Exclusive: Top Kollywood producers on I-T radar, trail leads to controversial financier

The Income Tax Department has begun an investigation into the financial transactions of film producers from the money trail left by a well known Kollywood financier.
Anbu Chezhiyan
Anbu Chezhiyan
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The Tamil film industry is reeling under an investigation by the Income Tax department, who have zeroed in on producers who have borrowed money over the years from well known Kollywood financier G N Anbu Chezhiyan to finance their films. Reliable sources have told TNM that several producers in the Tamil film industry who had business dealings with Chezhiyan were served notices in March 2022 by the Income Tax department on charges of tax evasion. At least seven top producers received notices asking them to explain money borrowed from Anbu Chezhiyan, ranging from Rs 6 crore to Rs 75 crore. One production house which has around three movies in the pipeline received a notice seeking an explanation for Rs 75 crore that was allegedly borrowed from Madurai based financier Anbu Chezhiyan.

TNM individually spoke to at least six producers from Kollywood and all of them confirmed that majority of the producers who had business transactions with financier Anbu Chezhiyan have come under the Income Tax scanner and received notices from the department based on the documents seized from the financier. “Many producers have received show cause notices from the Income Tax department in March 2022. They were all summoned to appear before the I-T authorities. The producers have been issued notices based on business transactions they have had with Anbu Chezhiyan during different periods of time," said a producer on condition of anonymity.

The News Minute has accessed the Income Tax notices that have been sent to the producers which talks about the search and seizure operation that was conducted with regards to G N Anbu Chezhiyan and others on February 5, 2020. Even as Anbu Chezhiyan was being raided by the I-T Department, little did some of the major producers in Kollywood know that it would spell trouble for them.

“During the search proceedings at the premises of ____, various loose sheets were seized in which Anbu Chezhiyan had noted down the details of daily cash transactions he had with so many parties that happened from his office. The details of such transactions the parties had with G N Anbu Chezhiyan was tabulated and it has been found that ____ had repaid the loan amount and interest thereof in cash to a tune of Rs __ crore  to G N Anbu Chezhiyan from the AY 20__-__. Please state why the same should not be taxed as your undisclosed income and added back to your total income from AY 20__-__," the Income Tax notice to one of the producers read. (TNM has redacted the name and details)

A director and producer, who has had close business ties with Anbu Chezhiyan, also spoke to TNM and said there were some queries that were raised by the Income Tax department at the time of the raids because documents related to him were found during the raids on Anbu Chezhiyan. "I have provided an explanation to the Income Tax and after that they have not raised any queries,” he said.

Who is Anbu Chezhiyan?

Settled in Madurai, Anbu Chezhiyan is a top financier who bankrolls many Tamil movies. He has been previously linked to allegations of harassment over loan recovery and was arrested once in 2011 over a producer’s complaint that he was being threatened by Anbu Chezhiyan despite settling a loan. Furthermore, in November 2017, the financier was in the eye of the storm after Ashok Kumar, cousin of director Sasikumar, died by suicide due to harassment and mental trauma caused by the financier. Regardless of the allegations, he remains a powerful force in Kollywood, financing many big budget movies with top stars.

 Sources told TNM that most producers were livid with Anbu Chezhiyan as the amount borrowed from him were almost all fully paid back, but the financier retained most of the business related documents with him. Several players in the Kollywood industry alleged that Anbu does not return written loan agreements, promissory notes, blank cheques or security cheques. “He retains them as leverage for later. In one producer’s case, he took money for three consecutive years. Even though the producer repaid the money the same year, Anbu did not give back his documents. Now this producer has also received a notice,” a source said. 

Another producer blamed it on the vicious loop created by circumstances in the industry and that there was no way to escape people like Anbu Chezhiyan. “The top three heroes in the Tamil film industry charge Rs 100 - Rs 120 crore per movie. No one can even dare to have a conversation with them about reducing the rates. So where will the producer get money from? The government or the banks will not give loans, only a few financiers do,” the producer said.

Industry insiders claim that barring a few big players, all other directors and producers have little option but to do business with the financier despite knowing his alleged notorious ways of harassing clients. “He understands the requirements in the industry very well and only he has the resources. So it is difficult for anyone to ignore his involvement. If you manage to get dates from the artists, Anbu Chezhiyan will automatically enter the picture with the funds. Then there is no end to it," a senior film  journalist added. 

What triggered the I-T notices?

On February 5, 2020, prominent figures belonging to the Tamil film industry came under the Income Tax scanner and searches were conducted at 38 locations across Tamil Nadu. Four major players from Kollywood, including actor Vijay, his distributor Sundar Arumugam, producer AGS group and top Kollywood financier Anbu Chezhiyan were raided by the Income tax department. At the time, the entire media attention was largely focused on tax raids at popular actor Vijay’s residence. The Income Tax did not recover any money from Vijay's residence and the agency faced flak from fans of the actor for allegedly targeting him.  However, the press release issued on February 6, 2020, by the Central Board of Direct Taxes termed the seizure made at the properties of financier Anbu Chezhiyan as the "highlight" of the search and seizure operation they had carried out.

“The highlight of the searches is the seizure of unaccounted cash of about Rs 77 crore from hideouts and secret places located at Chennai and Madurai, purportedly belonging to the financier,” said the CBDT press statement. Apart from this, the Income Tax department also stumbled upon key information in the form of “large number of property documents, promissory notes, post dated cheques taken as collateral security" which were recovered during the searches. The CBDT claimed that the income concealment in his case was likely to exceed Rs 300 crore.

The fear among the producers is that the I-T Department considers the transactions as undisclosed income and it could result in imposing heavy penalties. Chartered Accountant Bhargav Narayanan speaking to TNM explained the process of imposing penalty for undisclosed income under Income Tax Act, 1961. “If the assessee admits the undisclosed income and substantiates the source, a 30% penalty will be levied. If it is an undisclosed income deducted by the income tax department after the search and seizure procedure, it will be a 60% penalty. In both cases an additional 30% income tax will be imposed and interest for the assessment year will also be applicable.”  

(With inputs from Dhanya Rajendran)

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