Income Tax Department conducts search operations in Maharashtra, Gujarat and Delhi on certain Indian companies and their associate concerns, controlled by a neighbouring country

The Income Tax Department conducted search and seizure operations on specific Indian firms and their affiliated concerns that were managed by a neighbouring country. Chemicals, ball bearings, equipment parts, and injection moulding machinery are all products of these businesses. Around 20 locations in Gujarat, including Mumbai, Ahmedabad, and Gandhidham, as well as Delhi, were searched on 16.11.2021.

A large number of incriminating evidence in the form of digital data showing earning of huge unaccounted income by these companies has been found and seized. It has been found that these companies are indulging in tax evasion through manipulation of books of accounts. The analysis of evidence has revealed that these companies have indulged in transferring funds by using a network of shell companies to a neighbouring country. An estimated amount of Rs 20 crore was transferred in the last 2 years through the above modus operandi.

According to investigations, a Mumbai-based professional firm not only supported in the construction of these shell firms, but also provided them with sham directors. The investigations also revealed that the dummy directors were either professional firm employees/drivers or low-income individuals. When questioned, they admitted that they were unaware of these businesses’ activities and that they had been signing on paperwork according to the top functionaries’ orders. Foreign nationals benefit from the professional firm’s assistance by using its addresses for banking and other regulatory obligations.

One of these chemical trading corporations was discovered to be passing purchase claims through Marshall Island, a low-tax jurisdiction. The corporation actually bought things from a neighbouring company worth Rs. 56 crore, but it was billed from Marshall Island. However, payment for such purchases has been made into the bank account of the Marshall Island-based company which is held in the neighbouring country. It was further unearthed during the search proceedings that this Indian company was also involved in taking non-genuine purchase bills to reduce its tax liability and also paid unaccounted cash for purchase of land in India.

The search operation has already resulted in the seizure of around Rs. 66 lakh in unaccounted cash. Some of the companies’ bank accounts have been frozen, with a total bank balance of around Rs. 28 crore.

Further investigations are being carried out.