Tag: Search & Seizure

The Income Tax Department had conducted a search and seizure operations on a diversified business group engaged in the manufacturing of plywood/plyboard, MDF board, inverter and vehicle batteries, and in the refining of lead on 11.01.2022.  More than 30 premises spread across the cities of Yamuna Nagar, Ambala, Karnal, and Mohali have been covered in the search operation.

During the search operation, various incriminating documents and digital evidences have been found and seized in relation to entities of plywood business. These include a parallel set of books of account recording the entries of cash transactions of purchase, sale, payment of wages, and other expenses of group entities, in addition to transactions of investment in immovable properties. These evidences have clearly revealed the modus operandi of the group that it is involved in the generation of cash by suppression of sales to the extent of about 40% of the actual sales. The preliminary analysis of incriminating evidence indicates that this group has suppressed sales to the tune of Rs.400 crore in the last three years.

In case of a battery manufacturing concern, the search team unearthed incriminating evidence regarding payment of wages and purchase of raw materials in cash aggregating to Rs.110 crore which has not been recorded in the books of account. In the case of battery manufacturing as well as lead refining concerns and its related entities, suspicious purchases exceeding Rs.40 crore from non-existent concerns have also been identified.

The correlation of this evidence has also revealed that unaccounted cash so generated is systematically invested in the acquisition of immovable properties of key persons of plywood and lead refining businesses.

The search action has resulted in seizure of unaccounted cash of more than Rs 6.60 crore and jewellary valued to the tune of Rs 2.10 crore. In total, 22 bank lockers have been kept under restraint and are yet to be operated.

Further investigations are in progress.

The Income Tax Department carried out search and seizure operation on 05.01.2022 on two groups, engaged in the business of quarry operation.  More than 35 premises spread across districts of Kottayam, Eranakulam, Thrissur, Palakkad and Kannur have been covered in the search operation.

During the course of the search operation, various incriminating documents and digital evidences have been found and seized, including a parallel set of books of account recording the entries of actual sales and receipt of cash. These evidences have clearly revealed the modus operandi being followed by the quarry operators as they are indulging in large scale suppression of sales made in cash including the fact that these transactions are not recorded in the regular books of account of the group. 

The correlation of these evidences also indicates that unaccounted cash so generated is systematically invested in acquisition of immovable properties, used for the business of cash loans, and unrecorded capital investments in other businesses. The search team has also gathered evidences of on-money payment for purchase of properties and substantial cash deposits in undisclosed bank accounts. The assessees of the group have been found to have sold immovable properties without duly accounting for the capital gains arising from such transactions.

The search action has resulted in seizure of unaccounted cash of more than Rs 2.30 crore.

So far, the search has led to the detection of estimated unaccounted income to the tune of Rs. 200 crore. 

Further investigations are in progress.

The Income Tax Department carried out search and seizure operation on 05.01.2022 on three real estate developers, engaged in the business of land development as well as construction activities in the town of Kurnool and other mofussil areas of Andhra Pradesh and Telangana. More than two dozen premises have been covered in the search operation spread over Kurnool, Ananthapur, Kadapa, Nandyal, Bellary, etc.

During the course of the search operations, several incriminating documents, such as handwritten books, agreements, etc. have been found and seized. Digital data has also been seized from a specialized software application as well as from other electronic gadgets. It has been found in the case of one of the assessee groups that it has been using a software which has been systematically modified to eliminate the unaccounted cash element of the consideration received and to record in the regular books of account the sale consideration that matches with registered sale price.

These groups have been found to be accepting cash over and above the registered value of the properties. Such unaccounted cash is used for payments of on-money towards the purchase of lands and incurring other expenditure.

So far, the search action has led to the seizure of unaccounted cash of Rs.1.64 crore.

The search has resulted in the detection of unaccounted cash transactions to the tune of Rs. 800 crore.

Further investigations are in progress.

The Income Tax Department carried out search and seizure operation on 31.12.2021 on two groups engaged in the business of perfume manufacturing and real estate. Over 40 premises in the states of Uttar Pradesh, Maharashtra, Delhi, Tamil Nadu and Gujarat have been covered during the search action.

In case of the first group primarily based in Mumbai & UP, the search action revealed that the group is involved in tax evasion by under-reporting sale of perfumes, stock manipulation, fudging books of account to shift profits from taxable unit to tax exempt unit, inflation of expenditure, etc. Evidences found in the sales office and main office have revealed that the group makes 35% to 40% of its retail sales in cash by ‘kucha’ bills and these cash receipts are not recorded in the regular books of account, running into crores of rupees. Evidences of booking purchases from bogus parties to the extent of about Rs. 5 crore have also been unearthed.

The analysis of incriminating evidence indicates that unaccounted income so generated is invested in various real estate projects in Mumbai, acquisition of properties both in India and The United Arab Emirates (UAE). It has also been detected that the group has evaded tax of Rs. 10 crore on conversion of the stock-in-trade to capital as corresponding income has not been declared. The group has also not declared income amounting to Rs. 45 crore on the benefits paid to retiring partners.

Evidences have also been found and seized substantiating that the promoters of the group have incorporated some offshore entities. However, such offshore entities have not been reported in their respective Income Tax Returns. The evidences recovered during the search reveal that the offshore entities are run and managed by the Indian promotors. Two of such offshore entities have also been found to own one villa each in the UAE.

It has also been unearthed that one of the offshore entities of the group from the UAE has purportedly introduced illicit share capital of over Rs. 16 crore in an Indian entity of the group, at exorbitant premium. This recipient group entity has also obtained further sum of Rs. 19 crore in the form of illicit share capital from certain Kolkata based shell entities. One of the shareholder directors of these shell entities admitted on oath that he was a dummy director and invested in share capital of the group company at the instance of the promoters of the group.

During the course of search action on another UP based group, incriminating evidences substantiating unrecorded cash transactions of about Rs. 10 crore have been found and seized. It is also gathered that the group is not maintaining any stock register for its inventory.

So far, unaccounted cash exceeding Rs. 9.40 crore and unexplained jewellery of  more than Rs. 2 crore have been seized. Several bank lockers have been placed under restraint and are yet to be operated.

Further investigations are in progress.

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.

The Income Tax Department carried out search and seizure operations on 08.12.2021 on four Asset Reconstruction Companies (ARCs). Total of 60 premises spread over Mumbai, Ahmedabad, Delhi, etc. have been covered.

The search action has revealed that the ARCs had adopted various unfair and fraudulent trade practices in acquiring the Non-Performing Assets (NPA) from the lender banks. It has been found that an unholy nexus existed between the borrower groups and ARCs and in the process, a maze of shell / dummy concerns have been used. The amount at which the NPA has been acquired by the ARC has been found to be far less than the real value of the collateral securities covering the said asset/NPA.

The search has revealed that the minimum cash payout made out by the ARCs to lender bank(s) for acquiring the stressed assets/NPAs have usually been using the funds of the borrower group. Such funds have been routed through several layers of dummy companies controlled by the borrower group or through hawala channels.

It has also been found that the ARCs have been following non-transparent methods in disposal of assets that were acquired by them from the banks. More often than not, the underlying assets had been re-acquired by the same borrower group, albeit at a fraction of their real values. The ARCs are found to have concealed the profits on disposal of the underlying assets by diverting the actual profit to their related concerns, under the garb of consultancy receipts or unsecured loans/investments. Through this method, the ARCs have not only evaded the payment of due taxes but also deprived the lender bank(s) of their share of actual profits.

One of the ARCs was found to be maintaining a parallel set of accounts on Tally accounting software, in a pen drive, recovered from the custody of the trusted employees of the promoter. This parallel set of accounts contained cash transactions aggregating to more than Rs. 850 crore. Handwritten diaries have also been found during the search, containing detailed entries substantiating the deliberate act of layering of transactions by the promoter group and use of a network of middlemen for the same. There are also evidences of routing of funds through offshore structures to acquire the assets.

Cash of Rs. 4 crore has been seized during the search operation. Large volumes of documentary and digital evidence seized are being further analysed for detection of violations under the Income Tax and allied Acts.

Further investigations are in progress.

The Income Tax Department initiated search operation in the case of two major manufacturers and suppliers of refined lead, lead alloys and lead oxides on 07.12.2021. The search operation covered 24 premises spread over in the states of West Bengal and Uttar Pradesh.

During the search and seizure action, it has been noticed that these groups are involved in the suppression of taxable income by resorting to bogus purchases and inflation of purchases.

Investigations have categorically revealed that these two groups have booked bogus purchases of around Rs. 250 crore in the name of various individuals, proprietary concerns, and companies. Evidence gathered during the search operation further reveals that stock registers, transport documents, e-way bills etc. have been fabricated to make such bogus purchases. Several accommodation entry providers have admitted that they have supplied bogus bills without supply of material.

The analysis of documents seized from the business premises of one of the groups indicates the modus operandi of over-invoicing during the purchase of raw material in a systematic manner. The differential amount is received back in cash by the key persons of the assessee group. One of the employees of the group has admitted that invoices have been inflated by charging higher prices for better quality of goods than goods actually supplied.

Incriminating evidence in the form of physical documents and digital data indicating unaccounted investments made in cash in immovable properties has also been found and seized.

The search operations have resulted in seizure of jewellery valued at Rs. 53 lakh while four bank lockers are yet to be operated.

 Further investigations are under progress.