Category: Income Tax
Income Tax Department conducts searches in Maharashtra, Karnataka & Uttar Pradesh (MOF Press Release dated 04th Oct 2021)
The Income Tax Department carried outa search and seizure operation on 30.09.2021 on 37 premises spread across multiple cities including Mumbai, Pune, Noida & Bangalore. These groups/individuals were in varied businesses such as cable manufacturing, real estate, textile, printing machineries, hotels, logistics etc.
During the course of the search operation, several incriminating documents, loose sheets, diaries, emails and other digital evidences etc. have been unearthed which indicates ownership of a large number of foreign bank accounts and immovable properties, unreported to the Department. These groups/individuals utilized the services of a Dubai based financial service provider to create a dubious and complex web of foreign companies and trusts based in tax havens such as Mauritius, UAE, BVI, Gibraltar etc. to hold their unaccounted assets.
The credits in the bank accounts of these groups and individuals maintained by the Dubai based financial service provider exceed 100 Million US Dollars ( about Rs. 750 crore) accumulated over a decade and were found to be parked in bank accounts in Switzerland, UAE, Malaysia and several other countries. Evidences gathered during the search operation reveal that the undisclosed funds parked abroad have been used by these groups for acquiring immovable properties in several countries such as UK, Portugal, UAE etc in the name of defunct companies incorporated abroad, with funds layered through foreign bank accounts, for meeting the personal expenses of the promoters and their family members abroad and routing back funds in their Indian entities.
During the course of the search, evidence related to bogus payments to suppliers for generating cash, unaccounted cash expenditure, hawala transactions, over-invoicing have also been gathered. Unaccounted cash and jewellery to the tune of over Rs. 2 crore has been seized from the residential and business premises respectively. More than 50 bank lockers have been kept under restraint.
Further investigations are in progress.
Cases pertaining to ‘Pandora Papers’ to be investigated (Ministry of Finance Press Release dated 04th Aug 2021)
On 3rd October, 2021, the International Consortium of International Journalists (ICIJ) has come out with what is claimed to be a 2.94 terabyte data trove that exposes the offshore secrets of wealthy elites from more than 200 countries and territories. The investigation is based on a leak of confidential records of 14 offshore service providers that give professional services to wealthy individuals and corporations seeking to incorporate shell companies, trusts, foundations and other entities in low or no-tax jurisdictions.
The Government has taken note of these developments. The relevant investigative agencies would undertake investigation in these cases and appropriate action would be taken in such cases as per law. With a view to ensure effective investigation in these cases, the Government will also proactively engage with foreign jurisdictions for obtaining information in respect of relevant taxpayers/entities. The Government of India is also part of an Inter-Governmental Group that ensures collaboration and experience sharing to effectively address tax risks associated with such leaks.
It may be noted that following earlier similar such leaks in the form of ICIJ, HSBC, Panama Papers and Paradise Papers, the Government has already enacted the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 with an aim to curb black money, or undisclosed foreign assets and income by imposing suitable tax and penalty on such income. Undisclosed credits of Rs. 20,352 crore approximately (status as on 15.09.2021) have been detected in the investigations carried out in the Panama and Paradise Papers.
Names of only a few Indians (legal entities as well as individuals) have appeared so far in the media. Even the ICIJ website (www.icij.org) has not yet released the names and other particulars of all the entities. The website of ICIJ suggests that information will be released in phases and structured data connected to the Pandora Papers investigation will be released only in the days to come on its Offshore Leaks Database.
Further, the Government has directed today that, investigations in cases of Pandora Papers leaks appearing in the media under the name ‘PANDORA PAPERS’ will be monitored through the Multi Agency Group, headed by the Chairman, CBDT, having representatives from CBDT, ED, RBI & FIU.
Processing of returns claims under section 143(1) of the Income-tax Act, 1961 beyond the prescribed time limits in non-scrutiny cases
Income Tax Department conducts searches in Ahmedabad (Ministry of Finance Press Release dated 02 Oct 2021)
The Income Tax Department carried out search & seizure operations on 28.09.2021 on a real estate developer group and the brokers connected with this group. Total of 22 residential and business premises were covered in the operation.
In the case of the real estate developer group, a large number of incriminating documents, loose papers, digital evidences etc. have been found and seized. These evidences contain detailed records of the group’s unaccounted transactions spread across multiple financial years. Documents showing unaccounted investment in land of more than Rs. 200 crore and unaccounted cash receipts from sale of land amounting to more than Rs. 100 crore have been found and seized so far. A large number of original documents of properties purchased over the years which are apparently held in the name of benami individuals have also been found.
In the case of the broker, documents showing details of payments in cash and in cheques relating to transactions of purchase and sale of land carried out through the broker have been found. Documents showing cash transactions of more than Rs. 230 crore in these land deals have been found and seized so far.
The documents found reveal unaccounted income of more than Rs. 200 crore in the hands of the real estate group and also unaccounted income of more than Rs. 200 crore in the hands of the parties recorded in the documents found from the possession of the brokers. Over all, the search & seizure operation has resulted in the detection of unaccounted transactions of more than Rs. 500 crore.
24 lockers have also been found during the course of the search and seizure operation which have been put under restraint. Cash of approximately Rs.1 crore and jewellery worth Rs. 98 lakh have been seized so far.
The search and seizure operation is still continuing and further investigations are in progress.
****
CBDT notifies Rules for implementing the amendments made by the Taxation Laws (Amendment) Act, 2021 (Ministry of Finance Press Release dated 02 Oct 2021)
The Taxation Laws (Amendment) Act, 2021 (2021 Act), inter-alia, amended the Income-tax Act, 1961 (Income-tax Act) so as to provide that no tax demand shall be raised in future on the basis of the amendment to section 9 of the Income-tax Act made vide Finance Act, 2012 for any offshore indirect transfer of Indian assets if the transaction was undertaken before 28th May, 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President).
The 2021 Act also provides that the demand raised for offshore indirect transfer of Indian assets made before 28th May, 2012 (including the validation of demand provided under Section 119 of the Finance Act 2012) shall be nullified on fulfillment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc. shall be filed and such other conditions are fulfilled as may be prescribed. The amount paid/collected in these cases shall be refunded, without any interest, on fulfillment of the said conditions.
The draft rules, to amend the Income-tax Rules, 1962, prescribing the specified conditions as referred above and providing the form and manner for furnishing of undertaking for withdrawal of pending litigation, claiming no cost, damages, interest, etc. were circulated in public domain on 28th August, 2021, inviting suggestions/comments from all stakeholders by the 4th of September, 2021.
After examining the stakeholder comments and incorporating several suggestions contained therein, the rules for implementing the 2021 Act have been published in the Official Gazette vide Notification No. GSR 713(E) dated 1st October, 2021 wherein the following rules have been inserted to the Income-tax Rules, 1962:
- Rule 11UE which provides for the specified conditions in order to be eligible to claim relief under 2021 Act; and
- Rule 11UF which provides the form and manner of furnishing the undertaking for withdrawal of pending litigation, claiming no cost, damages, etc.
The notification containing the above rules can be accessed at www.incometaxindia.gov.in.
************
Income Tax Department conducts searches in Maharashtra (MoF Press Release dated 27th Sept 2021)
The Income Tax Department carried out a search and seizure operation on 23.09.2021 on a group of four major Steel Rolling Mills based in Jalna, Maharashtra. These companies are engaged in the business of manufacturing steel TMT bars and billets mostly using steel scrap as raw material. The operation was conducted in more than 32 premises spread across Jalna, Aurangabad, Pune, Mumbai and Kolkata.
During the course of the search and seizure operation, many incriminating documents, loose sheets and other digital evidences were found and seized. These evidences clearly indicate the involvement of the companies in large scale unaccounted financial transactions made outside the regular books of accounts, including inflation of purchases using entry providers, unaccounted cash expenses and investments, etc. The evidences found also indicate the laundering of substantial amount of unaccounted income earned by the companies in the guise of share premium and unsecured loans using shell companies. Evidence for unaccounted purchase in excess of Rs.200 crore has been found. Huge quantity of unaccounted stock was also found in the factory premises of the companies.
12 bank lockers were unearthed during the search operation. Unaccounted cash of more than Rs. 2.10 crore and jewellery amounting to Rs. 1.07 crore has been seized from different premises. Evidence detected so far, indicates that, unaccounted income is likely to exceed Rs. 300 crore and the four companies have already disclosed additional income to the extent of Rs. 71 crore consequent to the search.
Further investigations are in progress.
DRI seizes 3004 kg of Heroin at Mundra – arrest of eight persons (Ministry of Finance Press Release dated 22 Sept 2021)
In its continued crackdown on smuggling of Heroin into India,Directorate of Revenue Intelligence (DRI) detained two containers on 13.09.2021for examination that had arrived at Mundra Port from Kandhar, Afghanistan via Bandar Abbas, Iran. The containers were declared to contain Semi-processed Talc Stones. Detailed examination of the containers led to the seizure of 2988 kgs of heroin from the two containers on 17.09.2021 and 19.09.21.
The heroin was concealed in jumbo bags said to contain unprocessed talc powder. The heroin was placed in the lower layers of the bags. The heroin was then topped with Talc stones to avoid detection. Resultantly, the heroin had to be painstakingly separated from the Talc Stones.
Immediate follow-up operations were carried out in New Delhi, Noida (UP), Chennai, Coimbatore, Ahmedabad, Mandvi, Gandhidham and Vijaywada. This led to recovery of 16.1 kgs of heroin from a Godown in Delhi, 10.2 kgs powder suspected to be cocaine and 11 kgs of substance suspected to be heroin from a residential place in Noida.
A total of eight (8) persons including four (4) Afghan nationals, one (1) Uzbek National and three (3) Indian nationals have been arrested in the case so far. Thearrested Indian Nationals include the holder of the Import Export Code (IEC), which was used to import the consignment. He was arrested from Chennai. Investigations are in progress.
Income Tax Department conducts searches in West Bengal (MOF Press Release dated 21st Sept 2021)
The Income Tax Department carried out a search and seizure operation on 17.09.2021 on a prominent group engaged in manufacturing of steel products. 25 premises consisting of 8 residences, 9 offices and 8 factories, spread over Kolkata, Durgapur, Asansol and Purulia and other regions of West Bengal were covered in the operation.
The search operation has led to the detection of huge quantity of incriminating documents and digital evidence from different premises. Evidences pertain to generation of unaccounted income by the group by way of unaccounted cash sales, unaccounted cash expenditure, purchase from bogus parties, under-reporting of actual production, cash purchases of scrap, several documents of land purchases and sale etc. Evidence has also been found pertaining to the utilisation of the unaccounted income in the form of unsecured loans and sale of shares of shell entities though layering of the unaccounted income. A large number of property documents pertaining to one of the members of the group, showing land and property holding in different names, have also been seized. The total amount of such incriminating evidences pertaining to the manufacturing group exceeds Rs. 700 crore. The operation has led to seizure of unaccounted cash amounting to Rs.20 lakh while 2 lockers remain to be operated.
During the search operation, an accommodation entry provider, who was providing entries to the searched group, was also covered. From his secret back office, huge number of incriminating documents pertaining to providing accommodation entries through modes like sale of shares of shell companies, unsecured loans from shell entities, bogus billing, etc. have been found, the total amount of which runs into several hundreds of crores of rupees. Evidence of more than 200 companies/entities having more than 200 bank accounts being managed from the entry operator’s premises have been found. On the basis of preliminary examination of these documents, it appears that these bank accounts and entities have been used as conduit to route the unaccounted income of many beneficiaries.
Further investigations are in progress.
****
Income Tax Department conducts searches in Delhi, Punjab and West Bengal (MOF Press Release dated 21st Sept 2021)
The Income Tax Department carried out a search and seizure operation on 18.09.2021 on a leading business house of India involved in manufacture of textile and filament yarn having corporate offices in Delhi, Punjab and Kolkata.
During the course of the search operation, many incriminating documents, loose sheets, diaries, digital evidences etc have been recovered which indicate involvement of the group in routing of unaccounted funds back in its Indian entities, possession of foreign bank accounts unreported to the Department. Substantial evidence of transactions outside the books of accounts, cash transactions in land deals, bogus expenses debited in books of accounts, unaccounted cash expenditure, accommodation entries taken from entry operators have been gathered.
The group has maintained unaccounted funds of about Rs. 350 crore in its foreign bank accounts and has also routed these funds back into its business through shell entities in tax havens. The modus operandi detected was related to investment by foreign entities, under control of the group, in Foreign Currency Convertible Bonds, issued by its main concern, and subsequently under the garb of defaulting on payments, converting it into shares of the company. It was also seen that foreign companies and trusts were being paid management fees for managing the unaccounted funds. Though there is a specific requirement of disclosing foreign assets owned/managed in the form of companies and bank accounts in Schedule FA in Income Tax Returns, the same has not been disclosed by the group to the Department.
Details of accounts related to unexplained personal expenditure in cash were found to be meticulously maintained in one of the main offices of the company. Evidence has been gathered that cash of about Rs. 100 crore was generated by debiting bogus expenditure in company accounts and cash transactions in land deals.
The search operation is still continuing and further investigations are in progress.
Business So Simple 