Chit fund firms collected Rs 70,000 crore: IT report

WITH various agencies at work trying to measure the enormity of the chit fund scam in Bengal which started to unravel with the high-profile Saradha Group going bust,the Investigative Wing of the Income Tax department in Kolkata has estimated that the money raised from the people by nearly 800 chit fund companies operating in Bengal is a whopping Rs 70,000 crore.

Written by Madhuparna Das | Kolkata | Published: April 27, 2013 3:39:06 am

WITH various agencies at work trying to measure the enormity of the chit fund scam in Bengal which started to unravel with the high-profile Saradha Group going bust,the Investigative Wing of the Income Tax department in Kolkata has estimated that the money raised from the people by nearly 800 chit fund companies operating in Bengal is a whopping Rs 70,000 crore.

Like the Securities and Exchange Board of India (SEBI),the department has also warned the state government about dire consequences if it failed to initiate action and stop these operations. However,it says the scam is much bigger in size.

The IT department sent its findings through “official communications” to other central agencies as well as the West Bengal government. The reports were dispatched in installments since July 2011. The first installment of the IT investigative report on five chit fund companies reached the state government and Union Finance Ministry with copies marked to the SEBI and Reserve Bank of India as well in July,2011,said a senior official of the IT Department. However,both the state and central governments sat on the department’s report,it was learnt.

The department had raided offices of five major chit fund companies as “test cases”,which revealed major “financial anomalies.” Of these,four were Kolkata-based companies and one was based in Burdwan. Interestingly,one of the five companies taken up by the IT department as “test cases” was the Saradha Group,which did not file its income tax returns for the last three years. When it was served notices,it paid provisional taxes.

According to IT officials,the company subsequently filed three different balance sheets to three agencies including the Registrar of Companies,the Income Tax Department and the concerned banks. “It was a criminal offence under the companies Act,” said a top official on condition of anonymity.

SEBI officials confirmed that the audit firm of the Saradha Group is now being also investigated. When contacted,a senior official of Bidhannagar Police Commissionerate investigating the Saradha Group case confirmed that the audit firm in question will be called for questioning.

Here are some of the findings of the IT survey report:

z The IT department found that the five test companies were heading towards a financial disaster. Detailed reports of each of the company,containing at least 350 pages,were prepared. The five companies were served notices by the IT department for tax evasion. “Since IT department’s primary concern is to collect taxes,we did that. All of the five companies were defaulters but they paid up. However,we sent our report to the concerned agencies of the Government of India,and we also sent our investigation report with every detail of those five companies to the West Bengal government. We recommended criminal investigation against those companies,” added a senior IT official of the Investigative wing.

2. The reports prepared by the IT department claimed that the asset base of the companies were not more than 15 per cent of the total amount of money they had raised from the people which jeopardized the security of the deposits. The report further stated that the companies would “never be able to repay its investors” and the companies would collapse sooner or later.

3. The report mentioned the structure of the business of these companies saying that almost 35 per cent of the investor’s money goes for paying commission to the agents,10 per cent is spent on advertisement,15 per cent on political patronage,10 per cent on maintaining the administrative set up of the company and 20 per cent on Tollywood film industry to hire celebrities for brand promotion. The companies are left with just about 10 per cent of the investor’s money from which it would not to be able to repay the investors who are often promised 25 per cent interest,reads the report of the IT department.

4. Meanwhile,the IT department’s investigation revealed that the owner of a Kolkata-based non-banking finance company owns 25 imported cars and his wife is a big name in film production. “It is an alarming situation,” said a senior IT official. Sources said the IT department has registered cases against these five companies in its appellate authority.

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