The searches on November 4 had led to unearthing of evidence related to investments in a company registered in Singapore, allegedly in violation of the law.

The Investigation wing of Income Tax Department seized undisclosed assets valued at Rs 11 Crores including cash of 285 Cr and gold jewellery of 253 kg during a raid conducted on various persons in the cinema industry in BengaluruImage for Representation/PTI
news Crime Sunday, November 08, 2020 - 10:25

The Income Tax (I-T) department said that it has unearthed Rs 1,000 crore in unaccounted money, as a result of searches held at five locations in Chennai and Madurai, in the case of a Chennai-based group operating in the IT Infrastructure sector. The search on November 4 had led to unearthing of evidence related to investments that were made in a company registered in Singapore, allegedly in violation of the law.

The I-T department said that proceedings would be initiated under the Black Money Act, 2015 against the company for failing to disclose ‘foreign assets/beneficial interest’ in their income tax returns. According to the I-T department, the shareholding of the company in question is held by two companies, one owned by the group where searches were conducted, while the other company is a subsidiary of a major infrastructure development and financing group.

The I-T department found that the company where searches were carried out, had invested a very nominal amount, but was listed as a 72% shareholder, while the other company having 28% shareholding had invested nearly the entire money.  This resulted in a gain of nearly 7 crore Singapore dollars i.e. nearly Rs 200 crore, which was not disclosed in its income tax returns in Schedule FA (Foreign Assets), said a Finance Ministry statement on the searches.

Therefore, there is suppression of foreign income received in the form of share subscription equivalent to Rs 200 crore, which is taxable in India in the hands of the shareholder, the statement added.

‘Shell companies to siphon off funds’

During the search, it was found that the group had allegedly acquired five shell companies recently, which were used to siphon off as much as Rs 337 crore from the main company, by raising bogus bills and without doing any real business with these companies.

The siphoned money was transferred abroad and utilised for purchase of shares in the name of the son of the main assessee. One of the Directors admitted that they had diverted funds through these companies, the investigation revealed.

The department has also found evidence regarding allotment of preference shares worth Rs 150 crore in 2009 by passing accounting entries to project inflated capital before banks and financial institutions. Allotment of another Rs 150 crore in preference shares in 2015 from company funds is being examined.

During the search, the I-T department said it also found that the group had borrowed funds from banks with interest and diverted them to other group companies, free of interest, for investments in properties. The interest disallowance on this count works out to nearly Rs 423 crore, according to the investigation.

Real estate fraud

The search also revealed that the group had purchased nearly 800 acres of land worth at least Rs 500 crore in the names of various shell companies. Applicability of the Prohibition of Benami Property Transactions Act, 1988 to these transactions is being examined.

It was also seen that there was a transfer of substantial shareholdings during 2020 at a price much lower than the fair market value. The quantum of this will be determined in due course, investigation officials said.

In total, officials said that the search has led to the detection of unaccounted income of nearly Rs 1,000 crore, of which disclosure of additional income of nearly Rs 337 crore has already been made by the assessee, besides actionable issues under the Benami and Black Money Acts. Further investigation is ongoing.

(With IANS inputs)

Show us some love! Support our journalism by becoming a TNM Member - Click here.