The Directorate General of Goods and Services Tax Intelligence (DGGI), Pune, has arrested Shirish Chandrakant Shah (50), a market operator, who has at least 1,000 income tax assessment orders against him and is alleged to have laundered hundreds of crores through 212 shell companies before the government crackdown on shell firms last year.
The DGGI arrested Shah on August 1 and he has been remanded in judicial custody till August 12. The arrest was made after the DGGI found that a “shell firm” controlled by him – Allied Computer International Asia Ltd – issued “fake invoices” of Rs 70 crore to two firms in Delhi and Pune for services that were never supplied. Pune-based Designtech Systems Ltd had in 2015 entered into a contract with the Andhra Pradesh State Skill Development Corporation to set up and operate skill development centres in the state. As part of the contract, Rs 300 crore was given to Designtech Systems as advance. The probe has now found that Designtech Systems sub-contracted the work to Shah’s Allied Computer International, a company that allegedly only exists on paper. The Pune firm transferred about Rs 200 crore to a Delhi-based firm, Skillar Enterprise Indian Pvt Ltd, which then “misutilised” the bogus invoices given by Allied Computer International for “routing public money in an illegitimate manner”.
The DGGI has found that Designtech Systems and Skillar Enterprise allegedly used the bogus invoices to claim input tax credit refund of Rs 7 crore from the government. Ajitkumar Kartikeyan, a senior intelligence officer of the DGGI, told The Indian Express that Shah has also been booked for non-payment of service tax worth Rs 7.30 crore to the government between 2015 and 2017 fiscals, despite collecting it.
“Such unscrupulous acts not only causes loss to the government exchequer, but also distorts government schemes and projects that are being awarded to private companies. We hope that residents, too, will come forward and provide information on tax violations,” said Vaishali Patange, the deputy director at DGGI, Pune.
It is not the first time that Shah has been under scanner for alleged money laundering. He is being probed by multiple investigating agencies – Serious Fraud Investigation Office (SFIO), Securities and Exchange Board of India (Sebi), Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED). This, after the IT department’s investigations revealed that Shah controlled and operated 212 shell companies, including 16 penny stocks that were allegedly used to launder money and evade taxes by large firms in the country, including the troubled Amrapali Group. The income tax department also brought facts pertaining to Shah before the Prime Minister’s Office last year.
According to the filings of the tax authority before the Gujarat High Court in 2015, in a case pertaining to Shah, the department said he is “engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loans, long term capital gains and short term capital gain, wherein cash is received by him from various clients and against this cash he provides accommodation entries”.
The accommodation entry operators typically work through shell companies, formed and used for the sole purpose of giving accommodation entries, by taking cash and introducing the equivalent amounts through cheques. Some of the shell companies of Shah include Prraneta Industries Ltd, Ganesh Spinners Ltd, Vishesh Infotech Ltd,Channel Guide Ltd, Mohan Industries Ltd, Empower India Ltd, Emporish Projects Ltd, Sanguine Media Ltd and Yantra Naturals Ltd.
The extent of Shah’s web of shell companies can be understood from the fact that Sebi, as part of its enquiry against 331 shell firms, has asked several companies to disclose if they had any business transactions with him between April 2009 and March 2013.