AN ONGOING Income Tax investigation into IL&FS Rail Ltd, a subsidiary of IL&FS Transportation Networks Ltd, has alleged that the firm used accommodation entries from “shell companies” to show expenses running into crores of rupees for “non-existent” infrastructure work.
The I-T department has allegedly identified multiple contracts that IL&FS Rail awarded to shell companies, procuring fake invoices for “non-existent” work to lower its profits.
The official spokesperson of IL&FS Group declined to comment on the case.
According to the tax department, in 2013-14 for instance, IL&FS Rail received “bogus invoices” of over Rs 20.18 crore from Kolkata-based Silverpoint Infratech Ltd, a firm allegedly “involved in facilitating accommodation entries to beneficiaries in the garb of bogus work contract expenses/ unsecured loan entry/ share capital” for a commission of 0.50 per cent. The IT probe has found that while Silverpoint had “an income of Rs 251 crore, it did not have the business premises to carry out its operations”.
The tax investigation has found that Silverpoint did not have adequate infrastructure or manpower to complete any contractual work. In fact, the IL&FS Rail used shell firms for bogus invoices worth crores: I-T managing director of Silverpoint, in a statement under oath to the tax department, has accepted that his firm was involved in providing accommodation entries for a commission.
The tax authority has rejected the expenditure claimed by IL&FS Rail against the alleged invoices of Silverpoint in its assessment order. Sources, however, said IL&FS Rail has filed an appeal.
The tax probe has also sought information from IL&FS Rail on contracts of over Rs 20 crore allotted to at least three other firms —Suryamukhi Projects Pvt Ltd, Divyanshi Infra Projects Ltd and NKG Infrastructure Ltd — which the department has alleged are accommodation entry providers.
According to the I-T probe report, the top officials of Suryamukhi Projects and Divyanshi Infra have accepted that their firms are in the business of providing accommodation entries to companies and individuals.
Interestingly, the promoter of NKG Infrastructure, Pradeep Kumar Garg, is also being investigated by the CBI and Enforcement Directorate in connection with a corruption case against Yadav Singh, former engineer-in-chief of Noida Authority, Greater Noida Authority and Yamuna Expressway Industrial Development Authority. The agencies have alleged that NKG Infrastructure was allotted multi-crore infrastructure work by Noida Authority officials without inviting tenders in 2011.
The crisis at IL&FS was triggered when IL&FS Transportation Networks delayed repayment of Rs 450 crore of inter-corporate deposits from Small Industries Development Bank of India (SIDBI) in July 2018. Subsequently, rating agencies downgraded its debt papers/ credit facilities citing weak financials. In September, the group defaulted on a Rs 1,000 crore term loan owed to SIDBI.
Following the defaults, rating agencies ICRA, India Ratings and CARE downgraded IL&FS and its subsidiary from high investment grade (AA plus and A1 plus) to junk status, indicating actual or imminent default. Later, the Reserve Bank of India (RBI) initiated a special audit of the IL&FS Group. In October, the government superseded the company’s board to contain the fallout.
Since then, the IL&FS Group, with total liabilities of Rs 94,000 crore, has come under the scanner of the Serious Fraud Investigation Office (SFIO).