Income Tax Department conducts searches in West Bengal on two prominent real estate groups (Press release 31 Aug 2022)

The Income Tax Department carried out a search and seizure operation on 18.08.2022 on two prominent real estate groups of Kolkata.

During the course of the search operation, a large number of incriminating evidence including documents and digital data have been found and seized. There are evidences of out of books cash transactions and on-money receipts. Several documents and electronic data indicate routing of unaccounted money through shell companies. Further, some of the evidences found during the search operation indicate use of unaccounted funds in land acquisition.

The key persons admitted use of shell companies for infusion of unaccounted funds in the form of share capital, share premium and unsecured loans through sale of bogus investments.

The search action has, so far, led to a detection of a total unaccounted income of more than Rs. 250 crore. During the course of search proceedings, 16 bank lockers have been found which have been placed under restraint.

Further investigations are in progress.

Income Tax Department conducts searches in Gujarat on a business group primarily engaged in manufacturing and trading of ceramic tiles (Press release 23 Aug 2022)

The Income Tax Department carried out a search and seizure operation on 09.08.2022 on a business group primarily engaged in manufacturing and trading of ceramic tiles. The search action covered a total of 36 premises, spread across Rajkot, Morbi, Ahmedabad, Raipur, Guwahati, Gurgaon, and Kolkata. The search operation also covered persons engaged in providing finance.

During the course of the search operation, various incriminating evidences in the form of documents and digital data have been found and seized. The initial analysis of these evidences reveal that the group has been engaged in large scale tax evasion by adopting various methods, including, by way of unaccounted cash sales outside the books of account, under invoicing of sales and booking of bogus purchases. The group has also been found to be involved in layering of unaccounted sums through bogus unsecured loans from related parties and share capital from Kolkata-based shell companies.

Further, several evidences indicating the group’s involvement in routing of the unaccounted funds into the regular books of account using accommodation entries provided by a Gujarat based person engaged in providing finance, have also been found.

So far, the search action has resulted in unearthing of unaccounted transactions exceeding Rs. 300 crore including cash loans of more than Rs. 100 crore.

Further investigations are in progress.

Income Tax Department conducts searches in Mumbai on an ex-fund manager and chief trader of equities of a prominent mutual fund house along with related sharebrokers, middlemen and entry operators (Press release 05 Aug 2022)

The Income Tax Department carried out a search and seizure operation on 28.07.2022 on an ex-fund manager and chief trader of equities of a prominent mutual fund house along with related sharebrokers, middlemen and entry operators. The search action covered more than 25 premises, spread across Mumbai, Ahmedabad, Vadodara, Bhuj and Kolkata.

As a result of the search operation, various incriminating evidences in the form of documents and digital data have been found and seized. These evidences gathered during the search including sworn statements recorded from various persons have revealed the modus operandi. It has been detected that the said fund manager and chief trader were sharing specific trade related information with brokers/middlemen and persons located in certain foreign jurisdictions. These persons in turn, used such information for illicit gains in the share market by trading in such scrips either in their own account or account of their clients. These persons including family members of the fund manager have admitted in their statements that the unaccounted cash generated from the above operations was routed mainly through Kolkata based shell entities into their bank accounts. From these bank accounts, funds have been further diverted into the bank accounts of companies/entities incorporated in India and other low tax jurisdictions. The gleaning of seized evidences has exposed the nexus between the ex-fund manager, middlemen, share brokers, and entry operators.

Evidences of large-scale unaccounted investment in cash loans, fixed deposits, immovable properties and their renovation, etc. have also been found and seized. More than 20 lockers have been put under restraint. So far, unaccounted deposits exceeding Rs. 55 crore have been seized.

Further investigations are in progress.

Income tax raid on prominent business engaged in conglomerate business in Gujarat (Press release 02 Aug 2022)

The search action has resulted in unearthing unaccounted transactions exceeding Rs.1000 crore. So far, unaccounted cash of Rs. 24 crore and unexplained jewellery, bullion etc. valued at Rs. 20 crore have been seized during the course of search.

The Income Tax Department carried out a search and seizure operation on 20.07.2022 on a prominent business conglomerate engaged in diversified fields of Textiles, Chemicals, Packaging, Real estate and Education. The search action covered a total of 58 premises, spread across Kheda, Ahmedabad, Mumbai, Hyderabad and Kolkata.

As a result of the search operation, various incriminating evidences in the form of documents and digital data have been found and seized. These evidences reveal that the group has been engaged in large scale tax evasion by adopting various methods, including, by way of unaccounted cash sales outside the books of account, booking of bogus purchases and on-money receipts from real estate transactions. The group has also been found involved in layering of unaccounted sums through share premium from Kolkata-based shell companies. Certain instances of unaccounted income generated through cash based ‘sarafi’ (unsecured) advances made have also been found.

It was also found that the group has been involved in profiteering through manipulation of share prices of its listed companies through operators. Evidences seized also reveal that the group has been siphoning off funds through fictitious entities for personal use of promoters. Further, analysis of evidence suggests that the group is also involved in manipulation of books of account of its public limited companies.

The search action has resulted in unearthing unaccounted transactions exceeding Rs.1000 crore. So far, unaccounted cash of Rs. 24 crore and unexplained jewellery, bullion etc. valued at Rs. 20 crore have been seized during the course of search.

Further investigations are in progress.

Various communication and outreach initiatives to spread financial and tax literacy awareness among masses (Press release 01 Aug 2022)

The Government has launched a series of communication and outreach products aimed at spreading financial and tax literacy awareness among masses. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Lok Sabha today.

The Minister stated that the following communication and outreach campaigns and activities are carried out in respect of Direct Taxes:

  1. Campaigns are carried out on TV and Radio in Hindi and 10 Regional languages to spread awareness on important schemes of Government, due dates for Advance Tax installment, return filing, filing of TDS statement, SFT filing, Vivad se Vishwas Act, etc.
  2. Important circulars/information on Direct Taxes are regularly posted on social media handles of the Department including LinkedIn, Twitter, YouTube, Instagram and Facebook for information of the people.
  3. The Department has made a communication studio “Samvaad” at New Delhi where sessions with senior officers on important taxation issues are recorded and thereafter uploaded on YouTube and social media handles as a part of taxpayer outreach.
  4. The field formation of the Income tax Department under Pr. CCsIT carry out outreach programmes in their regions for different categories of taxpayers on various matters of direct taxation.

The communication and outreach activities have contributed to growth in Direct Tax collections. In F.Y. 2021-22, the Income tax Department has recorded the highest ever direct tax collections of Rs.14,09,000 crore marking a growth of 49% over the F.Y. 2020-21, the Minister stated.

In order to spread tax literacy among children two Board games, one 3D Puzzle game and three Digital Comics have been launched, the Minister stated. The details, aims and objectives are:

  1. Snakes, Ladders and Taxes: This Board game introduces good and bad habits in respect of tax events and financial transactions among the players through the well-established game pattern of snakes and ladders. The game is simple, intuitive and educational with good habits being rewarded instantaneously and bad habits being penalized instantly.
  2. Building India: This collaborative game introduces the concept of importance of paying taxes through the use of 50 memory cards based on infrastructure and social projects. The game, just like taxation, is collaborative in nature and not competitive wherein every player tries to do their best so that everyone can win together. The better everyone uses their memory, the happier the country remains.
  3. 3D Puzzle: This game consists of 30 pieces, which when connected together create a 3- dimensional structure. Each piece contains important information on various concepts and terms pertaining to Direct taxes. The game uses a 3-dimensional model to intuitively teach about income and taxes. The underlying theme is that a nation’s infrastructure is built on a foundation of taxes.
  4. Digital Comic Books – The Income tax Department has collaborated with Motu Patlu characters of Lot Pot comics to spread awareness about concepts of income and taxation among children and young adults. Three Digital comics in this series have been launched by Department.

The Government has taken many steps, the Minister stated, to widen the income tax net like higher Tax Deduction at Source (TDS)/ Tax Collection at Source (TCS) in case of non-filers, expanding the scope of TDS/TCS, broadening the coverage of Statement of Financial Transactions (SFT), implementation of Non- filers Monitoring System, introduction of Annual Information Statement and allowing updation of returns.

The number of new filers (assessees) added during the last 3 financial years is as under:

Giving more details, the Minister stated that a number of legislative measures have been taken by the Government:

  1. Dispute Resolution Committee (DRC):Section 245 MA has been inserted in the Income-tax Act, 1961 (the Act) vide the Finance Act, 2021 to create a new mechanism for small taxpayers, which allows such taxpayers to resolve their disputes with minimum cost and compliance burden. A taxpayer having taxable income up to Rs. 50 lakh and disputed income up to Rs. 10 lakh shall be eligible to approach the Dispute Resolution Committee. For ensuring efficiency, transparency and accountability, the e-Dispute Resolution Committee Scheme, 2021 was notified on 5th April, 2022.
  2. Vivad se Vishwas:In order to reduce pending income tax disputes, the Direct Tax Vivad se Vishwas Act, 2020 (“DTVsV Act”) was enacted on 17th March, 2020 which aims at all taxpayers, in whose case an appeal was pending as on 31st January, 2020, from the stage of first appeal to the Supreme Court, were eligible to file declaration under the DTVsV Act.
  3. Raising of monetary limit for filing of appealThe monetary thresholds limit for filing of departmental appeals have been raised from Rs. 20 lakh to Rs. 50 lakh for appeal before ITAT, from Rs.50 lakh to Rs. 1 crore for appeal before High Court and from Rs.1 crore to Rs. 2 crore for appeal before the Supreme Court.
  4. Repetitive appeals: Taking forward the policy of litigation management, a new section 158AB is inserted in the Act vide Finance Act, 2022. If a question of law in the case of an assessee is identical to a question of law pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal to the Appellate Tribunal or the jurisdictional High Court in the case of the assessee shall be deferred till such question of law is decided by the relevant Court, subject to certain conditions.

Income Tax raid on a group engaged in agro and textile business, and another group of entry operators in Mumbai (Press Release 26 July 2022)

Income Tax Department carried out a search and seizure operation on 05.07.2022 on a group engaged in agro and textile business, and another group of entry operators. A total of 27 premises were covered during the search action in Mumbai and Delhi NCR.

During the course of the search operation, a large number of incriminating evidences in the form of hard copy documents and digital data have been found and seized.

It was found during investigation that most of the turnover of the listed companies of the main group has been generated through circular trading. The promoter of the group was involved in systematic manipulation of performance of certain group companies on stock markets, with the help of stock brokers. Several instances of out of books payment to some stock brokers for unlawful purposes, have also been found. All such irregularities have been admitted by both, the promoter and the stock brokers. The group is also supported by a professional person, who is primarily engaged in providing accommodation entries to several other groups, in exchange of cash.

These evidences also revealed that the group has generated huge amount of cash through claiming bogus purchases of various materials including packing material of more than Rs. 100 crore. Moreover, the group has also indulged in unaccounted sales of agro and textile items over Rs. 150 crore. Handwritten diaries containing cash transactions have also been found and seized, which have been duly corroborated by statements of some of the counterparties/beneficiaries covered under the search action.

Searches were also conducted in case of another group which is involved in providing accommodation entry. This group is found to be operating and controlling various concerns including LLPs, companies and proprietorship concerns through which accommodation entry of sale and purchase of cut and polished diamond as well as shares are given in the guise of genuine business. The main persons of the group have admitted in their statement under oath, about arranging accommodation entries pertaining to expenses and unsecured loans for various beneficiaries, against cash. A preliminary analysis of few years of such transactions shows that accommodation entries in the nature of bogus loans and expenses exceeding few hundred crore have been provided through these entities.

Unaccounted cash of Rs. 1.4 crore has been seized during the search operation.

Further investigations are in progress

163rd Income Tax Day: A journey towards Nation Building (24 July 2022)

The 163rd anniversary of Income Tax Day was observed by Central Board of Direct Taxes (CBDT) and all its field offices across India today. As part of the celebrations, the field formations held a number of events and activities. The events by the field formations included outreach programmes for taxpayers recognising their contribution to the nation, taxpayer felicitation programmes, contributing for upgradation of resources such as computers to Government higher secondary schools, voluntary token donation to orphanages/old-age homes from the departmental employees’ contributions, organising blood donation camps, setting up medical examination and Covid-vaccination camps, tree plantation and cleanliness drives, among others. In addition, events like half marathon, cyclothon, distribution of board games on tax literacy to children and young adults, cultural programmes, inauguration of caricature exhibitions and such other events were also held.

In her message to the Income Tax Department, Union Minister of Finance & Corporate Affairs, Smt. Nirmala Sitharaman observed that the reforms introduced by the Government in recent years have ensured a trust-based tax system. The Finance Minister noted that the taxpayers also have vindicated this trust-based approach as evident from the trend of improved tax collections and increase in the number of Income Tax Returns filed. Smt. Sitharaman appreciated the Income Tax Department for having successfully implemented the policy reforms and for having effectively reoriented itself as a taxpayer-centric organisation. The Finance Minister complimented the Department for having achieved the highest ever revenue collection of over Rs.14 lakh crore in the last fiscal and hoped that the Department would continue to maintain the momentum in the present fiscal too.

Union Minister of State for Finance Shri Pankaj Chaudhary, in his message, observed that a Tax Department’s responsibility is not just limited to efficient and effective tax administration but also extends to honoring the honest taxpayers and providing better taxpayer facilitation. He appreciated the Department for having adapted itself in tune with the needs and aspirations of the people in today’s time, and becoming transparent, non-intrusive and taxpayer friendly in its functioning.

In his message, Union Minister of State for Finance Dr. Bhagwat Kishanrao Karad observed that the Income Tax Department has played a pivotal role in the growth and development of the nation. He lauded the Department for having implemented several far-reaching reforms which have the potential to redefine its engagement with the taxpayers and other stake holders.

Secretary Revenue, Shri Tarun Bajaj, in his message, commended the Department for having proved itself a competent organisation by embracing positive change and committing itself to delivering time-bound services to taxpayers. He also complimented the Department for keeping itself updated with the latest developments and adopting latest technology such as the use of artificial intelligence and data analytics tools for garnering revenue in a non-intrusive manner. He observed that various taxpayer outreach programs organized by the Department will go a long way in creating an atmosphere of mutual trust and respect between the taxpayers and the Department

Chairman, CBDT, Shri Nitin Gupta, in his message, while complimenting the Department for having registered the highest ever net collections of Rs. 14.09 lakh crore in FY 2021-22, exhorted the Departmental personnel not to rest on their laurels and to keep working hard. He observed that prompt redressal of taxpayers’ grievances in the true spirit of the Taxpayers’ Charter shall remain a top priority area. He hoped that the Department would continue with the same service oriented approach, strengthened by right values and ethics, as it has done in the past. The Chairman CBDT also addressed the taxpayers and stakeholders through ‘Samvaad’ which was aired on the YouTube Channel of the Department.

The observance of the Income Tax Day served as an occasion for the Departmental personnel to look back at the journey so far in service to the nation and to re-dedicate themselves to contributing to the growth of the nation.

Income tax raid on a Pharmaceutical Group in Bengaluru (Press release 13th July 2022)

Income Tax Department carried out search and seizure operations on 06.07.2022 on a major Bengaluru-based pharmaceutical group, engaged in the business of manufacturing and marketing of pharmaceutical products and Active Pharmaceutical Ingredients (API). The group has presence in over 50 countries. The search action covered around 36 premises spread across 9 States.

During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized. The initial gleaning of the evidence has revealed that the group has been debiting in its books of account unallowable expenses on account of distribution of freebies to the medical professionals under the head “Sales and Promotion”. These freebies included travel expenses, perquisites and gifts etc. to doctors and medical professionals for promoting the group’s products under the heads “Promotion and Propaganda”, “Seminars and Symposiums”, “Medical Advisories” etc. The evidence indicates that the group has adopted unethical practices to promote its products/ brands. The quantum of such freebies detected is estimated to be around Rs. 1000 crore.

The group is also found to have claimed artificially inflated deduction under special provisions in respect of certain incomes, by resorting to suppression of expenses and over-appropriation of revenue to the unit eligible for such deduction.  Various other means of tax evasion, including inadequate allocation of research and development expenses to eligible units and inflated claim of weighted deduction under section 35 (2AB), have also been detected. The quantum of tax sought to be evaded through such means is estimated at over Rs. 300 crore.

Instances of violation of provisions of tax deduction at source under section 194C of the Income-tax Act, 1961 have also been detected in respect of transactions under contracts entered into with the third-party bulk drug manufacturers.

During the search action, unaccounted cash amounting to Rs. 1.20 crore and unaccounted gold and diamond jewellery worth more than Rs. 1.40 crore have also been seized.  

Further investigations are in progress.

Income Tax raid in Delhi and Mumbai based group, engaged in the business of hospitality, marble, lights trading and real estate (Press release 15 July 2022)

Income Tax Department carried out a search and seizure operation on 07.07.2022 on a Delhi and Mumbai based group, engaged in the business of hospitality, marble, lights trading and real estate. A total of 18 premises across Delhi, Mumbai and Daman were covered during the search action.

During the course of the search operation, a large number of incriminating evidences in the form of hard copy documents and digital data have been found and seized. These evidences indicate that the group has parked its undisclosed money abroad in certain low tax jurisdictions. The group, through Malaysia based web of companies, has finally invested the funds in its hospitality business in India. It is estimated that quantum of such funds exceeds Rs. 40 crore.

The evidence gathered indicates that the group has invested in a few companies abroad, which have been incorporated specially for commodity trading. The net worth of one such company including its profits earned has not been disclosed by the group in its ITRs for the relevant period. Further, it has been detected that the promoter of the group has invested in an immovable property in foreign jurisdiction which has also not been disclosed in his Income tax return. Besides these, certain offshore entities, set up for commodity trading, have been identified, which have also not been declared.

The search action also revealed that the group was involved in out-of-books cash sales in its India operations. In its trading business of marble and lights, seized evidences indicate unaccounted cash sales to the extent of 50% to 70% of the total sales. Undisclosed excess stock of Rs. 30 crore has also been found.

In its hospitality business, unaccounted sales have been detected more specifically in banquet division.

So far, undeclared jewellery valued at Rs. 2.5 crore has been seized. Further investigations are in progress.

Income Tax raid on two business groups in Tamil Nadu (Press release 12 July 2022)

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.