Press Information Bureau

Government of India

Ministry of Finance

31 JUL 2019

Income Tax Department conducts search on group connected with VVIP Chopper Scam

Income Tax Department conducted search action on 24th July, 2019, on a Hyderabad based group engaged in the business of conducting seismic data analysis. The assesse group indulged in large scale over-invoicing of imports through a Dubai based operator who is an accused in a VVIP Chopper scam. The surplus funds thus generated amounting to USD 6 million were parked in Dubai based accounts of the said operator.

During the search, incriminating evidences including e-mail and mobile conversations were found between the main director of the searched company and the Dubai based operator, pertaining to over-invoicing of imports. When confronted, the persons concerned admitted to over-invoicing.

Further, the search action led to detection of at least 4 additional undisclosed foreign bank accounts in UBS bank Switzerland, OCBC Bank Singapore, Citizens Bank, USA and Bank of Nevis International, St Kitts. Moreover, 3 undisclosed companies of the Hyderabad based promoter in tax havens viz. British Virgin Islands, Island of Nevis and Singapore were also detected.

Unexplained cash of Rs. 45 lakh found during the search has been seized. Jewellery worth Rs. 3.1 crore was also found, which is in the process of being verified.

****

DSM/RCJ/HP

 

BEFORE THE SPECIAL COURT FOR ECONOMIC OFFENCES: AT BANGALORE.

Dated this the 26^th day of April 2019.

:Present: Sri. SHANTHANNA ALVA M., B.A., LL.B., Presiding Officer, Special Court for Economic Offences, Bangalore.

CC. No. 87-2016

Complainant: The Asst. Commissioner of Income Tax, Income Tax Department,

Central Circle – 1(2), 3^rd Floor, C.R. Building, Queens Road, Bangalore - 560 001.

(By Sri. J.J.N. Advocate)

Vs.

Accused: B. M. Govardhan Murthy

48 Years, No.1, Bilishivale Village, Doddagubbi

Post, Bangalore - 562149.

(By accused Sri. K.R., Advocate)

JUDGMENT

1. The complainant/ Assistant Commissioner of Income Tax, Income Tax Department, Central Cirlce-1(2), authorized by the sanction order dated: 14.01.2016, filed the complaint under Sec. 200 of Cr.P.C. alleging that accused committed the offence punishable u/s.276C(1) of the Income Tax Act, 1961, (Herein after referred as the ‘Act’).

2. The complainant’s case in brief is that accused is an individual and an assessee within the jurisdiction of the complainant. Accused is in the business of real estate. Income Tax Department had conducted the search on 16.09.2008 u/s.132 of the Act, in the premises of the accused. During the course of search, certain incriminating documents/materials were found and they were seized under mahazar. After search, the assessments proceedings were taken up by the Assessing Officer by issuing the notice u/s.142(1) of the Act. The Assessing Officer issued the notice dated: 07.07.2010 and 07.10.2010 u/s.142(1) of the Act and then issued the notice dated: 20.12.2010. In response to the notice, the accused filed the returns of income on 20.12.2010 declaring an income of Rs. 65,69,995/- and agricultural income of Rs.7,32,000/-. The assessment order dated: 31.12.2010 was passed making addition of Rs. 11,07,778/- and total tax payable at Rs. 20,26,743/- including interest. The penalty proceedings was also initiated and by the order dated: 27.06.2011 levied the penalty of Rs. 4,47,860/-. The appeals preferred by the accused before the Commissioner of Income Tax (Appeals) was dismissed vide order dated: 30.12.2013. The Principal Commissioner of Income Tax, Appeal, (Central), Karnataka, issued notice dated: 11.12.2015 calling upon the accused to show cause as to why the prosecution proceedings for the offence punishable u/s.276C(1) of the Act should not be initiated against the accused. Accused sent the reply dated: 23.12.2015 and the Sanctioning Authority being not convinced with the defense taken up by the accused, accorded the sanction to prosecute the accused. It is alleged that accused had suppressed the true income with an intention to evade the tax. The income assessed by the Assessing Officer has been detected in consequence of search. Had the department not conducted the search, the true and correct income of the accused would not have been disclosed. The filing of the returns disclosing the income by the accused is not voluntary. The accused had earned the income which he failed to disclose deliberately and willfully with an intention to evade the tax and thereby committed the offence punishable u/s.276C (1) of the Act.

3. On presentation of the complaint, cognizance was taken and the case registered against accused for the offence punishable u/s. 276C(1) of the Act.

4. In response to the summons, the accused appeared through his counsel and enlarged on bail. Copies of the complaint and other documents were furnished to him. The accusation was framed and read over to the accused and he denied the accusation leveled against him and pleaded not guilty and claimed to be tried.

5.To prove the case against the accused, the complainant examined 4 witnesses as P.w.1 to 4 and got marked the documents as Ex.p.1 to 13. During the cross examination of P.w.1, the accused got marked the documents as Ex.D.1 to 3.

6. After closure of complainant’s side evidence, the statement of accused was recorded as provided u/s. 313 of Cr.P.C. The accused denied incriminatory evidence found  against  him.  On  behalf  of  the  accused,  the Practicing C.A., Sri. Adithya Bharadwaj S.P. examined as D.w.1 and got marked documents as Ex.D.4 and 5.

7. Heard the arguments of the learned counsels of the complainant and accused. Perused the complaint and the evidence   on record. The points that arise for my consideration are:

Point No.1: Whether the complainant has proved that the accused willfully made attempts to evade the income tax on the earned income during the Assessment Year 2009-10 and thereby committed the offence punishable u/s. 276C(1) of the Act and complaint is backed by the valid sanction?

Point No.2: What order?

8. My findings on the above said points are as under:-

Point No.1: In the Negative,

Point No.2: As per the Final orders for the following:

REASONS

9. Point No.1: The complaint is filed alleging that accused committed the offence punishable u/s.276C (1) of the Act. Accused taken up the contention that there is no valid sanction. Ld. Counsel argued that the proviso attached to Sec.279 (1) of the Act mandates the instruction or direction from the authorities stated therein to file the complaint and without that, the criminal prosecution cannot be prosecuted. Countering this, Ld. Counsel of the complainant argued that under the proviso power is given to issue instruction or direction to the authorities stated in Sec.279 (1) of the Act, but it is not mandatory.

10. Sec.279 (1) of the Act says that a person shall not be proceeded against for the offence stated therein, except with the previous sanction of the Principal Commissioner or Commissioner or Commissioner (Appeals) or the appropriate authority. Here, the Principal Commissioner of Income Tax accorded the sanction. The proviso attached to Sec.279 (1) of the Act, says that provided that the Principal Chief Commissioner or Chief Commissioner or, as the case may be, Principal Director General or Director General may issue such instructions or direction to he aforesaid income tax authorities as he may deem fit for institution of the proceedings under the Sub-Section. The proviso stated above not restricts the power conferred u/s.279 (1) of the Act to the authorities stated there to accord the sanction. The provision may empowers the authorities stated therein to issue direction or instructions. The argument of the Ld. counsel of the accused that mere sanction u/s.279 (1) of the Act is not sufficient and there must be instruction or direction by the authorities mentioned in the proviso is not acceptable.

Thus, the argument that there is no valid sanction to prosecute the accused for the offence punishable u/s.276C (1) of the Act is legally not sustainable.

11.The   charge   leveled   against   the   accused   is punishable u/s.276C (1) of the Act. To prove that one has committed the offence punishable u/s.276C (1) of the Act, there must be evidence to the effect that accused willfully made attempts to evade the tax, penalty or interest chargeable or impossible under the Act. In the case of G. Vishwanathan Vs Income Tax Officer reported in (1987) 65 CTR 0184 it is held that “sub-sec. (1) and (2) of S. 276C deal with two different situations. Sub-sec.(1) deals with ‘evasion of tax, penalty or interest chargeable or impossible under the Act’. Therefore, evidently, what is contemplated is evasion before charging or imposing tax, penalty or interest. That may include willful suppression in the returns before assessment and completion.” Thus, the complainant has to prove that before completion of assessment, accused willfully suppresses the income to evade the tax.

12. Here, the complaint is filed or the Assessment Year 2009-10 stating that the accused made attempts to evade the tax by not disclosing the correct and true income by falsely verifying the original return. It is admitted fact that search was conducted in the premises of the accused on 31.03.2018. The complaint is for the Assessment Year 2009-10   i.e.,   for   the   period   from   01.04.2008   to The last dated for filing the returns for the Assessment Year 2009-10 u/s.139(1) of the Act was on 30.09.2009 and the last date to file the return of income u/s.139(4) of the Act was on 31.03.2010. After search, the Assessing Officer issued notices u/s.142(1) of the Act. Accused filed the return on 20.12.2010 declaring the loss. The Assessing Officer passed the assessment order dated: 31.12.2010 making addition of Rs.11,07,778/- and total tax payable at Rs.20,26,743/-.

13. It has come in the evidence that the department conducted the second search on 01.10.2013 and then notice u/s.153A of the Act was issued on 05.11.2014. Accused submitted the letter dated: 30.09.2015 to treat the return of income filed on 20.12.2010, as the return filed in response to the notice u/s.153A of the Act.

Thereafter, the second assessment order was passed on 23.03.2016. In the second assessment order, the total income determined at Rs.44,78,590/- was taken as income and addition of Rs.7,42,000/- was made by rejecting the claim of the accused that said income is agricultural income.

14. Ld. Counsel of the accused argued that the first assessment order become non-existence, because of the second search and second assessment order. Ld. Counsel of the complainant argued that the second search not effected the concluded assessment. Sec.153A of the Act deals with the assessment in case of search or books of account, other documents or any assets are requisitioned. The second proviso of Sec.153A of the Act says that assessment or re-assessment, if any relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of institution of search u/s.132 or making of requisition order u/s.132A, as the case may be shall abate. Our Hon’ble High Court, in the case of Canara Housing Development Company Vs. Deputy Commissioner of Income Tax, reported in [TS-475-HC-2014(Karnataka)-O] wherein it is held that “once the proceedings are initiated u/s.153A of the Income Tax Act, 1961, the legal effect is even in case where the assessment order is passed, it stands reopened. In the eye of law, there is no order of assessment.”

15. The reading of proviso attached to Sec.153A of the Act with aid of ruling referred above, makes it clear that in case of second search and initiation of re-assessment, all other proviso assessment or reassessment for six assessment years pending on the date of search stands abated. That means, the assessment order dated: 31.12.2010 stand abated and in view of the second assessment order dated: 31.12.2010, the first assessment order got abated. As far as the argument that in the second assessment substantial addition is made and that can be looked into is considered, the sanction based on which complaint filed was accorded on the basis of the first assessment order. In the sanction order, there is no reference about the assessment order dated: 23.03.2016. Thus, as argued by the Ld. counsel of the accused, the complaint is not maintainable.

16. Even, if it is held that the complaint is maintainable, there is no evidence to hold that accused willfully made attempts to evade the tax. Only for the reason that in the assessment proceedings, it has been held that Rs.11,07,778/- is brought to tax, it cannot be held that accused committed the offence punishable u/s.276C(1) of the Act. In the assessment order, it has been stated that during the course of search, accused admitted the additional income of Rs.44,78,590/- but to substantiate that complainant not produced the reliable evidence. P.w.1 in the cross examination stated that showing the income as agricultural income and not substantiating that amounts to suppression of income. But, criminal charge cannot be held proved for that reason only. Except assessment order the complainant not produced the evidence to substantiate this charge of willful evasion of tax.

17. The complainant not produced the evidence for having served the notice issued after search taken place on 16.09.2008. Accused taken up the contention that he was in judicial custody from 11.10.2008 to 27.12.2012. The order sheet and the Judgment in S.C.No.299/2009 marked as Ex.D.4 and 5 discloses that accused was in judicial custody during that period. The return of income dated: 20.12.2010 was not personally submitted by the accused. From this, it can be very well inferred that there was no willful default in filing the returns within time.

18. The complaint is legally not maintainable in view of the fact that it was filed based on the sanction accorded on abated assessment order. On factual aspect also, there is no evidence to the accused made willful attempt to evade the payable tax. Consequently, it has to be held that charge u/s. 276C(1) of the Act held not proved. Accordingly this point is answered in negative.

19. Point No.2: In view of my findings on points No.1, I proceed to pass the following:-

ORDER

By exercising the power conferred u/s. 255 (1) of Cr.P.C. the accused is acquitted for the offence punishable u/s. 276C (1) of the Income Tax Act, 1961.

Bail bond of accused stand cancelled.

(Dictated to the Stenographer, directly on computer, typed by her corrected and then pronounced by me, in open court on this the 26^th day of April - 2019.)

 

Ministry of Finance

Finance Minister exhorted Income Tax officers to be prompt in redressing the grievances of the tax payers

Finance Minister asks Tax officers to deal firmly with Tax evaders

Income Tax Department celebrates Aaykar Diwas 2019

Dated: 24 JUL 2019

The Union Minister of Finance & Corporate Affairs Smt Nirmala Sitharaman exhorted the Income Tax officers to be prompt in redressing the grievances of the tax payers and expand the tax base in a non-intrusive manner. Addressing officers at the Income Tax day celebrations here today, the Finance Minister asked the department to firmly deal with those who try to evade taxes and game the system while taking steps to provide better tax payer services to facilitate the honest taxpayers. Borrowing from Kautilya’s Arthashastra, she urged that the department should collect taxes like the Bee who sucks only that much nectar from the flower as is absolutely necessary, the Finance Minister added. She said the three enforcement wings of the revenue department - the Income Tax department, the Enforcement Directorate and Directorate of Revenue Intelligence - should share the information about assessees base and profile of assessee for better coordination in identifying of tax evasion/ avoidance. She also congratulated the department for working towards changing the mindset of the people and continue to work to reduce the trust deficit thereby helping them to become more tax compliant.

The function was attended by Shri Anurag Singh Thakur, the Minister of State for Finance and Corporate Affairs , senior officials of Department of Revenue including the Revenue Secretary, officers from other departments including CBI and ED Director, Settlement Commission, Chief Controller of Accounts, Chairman and Members of the Central Board of Direct Taxes and Central Board of Indirect Taxes and Customs respectively, as also other senior officers of the Income Tax Department (ITD).

In his address , Shri Anurag Singh Thakur , Minister of State for Finance & Corporate Affairs  underlined the importance of mobilization of resources as an important component in the vision of New India as envisioned by Hon’ble Prime Minister. He urged the department to take steps to encourage voluntary compliance and to address grievances especially pertaining to senior citizens and specially-abled persons. He also emphasized that collection of revenue should be done in a tax payer friendly manner and that the softer side of the department especially the initiatives of the department in the social sector also be highlighted.

Dr Ajay Bhushan Pandey , Revenue Secretary congratulated the department for becoming one of the few organizations in the world to have switched to almost cent percent e-filing in such a short time. He also lauded the new initiatives launched in the area of faceless assessment and hoped that the department would continue to use data mining and other non-intrusive methods to augment revenue collection. The Chairman CBDT, Shri P.C. Mody, stressed upon the technological changes in the ITD which have given it an edge in tackling tax evasion and also urged the department to work in a fair and transparent manner.

At the function , the Finance Minister  released a departmental publication titled “Investigation of Accounts” and also launched an in-house e-journal “Taxalogue” or Dialogue on Taxes, which is a new initiative taken by CBDT being a quarterly e-journal where one can contribute articles on issues pertaining to taxation. Shri Thakur launched the “Publicity Kit for Outreach Programmes” developed by the department to facilitate easy availability of publicity material to field offices of the department for conducting outreach programmes for increasing tax awareness among the public. The event also included the release of departmental publication on “Transfer Pricing” by the Revenue Secretary.  A film titled “Aaykardata- Badalte Bharat ka Bhagidar” detailing the contribution of the Department towards nation building was also screened.

****

DSM/RM/HP

(Release ID: 1580153)

 

Ministry of Finance

CBDT continues follow up in cases connected with J&K Bank 

Dated: 23 JUL 2019

CBDT has been actively pursuing leads found in the actions taken against the J&K Bank and its erstwhile Chairman, Sh. Parvez Ahmad.  In another such follow-up action, a search and seizure operation has been conducted on a Group that is in the business of providing security to business establishments and prominent individuals, as well as in running hotels in Jammu &  Kashmir and other parts of the country.   The searched group also held a controlling share in a controversial Medical College in Punjab, which has been ordered to be closed by the Medical Council of India in 2014.  The allegations against the group include defrauding the public sector banks including J&K bank in connivance with the bank officials, unexplained cash deposits in the group entities and large scale diversion of funds taken for development of the impugned Medical College as well as hotels of the Group for private gain of the promoters.

The search action has revealed apparent siphoning of loans obtained from various public sector banks of more than Rs. 74 crore.  Digital and documentary evidences found during search also clearly reflect machinations of the bank officials in violating prudence norms as well as rules of business to safeguard the banks’ interest in grant of loans that exceed Rs. 200 crore. These loans have subsequently become NPAs.

The search action has   revealed   concrete leads of round tripping of more than Rs. 125 crore by the promoters of the Group.  The money trail of round tripping suggests use of suspect entities, which have served as a conduit to bring back Rs. 125 crore as unsecured loans in the hands of the promoter family and its close associates.

Clear evidences that establish a wilful attempt to mislead and defraud the financial institutions have also been unearthed in the search operation.  Few instances of such subterfuge are as follows;

(a)       A sale of a hotel land in Jammu & Kashmir to a family member of the main promoter, who is a man of no means for a paltry sum of Rs. 35 lakh. Subsequently, a lease rental of Rs. 1 lakh per month was debited in the books of account in favour of the dummy relative.  Hot pursuit enquiries with the dummy relation have shown him to be unaware of any of these financial transactions.  Also, the lease rental debited in the books of the Group has been layered and brought back in the books of account of the other Group entities. 

(b)       Similarly, to obtain a large tranche of loan from the J&K Bank, the searched Group falsely claimed that 60 rooms of hotel being constructed by the Group at Mumbai had become operational and cash flow was being generated from such operations. The search party found that the hotel building in Mumbai was yet under civil construction and was nowhere near completion or in a shape wherein 60 rooms could be made operational to generate any cash flow to repay the loan.

The search team also found evidences of dummy manpower expenses. A large number of cheques issued to fictitious persons, who were supposedly on the rolls of the Group for providing security to businesses and prominent individuals, were found with the main promoter. Prima facie, dummy persons have been shown as employees to inflate the expenses of the security business undertaken by the Group at various locations in the country.

The main promoter and his family were the managing and controlling trustees of an educational society that ran the now closed Medical College in Punjab.  Three batches of students were admitted in the Medical College and fee, inclusive of capitation charges were paid by these students.  However, no tax return was ever filed by the society and the evidence gathered in the search strongly suggests that the impugned educational society also violated other regulatory laws. It is clear that the money collected from students as well as bank loans that were supposedly utilized for building infrastructure of Medical College, which was  actually never built or constructed has been siphoned off by the main promoter and his family for personal enrichment.

The search action has led to seizure of unaccounted jewellery and undisclosed cash of more than Rs. 1.28 crore from the promoter of the Group.

DSM/RM/HP
(Release ID: 1580004)

 

F. No. 225/157/2019/ITA.II

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated:23.07.2019

Order under Section 119 of the Income-tax Act, 1961

The 'due-date' for filing income-tax returns for Assessment-Year 2019-20 is 31.07.2019 for certain categories of taxpayers. It has been reported that some of the taxpayers are facing difficulties in filing their income- tax returns due to various reasons including extension of due date for issue of Form 16 for the Assessment-Year 2019-20.

2. In this regard, the Central Board of Direct Taxes, in exercise of its powers conferred under section 119 of the Income-tax Act, 1961 ('Act'), hereby extends the 'due-date', as prescribed under section 139(1) of the Act, for filing income-tax returns from 31st July, 2019 to 31st August, 2019 in cases of all taxpayers who are liable to file their income-tax returns by the said 'due-date'.

(Rajarajeswari R.)

Under Secretary to the Government of India