The Income Tax (I-T) Department recently carried out a search operation on a group in Uttar Pradesh dealing in mining, hospitality, news media, liquor and real estate.
The searches were carried out in Lucknow, Basti, Varanasi, Jaunpur as well as Kolkata on July 22.
The operation resulted in the seizure of more than Rs 3 crore in cash, while 16 lockers were placed under restraint.
Documents, including incriminating digital evidence indicating unaccounted transactions worth nearly Rs 200 crore, have been seized, a Finance Ministry statement said on Saturday.
Evidence found during the searches establishes that the group has been earning huge outside-the-books income through mining, processing and sales in liquor, flour business, real estate etc., the statement said.
The I-T Department has also found unaccounted income emanating out of these transactions exceeding Rs 90 crore, as per preliminary estimates.
This income was brought back into the books through a network of shell companies and other bogus entities without paying any tax, thereby creating a charade that the money has been accounted for, the investigations have found.
During the searches, more than 15 companies incorporated in Kolkata and other places were found to be non-existent. Share premia of over Rs 30 crore were collected by these shell companies through other similar entities or through individuals of no means.
The searches also established that individuals as well as shell entities were used by the group to launder huge funds amounting to more than Rs 40 crore, showing them as loans obtained by media companies.
Taxation profiling of such shell entities, which provided ‘loans’, indicates that they neither possessed the financial ability nor had any economic rationale for advancing such ‘loans’.
These persons and entities were found to be closely related to the final beneficiaries. One of these persons had provided loans of more than Rs 1 crore to media entities and was himself not only unlettered, but also of very meagre financial means.
Taxation profiling of each individual and entity indicated that either no returns were filed or very meagre taxes had been paid which were not at all commensurate with the huge amount of loans and premia running into crores.
One paper company was found not to have any business, the address mentioned was false and it had no employees. Yet it was paid more than Rs 4 crore of share premium by another bogus concern.
Similar modus operandi was also followed in having so called ‘trade payables’ in the books of the main entities of these businesses through such dubious concerns with unaccounted sources of funds.
These so called ‘payables’ alone amount to more than Rs 50 crore. One of the branches of the group voluntarily disclosed an income of Rs 20 crore during the search once they were confronted with evidence. This disclosure includes Rs 13 crore of bogus ‘trade payables’.
The group, therefore, devised a complex strategy of earning huge unaccounted income through the creation of sophisticated financial layers of dubious and bogus entities spread across multiple states, to route this unaccounted money back into the main businesses without paying any taxes, the Finance Ministry statement said.
The total amount of such unaccounted layering through bogus entities exceeds Rs 170 crore, while the total unaccounted transactions exceed Rs 200 crore.
The unaccounted amounts so earned were used partly for the purchase and construction of property. Evidence of unaccounted payments in cash running into crores has been found during search operation.
Evidence has also been found to indicate that payments exceeding Rs 2 crore have been made in cash by one of the businesses in violation of the provisions of Income Tax Act, 1961. Huge unaccounted money was also deposited in a group trust and routed to the main concerns. Further investigations are in progress.