Tax evasion worth crores detected after raids on 'foreign-run' firms

New Delhi, December 31

The Income Tax Department has detected alleged unaccounted income worth over Rs 6,500 crore after it recently raided some “foreign-controlled” mobile communication and handset manufacturing companies and persons linked to them, the CBDT said on Friday.

The searches were carried out on December 21 and premises in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and Delhi-NCR were covered.

“The search action has revealed that two major companies have made remittance in the nature of royalty, to and on behalf of its group companies located abroad, which aggregates to more than Rs 5,500 crore. The claim of such expenses does not seem to be appropriate in light of the facts and evidence gathered during the search action,” the Central Board of Direct Taxes (CBDT), the policy-making body for the I-T Department, claimed in an official statement issued here.

It did not identify the entities searched.

The raids “brought out the modus operandi of purchase of the components for manufacturing of mobile handsets”. “It is gathered that both these companies had not complied with the regulatory mandate prescribed under the Income Tax Act for disclosure of transactions with associated enterprises,” the statement said.

Such a lapse, it said, makes them liable for penal action under the I-T Act and the quantum could be more than Rs 1,000 crore.

A modus operandi was detected “whereby foreign funds have been introduced in the books of the Indian company but it transpires that the source from which such funds have been received are of doubtful nature, purportedly with no creditworthiness of the lender”.

“The quantum of such borrowings is about Rs 5,000 crore, on which interest expenses have also been claimed,” it said.

The CBDT said “evidence with regard to the inflation of expenses, payments on behalf of the associated enterprises, etc. have also been noticed which led to the reduction of taxable profits of the Indian mobile handset manufacturing company”. “Such amount could be in excess of Rs 1,400 crore,” it said. The statement claimed one of the companies raided had utilised the services of another entity located in India but did not comply with the provisions of tax deduction at source introduced from April 2020. — PTI

Searches conducted on Dec 21

On December 21, searches were carried out in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and Delhi-NCR.