Income Tax Department raids on two Real Estate Groups; Check Details

Income Tax Department carried out search and seizure operations on two leading real estate groups of Bengaluru and Hyderabad, engaged in the business of construction/sale/leasing of commercial/residential space, and educational and hospitality services. The search action covered more than 40 premises located in Bengaluru, Hyderabad and Chennai.

Several incriminating documents and digital evidences have been recovered during the search activities. According to a preliminary investigation of the evidence that was collected, the landowners had signed a Joint Development Agreement (JDA) with a developer based in Bengaluru. Instead of the land that was provided to the developer to create numerous projects, they received a highly developed area from the developer. Despite having secured completion certifications for the projects, the land owners did not disclose the capital gains resulting from the transaction. These hidden capital gains are thought to total more than Rs.400 crore.

The initial review of the seized records also showed that these organisations had hidden income to the tune of Rs.90 crore in relation to the revenue attributable to the sale of real estate units. Additionally, both parties engaged in tax fraud by inflating expenses in the construction and development industry to the tune of Rs.28 crore, claiming fictitious purchases and resorting to over-invoicing of building supplies.

The primary entities of both organisations have been discovered to have routed interest-bearing borrowed monies to affiliated entities or parties for non-business activities. There have also been reported instances of advances and loans made between group firms that are treated as presumed dividends and must therefore be taxed as income.

It was discovered that the trust involved in the search action failed to use the total sum of Rs. 40 crore for the designated purpose as stated in the registered trust deed within the allotted permitted time frame.

Undisclosed cash of Rs.3.50 crore and gold, silver, and jewellery worth Rs.18.50 crore have so far been seized as a result of the search operation.

Further investigations are in progress.