Income Tax Raids in Uttar Pradesh: Uncovering Rs. 200 Crore Tax Evasion Scheme

Income Tax Department Conducts Searches in Uttar Pradesh

On July 22, 2021, the Income Tax Department executed a search operation on a group in Uttar Pradesh engaged in various sectors, including mining, hospitality, news media, liquor, and real estate. The search encompassed locations in Lucknow, Basti, Varanasi, Jaunpur, and Kolkata.

Shell Companies and Fraudulent Activities

During the operation, more than 15 companies registered in Kolkata and other locations were determined to be non-existent. These shell corporations collected share premiums amounting to over Rs. 30 crore through connections with similar entities or individuals lacking financial capabilities, which have no economic justification.

Investigations revealed that individuals and these shell entities were instrumental in laundering substantial funds, exceeding Rs. 40 crore, while misrepresenting them as loans from media companies. Tax profiling indicates these entities either failed to file tax returns or paid nominal taxes that did not align with the substantial amounts loaned or premium collected.

One notable case involved an individual who provided loans exceeding Rs. 1 crore to media entities, despite lacking any formal education and possessing minimal financial resources. Additionally, some paper companies had no legitimate operations or employees yet received over Rs. 4 crore in share premiums from other fictitious concerns.

Financial Manipulations and Disclosures

The group utilized a similar method to create fictitious trade payables on the financial records of their core businesses through questionable associates, amounting to more than Rs. 50 crore. Upon confronting the group with evidence, one branch voluntarily disclosed an income of Rs. 20 crore during the searches, including Rs. 13 crore attributed to non-existent trade payables.

This complex scheme enabled the group to generate substantial unaccounted income while establishing intricate financial structures through dubious and fictitious entities across multiple states. The total unaccounted layering through these entities exceeds Rs. 170 crore, correlating to total unaccounted transactions surpassing Rs. 200 crore.

Use of Unaccounted Funds

The unaccounted income generated was utilized in part for property purchases and construction projects. Evidence collected during the searches indicates cash payments in excess of Rs. 2 crore, violating provisions of the Income-tax Act, 1961. Additionally, significant unaccounted funds were found to be deposited in a group Trust and subsequently channeled to the principal businesses.

Ongoing Investigations

Further investigations are in progress to uncover additional details and establish a comprehensive understanding of the financial activities within this group.