The Income-Tax Department has detected financial irregularities involving more than ₹1,000 crore in two separate operations conducted against a prominent group engaged in manufacturing steel products and a business house into textiles and filament yarn. Searches were conducted in West Bengal, Delhi and Punjab.
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In the first case, on September 17, the department initiated a search-and-seizure exercise at 25 locations in Kolkata, Durgapur, Asansol and Purulia and other places in West Bengal, linked to the company dealing in steel products.
Unaccounted income
It led to the detection of unaccounted income by the group through cash sales and expenditure, purchase from bogus parties, underreporting of actual production and cash purchase of scrap, besides land purchases and sale. This income was used in the form of unsecured loans and sale of shares of shell entities through the layering of funds.
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“A large number of property documents pertaining to one of the members of the group, showing land and property holding in different names, have also been seized. The total amount involving such incriminating evidence pertaining to the manufacturing group exceeds ₹700 crore,” said the department, adding that ₹20 lakh in cash was seized during the search. Two lockers were located.
Searches were also carried out against an “accommodation entry” provider, who helped the accused persons project financial transactions running into several hundreds of crores of rupees as genuine through sale of shares of shell companies, unsecured loans from such entities and bogus billings.
“Evidence of more than 200 companies/entities having more than 200 bank accounts being managed from the entry operator’s premises has been found...it appears that these bank accounts and entities have been used as conduit to route the unaccounted income of many beneficiaries,” stated the department.
Accommodation entries
Another search-and-seizure operation was conducted on the business house in Delhi, Punjab and Kolkata on September 18 and the department found evidence of accommodation entries. “The group has maintained unaccounted funds of about ₹350 crore in its foreign bank accounts and has also routed these funds back into its business through shell entities in tax havens,” the department noted.
The modus operandi involved investments by foreign entities, under the group’s control, in Foreign Currency Convertible Bonds, issued by its main concern, and subsequently -- under the garb of defaulting on payments, -- converting it into shares of the company.
Foreign companies and trusts were being paid management fees for managing the unaccounted funds. The group had not disclosed foreign assets and bank accounts to the authorities as required under the law.
“Evidence has been gathered that cash of about ₹100 crore was generated by debiting bogus expenditure in company accounts and cash transactions in land deals,” the department disclosed.