Income Tax Department conducts searches: PAN-India in a prominent group having diversified businesses
The Income Tax Department conducted a search operation under Section 132 of the Income Tax Act, 1961 on 22.07.2021 on a major business group which is involved in businesses in various sectors including Media, Power, Textiles and Real Estate. Group turnover of more than Rs. 6,000 crore per annum. Covers 20 residential and 12 commercial complexes spread across 9 cities including Mumbai, Delhi, Bhopal, Indore, Noida, and Ahmedabad
The group consists of over 100 companies including holdings and subsidiaries. During the search, it was found that they were operating several companies in the name of their employees, which have been used for booking of fraudulent expenses and routing of funds. During the searches, several employees, whose names were used as shareholders and directors, have admitted that they were not aware of such companies and had given their Aadhaar cards and digital signatures to the employer in good faith. Some relatives were found to have signed the papers voluntarily and knowingly, but had no knowledge or control of the business activities of the companies in which they were considered directors and shareholders.
Such companies have been used for several purposes namely; Booking of fraudulent expenses and snatching away the profits of listed companies, routing of funds so pooled in companies close to them for making investments, making circular transactions etc. For example, the nature of such fraudulent expenses booked varies from supply of manpower, transportation, logistics, and civil works and fictitious business dues. The amount of income escaping has been ascertained so far using this method. 700 crores spread over a period of 6 years. However, the quantity could be higher as the group has used multiple layers and investigations are underway to uncover the entire money mark. In addition, these include violation of S.2 (76) (vi) of the Companies Act and clause 49 of the listing agreement laid down by SEBI for listed companies. The enforcement of Benami Transactions Prohibition Act will also be examined. Cyclical trading and transfer of funds between group companies engaged in unrelated businesses is Rs. 2200 crores have been received. The inquiry has confirmed that these are fictitious transactions without any actual movement or delivery of goods. The tax implications and violations of other laws are being investigated.
The real estate unit of a group operating a mall was sanctioned a term loan of Rs. 597 crore from a nationalized bank. Out of this amount Rs. 408 crore has been given to a sister concern as a loan at a low interest rate of 1%. While the real estate company is claiming interest expense from its taxable profit, it has been diverted to the individual investment of the holding company. The listed media company conducts barter deals for advertising revenue, whereby real estate is acquired in exchange for actual payment. Evidence indicating cash receipts in respect of sale of such assets has been found. It is under further investigation.
Evidence has been found which indicates receipt of on-money in cash on sale of flats by the realty arm of the group. This is confirmed by 2 employees and 1 director of the company. Along with the procedure, verifiable documents have also been found. The exact amount of out-of-book cash receipts is being determined. A total of 26 lockers have been found in the residential premises of the promoters and key employees of the group, which are being operated. Heavy items found during the search operation are being checked. Search is on and further investigation is on.
