Former CM Chandrababu Naidu receives Income Tax Notice over Undisclosed Income of Rs.118 Crore

The Income Tax Department has issued a show-cause notice to Telugu Desam Party (TDP) chief and former Andhra Pradesh chief minister Chandrababu Naidu, requesting that he explain why tax proceedings should not be initiated against him for having “undisclosed income” of Rs.118 crore received as kickbacks from some infrastructure companies.

This notice was issued in response to Naidu’s preliminary objections that the tax proceedings against him could not have been launched before the jurisdictional assessing officer reassessed his income for the contested financial years.

The show-cause notice stated, “Once the case is notified to this office (Central Circle), immediately to commence the proceedings, notice under section 153C was validly issued and the proceedings are in progress,” adding that the department has evidence to show that unaccounted income generated through bogus sub-contracts was given to Naidu, according to the report.

If certain incriminating evidence are discovered against a party other than the person who has been searched, Section 153C of the Income Tax Act permits the tax department to prosecute against that party.

In November 2019, searches were conducted on the premises of one Manoj Vasudev Pardasany (referred to as MVP in the notice), who had been participating in the tendering process in the state since December 2017 on behalf of Shapoorji Pallonji & Co. Pvt Ltd (SPCL), and on the premises of Pardasany’s associates.

According to the notice, Pardasany acknowledged in his statements to arranging phoney connections and work orders in order to syphon off monies from SPCL and create income through bogus subcontractor firms.

“During search operations, several incriminating messages, chats, and excel sheets were recovered from MVP and his associates, demonstrating syphoning off of funds and cash generation by several major infrastructure companies. Delivery of such cash to you (Naidu) has also been discovered during the course of the investigation,” it stated.

According to the notice, MVP phoned Naidu’s personal secretary P Srinivas in August 2016 (while Naidu was the CM) and requested him to arrange for party finances.

“It has been discovered through MVP statements recorded on November 1, 2019 and November 5, 2019, that cash were syphoned out from projects awarded to SP by the Andhra Pradesh Government without conducting any actual work…Funds were syphoned off from L&T and delivered to you through companies such as Phoenix Infra & Pour Trading, in addition to Shapoorji Pallonji (SP),” the notice to Naidu claimed.

“Please state why an amount of 118,98,13,2071- for AY 2020-21 should not be treated as your undisclosed income,” the IT Department stated after totaling the money MVP allegedly syphoned off from multiple sub-contractor businesses to pay Naidu.

This notice comes amid rumours of a possible partnership between the TDP and the Bharatiya Janata Party (BJP), according to the report.