Among the 37,000-odd shell companies found to have been indulging in tax evasion, actionable inputs have been firmed up by the tax department on a sub-list of over 1,155 shell companies and entities that were used as conduits by over 22,000 beneficiaries. These “non-genuine transactions” involve an amount of over Rs 13,300 crore, according to government officials involved in the exercise.
Investigations conducted by the income-tax department led to the identification of these entities, including private companies that existed and operated “only in form but not in substance”, and were found to be used as conduits for transactions such as bogus purchases, sales, expenses, donations, loans, advances, long term capital gains in shares and layering of transactions.
Prime Minister Narendra Modi, in his hour-long speech at the foundation day function of the Institute of Chartered Accountants of India on Saturday, had stated that 37,000 shell companies indulging in tax evasion have been detected and more than three lakh firms were under the scanner for “suspicious dealings” post demonetisation. Data mining about the money that has come into the system after demonetisation is currently on and the crackdown on illicit firms is being aided by inputs pooled in by various agencies, including the Enforcement Directorate, Economic Offences Wings of the States, Income Tax authorities and the Serious Fraud Investigation Office (SFIO).
Officials said that in one of the investigations by the SFIO, a list of 54 professionals has been identified who allegedly helped 559 beneficiaries in laundering the illicit cash. The list of professionals included 34 chartered accountants, three company secretaries, four advocates and 13 others.
The constitution of a ‘Task Force on Shell Companies’ in February, 2017 under the joint chairmanship of the Revenue Secretary and Secretary, Ministry of Corporate Affairs, has helped coordinate the efforts. The other members of the Task Force are from the Department of Financial Services, the Central Board of Direct Taxes, the Central Board of Excise and Customs, the Central Bureau of Investigation, the Enforcement Directorate, the SFIO and the Financial Intelligence Unit.
Action against these entities includes searches, surveys, assessment of income, levy of taxes, penalties and filing of prosecution complaints in criminal courts, wherever applicable. As per government records, there are about 15 lakh registered companies in India, but just around six lakh of these companies file their annual returns. It is suspected that a number of these companies have been floated to help raise fake inflated invoices and enable evasion of tax.