.

The search has resulted in seizure of unaccounted cash and jewellery of more than Rs.2 crore and has, so far, led to detection of total unaccounted income exceeding Rs. 125 crore.

Further investigations are in progress.