Income Tax Searches Yield Findings Against Cattle Feed Producer in Uttar Pradesh

Income Tax Department Initiates Searches in Uttar Pradesh

The Income Tax Department, on 18 November 2020, initiated a search and survey operation against one of the leading manufacturers of cattle feed in Northern India. The operations are being conducted at 16 sites, among which Kanpur, Gorakhpur, Noida, Delhi, and Ludhiana.

Charges Against the Group

The principal charges against this group are:

• Acceptance of accommodation entries of over Rs. 100 crore through some Delhi-based shell companies from unsecured fake loans.
• Exceedingly large sundry creditors.
• Concealment of net profits.
• A chit fund company related to it reportedly having received in the range of several crore in unsecured loans from unspecified sources.

Results of the Search

During the search, it became clear that the shell companies involved in the loan transactions exist only on paper and have no business activities or creditworthiness. The directors of the shell companies turned out to be non-filers and individuals with no substantial means—one director, for instance, is a taxi driver with 11 bank accounts, which are indicative of substantial routing of funds.

Consequently, it has been found that the accommodation entries amounting to more than Rs. 121 crore in the form of unsecured loans by such shell companies are fictitious and represents unaccounted revenue for the group.

Violations of Law

In subsequent inquiries, it was revealed that one such shell company is a subscriber to the group's chit fund venture which is a violation of the Chit Funds Act, 1982.

Unaccounted Investments and Seizures

The search has also uncovered substantial unrecorded investments in relation to the construction of houses for significant people in the group, which are subject to verification and will be assessed for purposes of valuation.

Until now, jewellery valued at Rs. 52 lakh of gold and diamond has been recovered, and the source of procurement of the remaining jewellery is being authenticated. Not to mention jewellery, even Rs. 1.30 crore in cash has been confiscated, and the source is being put under the spotlight. The search operation has also found seven lockers, which have not been opened yet.