How Income Tax officers helped Gujarat firm evade tax, set up shell companies

A diary shipped by tax department to the Central Bureau of Investigation indicates Income Tax officials got kickbacks for helping Sterling Biotech set up benamis.

Published: 07th September 2017 09:55 AM  |   Last Updated: 07th September 2017 09:55 AM   |  A+A-

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Express News Service

NEW DELHI: Officials at the Central Bureau of Investigation (CBI) are perplexed over the ‘solid evidence’ shipped to them by the Income Tax department. What perplexes them is that the evidence collected by the I-T department is against its own officers, who offered to settle tax evasion cases for a hefty price.Evidence provided by the tax department includes hundreds of pages of notes and diary entries that indicate kickbacks were given to officials. On August 30, the CBI registered an FIR against several tax officials, including three seniors — SK Ojha, Dr Subhash Chandra and MS Ray — and a Vadodara-based private company called Sterling Biotech Limited.

Express has access to the diary and computer data provided to the CBI as evidence. “The authenticity of the entries and accuracy has been established beyond doubt from the corroborative evidence from other premises also. Therefore, the entries stand substantiated on authenticity and contents both,” it said.It was during an I-T search at Sterling’s premises, way back in 2011, that this diary was seized. However, the case or the diary did not surface for four long years, until the current government decided to reopen the matter and probe the role played by government officers.

Diary shows entry of D1 crore each for I-T officers Subhash Chandra and MS Ray. (R) Ticket purchased for SK Ojha found during the CBI probe | Express 

The CBI now suspects that these officers under question could have helped Sterling raise offshore entities and even turned a blind eye to 200 benami companies floated by it to evade taxes and funnel money abroad. “There were serious lapses in the investigation into the affairs of Sterling Biotech Limited, resulting in substantial loss of revenue, not only on account of cash transactions like the one under focus, but also on number of other issues having a greater impact on taxable income of the group,” reads the CBI file.“It was found that Sterling Biotech had incorporated more than 100 undisclosed offshore entities, trusts, foundations and companies in known tax havens like British Virgin Island, Seychelles, Liechtenstein and other countries. Though complete documentary evidence in incorporation of the entities and details of their beneficial owner was available in the seized data, there is absolutely no mention in the appraisal report about the issue,” claimed the documents.

“The turnover of the company was being manipulated through benami entities in India and undisclosed offshore entities. Though the CA of the group and a few key persons admitted to the fact, no further enquiry was carried out to ascertain the impact on revenue.”Evidence against IT officials of having helped the firm evade laws is overwhelming, said CBI officers. Investigations so far have revealed that funds were diverted to benami entities by Sterling and other group companies. This was done under the pretext of purchasing assets and payment for goods. These were found to be bogus, claimed CBI sleuths.

The CBI document claimed, “The turnover of the company was being manipulated through the Benami entities in India and undisclosed offshore entities. Though, the CA of the group and few key persons admitted to the fact, no further enquiry was carried out to ascertain the impact on revenue.”

The CBI officials said, evidence against IT officers in benefiting the firm was overwhelming. The investigation so far revealed: “Funds were diverted to the Benami entities of the group by Sterling Biotech Limited and other group companies under the pretext of purchase of assets and payments for goods which were found to be bogus.

“The money was withdrawn in cash by these recipient companies and siphoned off. Though enough evidence was found during the course of search and the account officer had admitted to such practice, no further investigation was carried out,” revealed the investigation.

The greed of I-T officers and a greased diary

The investigators claimed that pay off for senior IT officer SK Ojha was mentioned in the diary as well as in the computer seized from the company’s premise.The documents with CBI said: “Total transactions noticed in the name of SK Ojha were for 1, 23, 89,500/ including cash deposits of Rs 25 lakh and interest payment in cash of Rs 97.40 lakh.  Further evidence found in the seized data clearly established the identity of the person as the officer of the department (Income Tax). The cash payments were made on April 13, 2007, April 7, 2008, April 9, 2008 and November 27, 2009. Four payments through demand drafts were noticed on February 22, 2005, December 4, 2007, February 1, 2008 and March 4, 2008. Apart from these cash transactions, further documentary evidences on regular travel arrangements being made by the assessee group (Sterling Biotech) for the officer was also found.”

The CBI officer said Ojha was posted in in Gujarat for nine years from 1987 to 1996, thereafter he was posted in Mumbai for nine years from 1996 to 2005. He was posted again in Mumbai from 2009 to 2015.An entry was found in the seized computer showing  Rs 25 lakh was deposited in the name of S K Ojha. The first entry is on April 27, 2005 for Rs 19 lakh and the second for Rs 6 lakh on May 4, 2005.

“The fourth entry appears as cash payment of Rs 29 lakh as interest on April 13, 2007, towards SK Ojha. There is another entry for a further sum of Rs 13.40 lakh towards balance payment of interest on April 9, 2009. Further cash payment of Rs 30 lakh towards interest on November 27, 2009 is seen with the narration ‘Interest-Sk Ojha.

There are at least three payments shown as payment to made to Hyatt Hotel for the stay of SK Ojha. CBI’s documents said further adding that long-standing association of the group and its familiarity with the officer is evident from the seized data which shows regular booking of tickets for family members and draft letters seeking to promote officer’s career option.Page 8 of the handwritten diary is dated January 10, 2011 in which payment of Rs 5 lakh is shown against senior IT officer Subhash Chandra. Page 14 of the diary shows payment of Rs 2 lakh. Screenshot of worksheet for January 2011 shows Rs 7 lakh paid to the officer.

“Brd refers to Baroda and the payments have been shown under the head expenses indicating these were passed off as business expenses by the group in the respective cases. Page 48 of the diary contains an entry for cash deposit of Rs 75 lakh in the name of Subhash Chandra, IT on February 25, 2011. Page 79 of the diary contains entry of Rs 30 lakh, page 84 contains entries for Rs 1 crore in the name of Subhash Chandra and a similar entry in the name of Ray IT as well on March 1, 2011,” the documents revealed. CBI officials said the evidence clearly establishes the identity of the officers and they will grill all the relevant persons

“This is just the tip of the iceberg. The company has used Benami companies for showing bogus purchases, inflating turnover and claiming depreciation on fictitious assets. Yet, the I-T officers allegedly supported the wrongdoings,” the official added.

10-year jail term for shell firm bosses siphoning off funds

The government has said directors or authorised signatories of de-registered companies who try to siphon money from the firms’ bank accounts can face up to 10 years in prison. Besides, directors of shell firms that have not filed returns for three or more years would be disqualified from holding such positions in all firms

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