Pursuant to the detection, search operations were carried out at all establishments of VLS Finance and its subsidiary companies and firm proof regarding the evasion was gathered. ``We have now issued a notice to the company to file returns on the amount detected by us. This will help us ascertain the source of income of this huge amount,'' the official added. Actress-turned-film producer Kutty Padmini is reported to be among the film producers who were party to the paper transactions with VLS Finance. VLS also holds the distinction of having charged the highest premium in the history of Indian stock market _ of Rs 390 per shareduring its public issue in 1994. The authorities have established that VLS Finance Ltd and South Asia Enterprises Ltd came out with public issues on the basis having one of the highest earning per share and fastest growing NBFC tag even though they were registering huge losses and were not paying tax. On the basis of accumulated losses, they were allegedly providing accommodation entries to many companies. The IT official stated that a detailed report has already been prepared on VLS Finance. According to estimates, film-makers and the Delhi-based finance company colluded to generate fake depreciation claims to the extent of Rs 100 crore. The modus operandi was to organise `sale and lease back' deals for movies at highly inflated rates. Most of the movies involved had no commercial value and were exhibited during the lease period.

Therefore, buying and leasing out exhibition rights was done with the sole purpose of raising fake depreciation claims, the official alleged. The IT department has conductedextensive investigations on unaccounted investment in properties and assets held by the directors of the company, providing accommodation entries to other companies in order to reduce their tax liability and artificially enhance the share of the company by use of unaccounted income, invested in a benami manner, in sale and purchase of their own shares.

The search also revealed that the VLS group had gathered funds by way of public issue with a heavy premium, thereby ensuring that the equity base is not diluted and public funds become available to it. These funds were then deployed in a manner which ensured optimum returns, not to the shareholders, but to the promoters. Money was also lent to closely-held companies of the promoters and directors without any commensurate returns. These companies invested the funds in immovable properties and other similar ventures, where returns accrue to the company of the promoter and not to VLS Finance. Money was also lent to the promoter directors individuall, who, inturn, invested the same in immovable properties. The promoters are also alleged to have siphoned off funds from VLS Finance by way of payment of lease rentals to its sister company.