Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes    

New Delhi, 4th March, 2020

PRESS RELEASE

TDS Surveys by Income Tax Department unearths huge defaults in deduction and deposit

In a major breakthrough, the TDS wing of the Income Tax Department has unearthed default of tax deducted at source (TDS) of Rs. 324 crore in the case of a major Telecom Operator in Delhi. The company did not make the required TDS of 10% u/s 194J of the Income-tax Act, 1961 on technical contracts worth Rs. 4000 crore. The amount is further liable to go up once the enquiry is completed.

Several hospitals of the city were found openly flouting the norms of TDS and tax collected at source (TCS) and were paying less tax to the Income Tax Department. During the survey, at two premier hospitals, one with more than 2500 bed capacity and the other with 700 bed capacity, it was found that the former was not making any TDS on construction contracts as statutorily required u/s 194C/ 194J, while the latter was deducting tax at the rate of 10% only on salary paid to the doctors, instead of the present TDS rate of 30% applicable for salary payments.

Enquiries during the survey revealed that the terms of appointment between the hospital and the doctors indicated an employer-employee relationship on which the hospital was required to deduct tax at 30% instead of 10% as was being made by the hospital. TDS defaults of Rs. 70 crore and Rs. 20 crore respectively were detected in the said hospitals. Further enquiry revealed that the hospitals were also not making the required TDS at 10% from the maintenance charges paid for the hi-tech sophisticated operation theatre and diagnostic equipments.

Furthermore, it was seen that many hospitals were still not complying with the TCS norms which came into effect from June 1, 2016 under which, on any cash payment received in excess of Rs. 2 lakh, the hospital was required to collect TCS @1% and deposit it to the Government account.

In another TDS survey conducted on a prominent Real Estate Group in Delhi in the first week of the March, 2020, after credible data analysis of previous years, analysis of TDS compliance patterns by the various group companies, their ITR filings and tax auditor reports and real time data generated by CPC-TDS, it was seen that the deductor having already deducted tax in earlier years, had not deposited the deducted taxes in government account.

During the survey, verification and analysis indicated outstanding TDS liability and interest payable of Rs. 214 crore. Major TDS default related to the payment of interest on outstanding loans. The Real Estate Company had taken huge loans on which interest payments were credited from time to time, TDS was duly deducted during various financial years but was not deposited to Government account. Since it was a case of non-compliance, interest at the rate of 1.5% for every month or part of the month is to be paid from the date on which such tax is deducted to the date on which such tax is actually deposited to Government account.

In another action by the TDS Wing of the Department, TDS default of approximately Rs. 3200 crore was detected in the case of a major oil company pursuant to survey u/s 133A of the Act. The defaults included short deduction of tax and non deduction of tax respectively. Short deduction of tax pertained to TDS u/s 194J for several years on payment of Fee for Technical Services for installation and maintenance of high tech oil refineries, payments for chemical process of re-gasification and transportation of LNG. Default of non deduction was detected on composite contracts involving service and purchase of products on which TDS @2% should have been deducted but which was not deducted resulting in the said default.

The Income Tax Department has, in recent times, stepped up enforcement action against TDS default cases as this category of revenue contributes to over 45% of the total direct tax collection in the country. As per Rules, the TDS has to be paid to the credit of the central government within seven days from the end of the month in which the deduction is made.  

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

 

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 2nd March, 2020

PRESS RELEASE

Income Tax Department conducts search on a group of individuals, hawala dealers and businessmen in Raipur

On 27.02.2020, Income Tax Department conducted a search on a group of individuals, hawala dealers and businessmen in Raipur. The search action was mounted on the basis of credible inputs, intelligence and evidence of generation of huge unaccounted cash from liquor and mining business and transfer of the same to public servants, huge cash deposits during demonetization period, accommodation entries from shell companies, undisclosed investment in properties etc.  Subsequently, based on evidences found during search, a few other premises were also covered in consequential actions.

Incriminating documents and electronic data seized during the search show that substantial amount of illegal gratification was being paid to public servants and others every month. Further, daily details of unaccounted sales, bank accounts opened in the names of employees having transactions worth crores and an unaccounted bank account have been found. Details of benami vehicles, hawala transfers, transfer to Kolkata-based companies and creation of shell companies with huge land bank have also been found and seized. Search has also resulted in seizure of substantial amount of cash. The total unaccounted transactions unearthed till date are over Rs. 150 crore and the figure is likely to substantially increase after the seized evidences and leads found during the search are further scrutinized and investigated. The search action and investigations are continuing and a number of Prohibitory Orders have been placed, including on several bank lockers.

 

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

 

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 29th February, 2020

PRESS RELEASE

Income Tax Department conducts search on prominent metal processing and financing group in Tamil Nadu

On 25-02-2020, the Income Tax Department conducted a search in the case of a prominent business group based in Chennai dealing in the business of non-ferrous metal processing in lead, copper and aluminium and Money Lending activities. The group is said to have reported a turnover of more than a thousand crore and engaged in a number of businesses such as plastic manufacture and financing activities.

The highlight of the search is the discovery of hidden cloud servers other than the servers regularly used by the group for accounting, containing unaccounted transaction details often referred by the group as “kaccha” accounts. Similarly, large amount of encrypted data was retrieved from a pen drive which was tracked and obtained from a third party premise. The pen drive and the database was decrypted to gather information about the unaccounted capital accumulated by the group. Evidences were also gathered for the introduction of unaccounted funds as bogus share premium in one of the group companies.

Large number of property documents, Promissory notes, post dated cheques taken as collateral security etc in the money lending business were recovered during the search and have been seized.  As per evidence detected during the search, the search action resulted in cash seizure of Rs. 1 crore and detection of unaccounted income exceeding Rs. 400 crore. The investigations are still ongoing and the Department is in the process of finalizing the proceedings.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

 

Ministry of Finance

Searches conducted by the Income Tax Department lead to detection of unaccounted income of more than Rs. 2000 crore

Dated: 13^th FEB 2020

Income Tax Department carried out Search and Seizure action on 6th February 2020 at Hyderabad, Vijaywada, Cuddapah, Vishakhapatnam, Delhi and Pune. More than 40 premises were covered.

The search action included three prominent infrastructure groups based in Andhra Pradesh and Telangana. Investigations led to busting of a major racket of cash generation through bogus sub-contractors, over-invoicing and bogus billing. Several incriminating documents and loose papers were found and seized during the search, apart from emails, WhatsApp messages and unexplained foreign transactions unearthed during the search.

Search operation was also carried out on close associates including ex-personal secretary of a prominent person and incriminating evidence seized.

The search operations revealed that Infrastructure companies had sub-contracted work to several non-existent/bogus entities. Preliminary estimates suggest siphoning of more than Rs. 2000 crore through transactions that were layered through multiple entities with the last in the chain being small entities with turnover less than Rs. 2 crore to avoid maintenance of books of accounts and tax audits etc. Such entities were either not found at their registered address or were found to be shell entities. Several such sub-contractors were controlled by the principal contractors with all their ITR filings and other compliances being done from the IP addresses of main corporate office.

FDI receipts of several crores in the group companies of one of the Infrastructure companies is suspected to be round-tripping of its unaccounted funds.

Unexplained cash of Rs. 85 lakh and Jewellery worth Rs. 71 lakh have been seized. More than 25 bank lockers have been restrained.

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RM/KMN
(Release ID: 1603150)

 

Cabinet approves protocol amending the Agreement between India and Sri Lanka for avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Dated: 12 FEB 2020

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the Signing and Ratification of the Protocol amending the Agreement between India and Sri Lanka for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Impact:

Updation of preamble text and inclusion of Principal Purpose Test, a general anti abuse provision in the Double Taxation Avoidance Agreement (DTAA) will result in curbing of tax planning strategies which exploit gaps and mismatches in tax rules.

Details:

i) The existing DTAA between India and Sri Lanka was signed on 22nd January, 2013 and entered into force on 22nd October, 2013.

ii) India and Sri Lanka are members of the Inclusive Framework and as such are required to implement the minimum standards under G-20 OECD BEPS Action Reports in respect of their DTAAs with Inclusive Framework countries. Minimum standards under BEPS Action 6 can be met through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) or through agreement bilaterally.

iii) India is a signatory to the MLI. However, Sri Lanka is not a signatory to the MLI as of now. Therefore, amendment of the India-Sri Lanka DTAA bilaterally is required to update the Preamble and also to insert Principal Purpose Test (PPT) provisions to meet the minimum standards on treaty abuse under Action 6 of G-20 OECD Base Erosion & Profit Shifting (BEPS) Project.

Background:

The existing Double Taxation Avoidance Agreement (DTAA) between India and Sri Lanka was signed on 22nd January, 2013 and entered into force on 22nd October, 2013. India and Sri Lanka are members of the Inclusive Framework and as such are required to implement the minimum standards under G-20 OECD BEPS Action Reports in respect of their DTAAs with Inclusive Framework countries. Minimum standards under BEPS Action 6 can be met through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) or through agreement bilaterally. India is a signatory to the MLI.

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VRRK/SC

(Release ID: 1602925)