IT raids in Tamil Nadu unearth unaccounted income of around Rs 1,000 crores

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Searches were simultaneously carried out in five locations in the state capital of Chennai and Madurai on Friday, November 6.

Income Tax department raid of a Chennai-based IT Infra sector company at five locations in Tamil Nadu on Friday unearthed unaccounted income of around Rs.1000 crores, reported news agency ANI on Saturday, November 7.

Searches were simultaneously carried out in five locations in the state capital of Chennai and Madurai on Friday, November 6. A statement issued by the Central Board of Direct Taxes (CBDT) said that the searches had revealed discrepancies in shareholding, suppression of foreign income and diversion of funds.

The statement said that it unearthed evidence relating to the curious investments in a Singapore-registered company. The shareholding of the particular company was held by two others. One of them was the group which was searched by the income tax department while the other is a subsidiary of a major infrastructure development and financing group.

The statement said the company that was raided had a 72% shareholding despite investing a nominal amount. The rest was held by the infrastructure major despite having a major investment.

The CBDT said this has resulted in a benefit of almost Singaporean dollars 7 crore, which is around Rs 200 crore, in the hands of the company belonging to the searched group, which was not disclosed by it in its return of income and also in the FA Schedule.

"Thus, there is a 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 present value of the investment exceeds Rs 354 crore," according to the CBDT.

Proceedings will be initiated under the Black Money Act, 2015 against the company for not disclosing foreign assets/beneficial interest in the FA Schedule of the income tax return, the statement said.

The statement further said that the searches revealed that five shell companies had been acquired by the group which were used to siphon out Rs 337 crore from the main group company by raising bogus bills and without doing any real business.

The CBDT said it found evidences 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 banks and financial institutions to obtain finances. Allotment of another Rs 150 crore worth preference shares in 2015 from funds from group companies, who in turn took loans.

During the search, officials 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 total interest disallowance on this count works out to about Rs 423 crore.

Further, the search also revealed that the group had purchased about 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 concern. 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 the current year 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(the Act) in the case of the buyer and capital gains under section 50CA of the Act, in the hands of the seller," the statement said (with agency inputs)

Image Credit: The New Indian Express

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