IT Dept finds Rs 450 cr undisclosed income during search across four cities

Topics IT dept | Income Tax fraud | IT SEZ

The search also revealed certain share purchase transactions relating to the IT SEZ developer
A recent search conducted by the Income Tax (IT) Department's in 16 premises across Chennai, Mumbai, Hyderabad and Cuddalore, resulted in the detection of an undisclosed income of more than Rs 450 crore. 

The search was conducted in the case of an IT SEZ developer, its ex-director and a "prominent" stainless-steel supplier from Chennai. The Department did not disclose the names.

According to the Department, an unaccounted assets worth Rs 100 crore accumulated by the ex-Director and his family members in the past three years were unearthed during the search. Besides, the IT SEZ developer claimed bogus work-in-progress expenses of about Rs 160 crore in an under-construction project, capital expenses of Rs 30 crore on account of bogus consultancy fees in an operational project and inadmissible interest expense of Rs 20 crore.

The search also revealed certain share purchase transactions relating to the IT SEZ developer. THe shares of this entity were sold by its erstwhile shareholders, a resident and a non-resident entity, who routed the investment through a Mauritius intermediary, for about Rs 2,300 crore in 2017-18, but capital gains arising therefrom were not disclosed to the Department.

The Department said that investigations are in progress to determine the undisclosed capital gains in the hands of both shareholders. Other land transactions involving cash payments and an issue relating to Compulsory Convertible Debentures are also under examination.

During the search, in the premises of the stainless-steel supplier the Department found the supplier group has been conducting three sets of sales: accounted: unaccounted and partly-accounted. The unaccounted and partly-accounted sales amount to more than 25 per cent of the total sales each year. Further, the assessee group has provided sales accommodation bills to various customers and received commission of more than 10 per cent on these transactions.

While the quantification of the unaccounted income is being carried out currently, it is estimated to be around Rs 100 crore.

The related concerns of the assessee group are involved in financing, money lending and real estate development. The unaccounted transactions conducted by these entities and the unaccountable capital/ loan infusion in these entities are estimated to be around Rs 50 crore.

According to the Department, the searches, so far, have resulted in the unearthing of an undisclosed income of more than Rs 450 crore.

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