Evidence led to action on Coffee Day shares: Income Tax department


Siddhartha admitted to ₹362 cr. unaccounted income: I-T

Justifying the provisional attachment of shares of Coffee Day Enterprises Ltd. (CDEL), the Income Tax Department, which has been accused of “harassment” by promoter V.G. Siddhartha, has said that such a step was taken to protect the interests of revenue (to the government), and done based on credible evidence and under the provisions of Income Tax Act.

According to the I-T Department, the provisional attachment procedure was taken up when newspapers reported a possible sale of equity share in Mindtree Ltd. to a tune of 21% held by Mr. Siddhartha and CDEL.

As required under the provisions, no application was filed by the assessees concerned before transferring the assets when the Income Tax proceedings were pending.

As many as 74.90 lakh shares out of 2.29 crore shares held by Mr. Siddharatha and CDEL in Mindtree Ltd. were attached, which is “a normal requirement”, the department said.

V.G. Siddhartha's and Café Coffee Day's journey through the years

Harassment charge

In a typed letter dated July 27 — said to be signed by him — to the board of directors and Coffee Day family, Mr. Siddhartha, who is now missing, accused the former director general of Income Tax of “a lot of harassment” in the form of attaching shares on two separate occasions to block the Mindtree deal and then “taking position of Coffee Day shares although the revised returns have been filed.” This, he pointed out, was “very unfair” and led to serious liquidity crunch.

The attachment arose after investigation of Mr. Siddhartha and Cafe Coffee Day — in 2017 — led to admission of unaccounted income of ₹362.11 crore by Mr. Siddhartha and ₹118.02 crore by CDEL, a release from the I-T Department on Tuesday said.

The search on Mr. Siddhartha was based on “credible evidence” gathered from the search of “a prominent political leader,” the department’s release said. However, it pointed out, when Mr. Siddhartha filed the return of income, he had disclosed a sum of around ₹35 crore.

Meanwhile, another group company, Coffee Day Global Ltd., had not paid self-assessment tax of ₹14.5 crore and CDEL too did not offer the admitted income on its part.

After the equity shares in Mindtree Ltd. were attached, Mr. Siddhartha, on February 13, 2019, offered the security of shares of CDEL and requested the release of Mindtree shares. “This was accepted with a specific condition that the sale proceeds will be utilised only for repayment of loans availed against the Mindtree shares while the remaining balance will be provided for attachment against the tax liability to arise.” Alternatively, 46.01 lakh shares of Mr. Siddhartha and 2.04 crore shares of CDEL were attached on February 13 and February 14, 2019.

After the Mindtree shares were transferred to L&T Infotech Ltd. on April 28, 2019, for which he received around ₹3,200 crore, the department said that the assessee repaid a loan of around ₹3,000 crore, and ₹154 crore towards the expenses related to the transfer of shares.

The balance of ₹46 crore was paid towards the first instalment of advanced tax, estimated at around ₹300 crore in the case of CDEL.

“As against the balance of advanced tax liability of ₹250 crore and tax liability arising on search findings to a tune of approximately ₹400 crore, the provisional attachment made by the department is less than 40% of the likely tax liability,” the department justified.

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Printable version | Dec 12, 2019 10:58:08 PM |

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