The authorities are seeking legal opinion for initiating criminal action against Jagajjanani Chit Funds Pvt. Ltd, Rajamahendravaram, based on the violations found by the Registrar of Chits and the officials of the State Revenue Intelligence during their inspection in October 2022.
The officials informed that many gross violations were noticed and hence the legal action was being initiated against the company.
“The Foreman of the company was asked to submit clarifications on the gross anomalies noticed. There is a strong indication that the officials of the chit fund company were diverting the subscribers’ money for the benefit of their own family members and for a private money lending business,” the officials revealed.
The company was incorporated in 2008. Appa Rao Adireddy is its managing director and Srinivas Adireddy, Veeraghavamma Adireddy, Venkata Jotsna Adireddy and Srinivasa Rao Adireddy were directors.
“The paid up capital of the company is ₹1 crore. This chit fund company is running 41 chit groups as on today with a monthly auction turnover of ₹7,61,50,000. But as observed from the auction minutes data submitted to ARC, Kakinada, it appears that this company is not regularly conducting the chit auctions. It is found that the company has not been conducting auctions as per the auction minutes filed with the registrar,” sources in the government informed.
“The company is not maintaining a separate bank account for 2nd account transactions for depositing the unpaid prize money which is against the provisions of the Chit Fund Act. Bank statement of the company reveals that the majority of the transactions were dealt in cash,” they said.
“There are no regular subscription credits into the bank account. For example, the auction turnover being ₹7.61 crore per month, at least ₹5 crore should have been reported in the bank account, excluding the dividend, but it is not the case,” the sources pointed out
Also, there were no proper corresponding prize money transfers in any of their bank statements. “Hence, it can be construed that they are paying the prize money to the prized bidder in cash or are defaulting to customers or keeping the same as deposits with them,” the officials said.
“If the prize money and subscriptions are paid and received in cash, it is a direct violation of the Income Tax Act with 100% penalty to both parties,” they added.
