Income Tax Department conducts searches in NCR

New Delhi [India], August 17 : The Income Tax Department on Monday conducted searches on a company engaged in trading of telecom equipment for various telecom players in India and identified tax liability of hundreds of crores and recovered unaccounted cash of more than Rs 62 lakh on the premises. Three lockers have also been found during the course of the search, which has been placed under restraint, as per the official press release by the Ministry of Finance.
Further, the assessee company involved in the installation and servicing of telecom equipment items has also declared only 2 bank accounts in its Income Tax Returns (ITRs) despite having around 12 operative bank accounts. Accountability of transactions in other bank accounts is being examined, stated the press release.
The searches were conducted at five premises, including the corporate office, the residence of a foreign director, the residence of a company secretary, an accounts person, and the cash handler of a foreign subsidiary company in India, according to the press release.
The search revealed that the purchases of the assessee company were entirely from its holding company. Examination of import bills vis-a-vis sale bills show that there is huge gross profit (approximately 30%) on the trading of these items, however, the company has been booking huge losses over the years, stated the press release.
It is thus evident that losses are being booked by the company through bogus expenses in respect of services provided by it, further stated the press release.
Few such recipients have been identified in whose case, substantial expenses have been booked over the years. These entities have been found to be non-existent at their addresses. Moreover, the said entities also do not file their Income Tax Returns(ITRs). More such dubious entities are being examined. It is expected that bogus expenses would run into hundreds of crores over the years, said the press release.
During the search, incriminating evidence has been detected in Whatsapp chats of the CEO, CFO, and other key persons indicating illegal payments to telecom companies. Whatsapp chats also reveal payment of commission to a person based in Australia for the purchase of shares of a telecom company in India.
These transactions are being examined further. Evidence in the form of electronic data and physical papers, found during the course of the search shows that unaccounted money, running into several crores every year, has been brought back into the books in the form of bogus scrap sales, etc.
Incriminating documents found from the electronic data of key persons, including the foreign CFO, show that the employees of the company were engaged in illegal currency exchange from Rupee to RMB. They were also found to be engaged in the large-scale illegal trade of medicines from India to China.
Examination of books of the assessee company shows large discrepancies. It has been found that the company has failed to deduct TDS on provisions made by them for expenses. During F.Y.s 2014-15 and 2015-16, the company failed to deduct TDS on such provisions amounting to more than Rs. 120 crore. The company has claimed expenses of more than Rs. 100 crore on account of provisions created by it for doubtful debts in F.Y. 2017-18. Similarly, expenses of hundreds of crores have been claimed over the years on account of provision for doubtful debts and provision for doubtful loans and advances. Admissibility of such expenses is being examined.
The search operation is still underway.