The Mumbai unit of the Income Tax Department, after an investigation aided by information received from agencies in several countries, has served notices to members of the Mukesh Ambani family under provisions of the 2015 Black Money Act.
In a closely guarded move, notices were served on March 28, 2019 in the names of Mukesh Ambani’s wife Nita Ambani and their three children for their alleged “undisclosed foreign income and assets”.
The I-T probe began after the government received details of an estimated 700 Indian individuals and entities holding accounts in HSBC Geneva in 2011. This was followed by an investigation by The Indian Express and the International Consortium of Investigative Journalists (February 2015) — called Swiss Leaks — which expanded the number of HSBC Geneva account holders to 1,195.
It was The Indian Express investigation that had first revealed how a cluster of 14 HSBC Geneva bank accounts with a cumulative balance of $601 million held by offshore entities in tax havens were all linked, through a complex chain of associates and offshore holdings, to the Reliance Group.
Details of the Income Tax investigation report dated February 4, 2019 and the notices sent on March 28, 2019 reveal that members of the Ambani family are named as “ultimate beneficiaries” of one of these 14 entities, the Capital Investment Trust, through various foreign and domestic entities.
Responding to questions sent by The Indian Express on the notices and the key allegations, a Reliance spokesperson replied: “We deny all the contents of your email including receipt of any such notice.”
However, The Indian Express has learnt that the notices were served after a protracted “back and forth” between the Mumbai unit and the top brass of the Central Board of Direct Taxes. Final clearances were given days before the notices were served.
Details reveal that the notices, from the office of the Additional Commissioner of Income Tax 3(3), Mumbai, were served under Sub-Section (I) of Section 10 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
There are details of how Capital Investment Trust was created on November 5, 2003 with one C J Damani as its Settlor/ Economic Contributor. The Trust’s initial funding was just $1,000. It owned an entity named Thames Global Limited which, in turn, owned Infrastructure Company Limited and Antalis Management Limited based in the British Virgin Islands.
The IT Department notice has also alleged that the Ambanis failed to disclose details and holdings in the Capital Investment Trust and in its “underlying company,” the Cayman Islands-based Infrastructure Company Limited of which they were also ultimate beneficiaries.
The notice states that the assessees were ultimate beneficiaries of another entity named Harinarayan Enterprises, having a Mumbai address.
Citing “non-compliance,” the notice states that following provisions introduced in the 2012 Finance Bill, the assessees were required to disclose details of all foreign bank accounts, Trusts as well as financial interest/ immovable property or assets held outside India. And that the assessees also did not avail of the Black Money Disclosure Scheme of 2015 under which a four-month compliance window was given to declare any foreign income or assets.
The notice clarifies that in this case, the officer proposes to assess the “Undisclosed Foreign Asset” in Previous Year (PY) 2018-2019 relevant to Assessment Year (AY) 2019-2020. The assessees have been asked to produce accounts/ documents/ evidence in their support either in person or through authorised representatives. The first date of hearing fixed for the case was April 12, 2019.
The notices are based on the IT Department’s investigation which was finalised about three months before the notices were served. Its key findings:
* Records received from overseas under foreign exchange treaties show that Infrastructure Company Limited invested $400 million on February 9, 2004 in GDRs of Reliance Ports & Terminals (RPTL) and Reliance Utilities & Power Ltd (RUPL). However, the name of this investor (Infrastructure Company Limited) does not appear in the list of shareholders of the two Indian companies. This $400 million ultimately reached RIHPL (Reliance Industries Holding Pvt Ltd) whose ultimate beneficiaries are the four members of the Ambani family.
* Foreign assets were obtained via The Bank of New York Mellon in the form of GDRs in the year 2002-03 and after transfer/ demerger/ amalgamation, the funds reached Reliance Industries Holding Private Limited having a share capital of Rs 5 lakh only. The shareholder of this company was a private Trust named Harinarayan Enterprises with four beneficiaries belonging to the Ambani family. Inquiries with The Bank of New York Mellon showed that it acted as the global custodian of the GDRs and was neither the owner nor beneficial owner of the GDRs. It is concluded that the two Indian companies “tried to hide” the names of owners and beneficial owners of GDRs by incorporating the name of Bank of New York as investors/ shareholders.
The inquiry report also sought permission for “remedial action” to be taken against the ultimate beneficiaries.