Ministry of Corporate Affairs

12,889 shell companies struck off in FY 2020-21

Dated: 03 AUG 2021

There is no definition of the term “Shell Company” in the Companies Act. It normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

On the identification shell companies, the Minister stated that the Special Task Force set up by the Government to look into the issue of “Shell Companies” has inter-alia recommended the use of certain red flag indicators as alerts for identification of Shell Companies.

Giving more details, the Minister stated that the Government has undertaken a Special Drive for identification and strike off of Companies by invoking the provisions of section 248 (1) of the Act by which the Registrar of Companies (RoC) struck off those companies after following the due process of law from the Register of companies when RoC has reasonable cause to believe that those companies are not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

The Minister listed the total number of companies struck off u/s 248 State/Union Territory-wise as under:

Sate/ UT-wise	2018-19	2019-20	2020-21
Gujarat	6398	2494	257
Andaman	24	15	2
Karnataka	4171	5568	1038
UT of Chandigarh	3514	893	501
Tamil Nadu and Coimbatore	9107	3214	1322
Orissa	2907	719	78
NCT of Delhi and Haryana	30544	12653	2396
Kerala	2801	5339	977
Goa	250	311	36
Madhya Pradesh	3386	1168	111
Himachal Pradesh	481	176	201
Telangana	16364	2686	730
Rajasthan	4038	4466	507
Jammu and Kashmir	255	138	0
Jharkhand	1306	403	139
Uttar Pradesh	7589	5821	1936
West Bengal	8390	6627	5
Maharashtra (Mumbai and Pune)	47575	7824	2298
Bihar	2540	1956	185
UT of Puducherry	37	117	35
Assam, Tripura, Arunachal Pradesh, Nagaland, Mizoram, Meghalaya, Manipur, and Sikkim	372	796	88
Uttarakhand	476	79	0
Andhra Pradesh	3864	958	0
Chhattisgarh	539	347	47
Grand Total	156928	64768	12889

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RM/KMN

(Release ID: 1741989) 

STATEMENT REFERRED TO IN REPLY TO PART (a) TO (c) OF RAJYA SABHA STARRED QUESTION NUMBER *84 FOR 27-07.2021, REGARDING PANAMA PAPERS SCAM BY SHRI SUKHENDU SEKHAR RAY:

(a) As on 01.06.2021, total undisclosed credits amounting to Rs. 20,078 crores have been detected with respect to India linked entities in the Panama Paper Leaks.

(b) Disclosure of information regarding specific taxpayers is prohibited except as provided under section 138 of the Income-tax Act, 1961 and section 84 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

(c) Income Tax Department takes appropriate actions in case of persons, who are found to be involved in violation of the provisions of various Acts administered by the Income Tax Department like the Income Tax Act, 1961, and Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,2015 etc. Such actions under direct tax law include searches & seizure, surveys, enquiries, assessment and reassessment of income, levy of taxes along with interest, levy of penalties, filing of prosecution complaints in criminal courts etc., wherever applicable. In 46 (forty six) cases of Panama Paper Leaks, Criminal prosecution complaints have been filed of which 20 cases are under the Income Tax Act, 1961 and 26 cases are under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 put together.

 

 

Ministry of Finance

Direct tax collection doubled for first quarter of current fiscal

Dated: 27 JUL 2021

Direct tax collection for the first quarter of the current fiscal has doubled. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha today.

The Minister stated that the net direct tax collection in the 1st quarter of FY 2021-2022 is Rs. 2,46,519.82 crore as against Rs. 1,17,783.87 crore during the same period of previous FY 2020-21.

Giving reasons for increase in the tax collections, the Minister stated that it includes revival of economic activities and positive sentiments among taxpayers during this current financial year leading to increased income estimates and higher advance tax payments in the first quarter of the FY 2021-22 as compared to the corresponding period of FY 2020-21.

To the question of direct tax collections in the second quarter of the current  fiscal, the Minister stated that the collection of taxes during second quarter cannot be ascertained for the present as the second quarter has just started

On details of indirect tax collections of the first two quarters of the current  fiscal, the Minister stated that the second quarter of the current fiscal has just started, however the details of Net Indirect Tax (GST and Non-GST) revenue collection in the 1st quarter of FY 2021- 2022 is Rs. 3,11,398 crore.

Stating about Vivad-se-Vishwas Scheme, the Minister said the Government has resolved significant number of pending direct tax disputes amicably with the taxpayers under Vivad-se-Vishwas Scheme, 2020. This was the primary objective of the Scheme as provided in the short title therein ‘An Act to provide for resolution of tax and for matters connected therewith or incidental thereto’. The declarations received under the Scheme cover around 28.73% of pending tax disputes. Additional tax revenue received is an additional positive outcome.

On the recovery of economy, the Minister stated that the increased tax collection (Direct & Indirect) as reported in the first quarter of the current financial year as compared to the same period previous financial year shows that the economy is on the recovery path. Higher tax collection would enable Government in increasing public expenditure which would have a positive impact on GDP, the Minister stated.

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RM/KMN
(Release ID: 1739650)

Ministry of Finance

Systemic measures by Government under Black Money Act yields results; detects undisclosed income of several crores

Dated: 26 JUL 2021 

In the recent years, the Government has taken a number of measures to bring back the black money stashed abroad ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’. This was stated in a written reply by Union Minister of State for Finance Shri Pankaj Chaudhary to a question in Lok Sabha today.

The Minister stated that as a result of systematic actions by the Government, the following results have been achieved as on 31.05.2021:

• As on 31.05.2021, assessment orders under section 10(3)/10(4) of the Black Money Act, 2015 have been passed in 166 cases, wherein demand of Rs. 8,216 crore has been raised.
• Undisclosed income of Rs. 8,465 crore (approx.) has been brought to tax and penalty of Rs. 1,294 crore has been levied in HSBC cases.
• Undisclosed income of Rs. 11,010 crore (approx.) has been detected in ICIJ (International Consortium of Investigative Journalists) cases.
• In the Panama Papers Leaks cases, undisclosed credits of Rs. 20,078 crore (approx.) have been detected.
• In the Paradise Papers Leaks cases, undisclosed credits of Rs. 246 crore (approx.) have been detected.

The Minister stated that Income Tax Department takes appropriate action under relevant laws against the tax evaders. Such action under direct tax laws includes searches, surveys, enquiries, assessment of income, levy of tax, interest, penalties, etc. and filing of prosecution complaints in criminal courts, wherever applicable.

Giving details of the number of people arrested/chargesheeted, the Minister tabled details of prosecution complaints filed during last 5 years by the Income Tax Department under Income Tax Act, 1961 are as under:

F.Y.	Prosecution complaints filed in court	Cases compounded	Conviction order passed
2016-17	1252	1208	16
2017-18	4527	1621	75
2018-19	3512	2235	105
2019-20	1226	1410	49
2020-21*	173	537	16

*Figures are provisional

Further, more than 107 prosecution complaints have been filed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Minister stated.

Giving more details of the steps taken by the Government to bring back black money from outside the country to India, the Minister stated that the following number of measures have been taken:

1. Enactment of ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’ which has come into force w.e.f. 01.07.2015 to specifically and more effectively deal with the issue of black money stashed away abroad. Apart from prescribing more stringent penal consequences, this law has included the offence of willful attempt to evade tax etc. in relation to undisclosed foreign income/assets as a Scheduled Offence under the Prevention of Money- laundering Act, 2002 (PMLA).
2. Constitution of the Special Investigation Team (SIT) on Black Money under Chairmanship and Vice-Chairmanship of two former Judges of Hon’ble Supreme Court,
3. Proactively engaging with foreign governments with a view to facilitate and enhance the exchange of information under Double Taxation Avoidance Agreements (DTAAs)/Tax Information Exchange Agreements (TIEAs)/Multilateral Conventions.
4. India has been a leading force in the efforts to forge a multi-lateral regime for proactive sharing of financial information known as Automatic Exchange of Information which will greatly assist the global efforts to combat tax evasion. The Automatic Exchange of Information based on Common Reporting Standard has commenced from 2017 enabling India to receive financial account information of Indian residents in other countries.
5. India has entered into information sharing agreement with the USA under the Foreign Account Tax Compliance Act of USA.

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RM/KMN
(Release ID: 1739186)

 

Ministry of Finance

Income Tax Department conducts searches in Uttar Pradesh

Dated: 24 JUL 2021 

Income Tax Department carried out a search operation on 22.07.2021 on a group in Uttar Pradesh dealing in Mining, Hospitality, News Media, Liquor and Real Estate. The search began in Lucknow, Basti, Varanasi, Jaunpur and Kolkata.

Cash of more than Rs. 3 crore has been seized and 16 lockers have been placed under restraint. Documents including incriminating digital evidence indicating nearly Rs. 200 crore of unaccounted transactions have been seized.

Evidence found during searches establishes that the group has been earning huge outside-the-books income through mining, processing and sales in liquor, flour business, real estate etc. Unaccounted income emanating out of these transactions has been found exceeding Rs. 90 crore as per preliminary estimates. This income has been brought back into the books through a network of shell companies and other bogus entities without paying any taxes, thereby creating a charade that the money has been accounted for.

During the  searches, more than 15 companies incorporated at Kolkata and other places were found to be non-existent. Share premia of over Rs. 30 crore were collected by these shell companies through other similar entities or through individuals of no means. There is no economic rationale for any such premium.

Searches have also established that individuals as well as shell entities were used by the group to launder huge funds amounting to more than Rs. 40 crore, showing them as loans obtained by media companies. Taxation profiling of such shell entities who have provided ‘loans’ indicates that they neither possess the financial ability nor had any economic rationale for advancing such ‘loans’. These persons and entities were found to be closely related to the final beneficiaries. One of these persons had provided loans of more than one crore to media entities and was himself not only unlettered but also of very meagre financial means.

Taxation profiling of each individual and entity indicated that either no returns were filed or very meagre taxes had been paid which were not at all commensurate with the huge amount of loans and premia running into crores. One paper company was found not to have any business, the address mentioned was false and it had no employees. Yet it had been paid more than Rs. 4 crore of share premium by another bogus concern.

Similar modus operandi was also followed in having so called ‘trade payables’ in the books of the main entities of these businesses through such dubious concerns with unaccounted sources of funds. These so called ‘payables’ alone amount to more than Rs. 50 crore . One of the branches of the group has voluntarily disclosed an income of Rs. 20 crore during the search once they were confronted with the evidence. This disclosure includes Rs. 13 crore of bogus ‘trade payables’.

The group therefore devised a complex strategy of earning huge unaccounted income through the creation of sophisticated financial layers of dubious and bogus entities spread across multiple States, to route this unaccounted money back into the main businesses without paying any taxes. The total amount of such unaccounted layering through bogus entities exceeds Rs. 170 crore while the total unaccounted transactions exceed Rs. 200 crore.

The unaccounted amounts so earned were used partly for the purchase and construction of property. Evidence of unaccounted payments in cash running into crores has been found during search. Evidence has also been found to indicate that payments exceeding Rs. 2 crore have been made in cash by one of the businesses in violation of provisions of Income-tax Act, 1961. Huge unaccounted money has also been deposited in a group Trust and routed to the main concerns.

Further investigations are in progress.

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RM/KMN

(Release ID: 1738681)