The Income Tax (I-T) department has carried out searches 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 in a Singapore registered company.

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According to the I-T department, the shareholding of this company is held by two companies, one owned by the group searched while the other company is a subsidiary of a major infrastructure development and financing group.

The department found that the company belonging to the searched group had invested a very nominal amount although it has 72 per cent shareholding while the other company having 28 per cent shareholding only had invested nearly the entire money. This has resulted into a benefit/gain of nearly (Singapore) S$7 crore i.e. nearly Rs 200 crore, in the hands of the company belonging to the searched group not disclosed by it in its income tax returns and also in the 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.

The I-T department said proceedings will be initiated under the Black Money Act, 2015 for not disclosing foreign assets/beneficial interest in the Schedule FA of the income tax return. The present value of this investment exceeds Rs 354 crore.

During the search it was found that the group had acquired five shell companies recently, which was used to siphon off as much as Rs 337 crore from the main group 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 in the group company by passing accounting entries only to project inflated capital before the banks and financial institutions to obtain finances.

Allotment of another Rs 150 crore worth preference shares in 2015 from group companies funds, who took loans/entries is being examined.

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

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 from the funds provided by the main group concerned. Applicability of the Prohibition of Benami Property Transactions Act, 1988 to these transactions is being examined.

It was also seen that there was transfer of substantial share holdings during 2020 at a price much lower than the fair market value to be determined as per IT rules, 1962.

In view of this, substantial additions are likely to be made under section 56(2)(x) of the IT Act, 1961 in case of the buyer and capital gains under section 50CA of the Act in the hands of the seller. The quantum of this will be determined in due course.

Therefore, 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 investigations are going on.

 

 

The story has been taken from a news agency