* The modus operandi for tax evasion in case of a group engaged in manufacturing and trading of detergents, toilet soaps and salt in Ahmedabad included floating of a company in Mauritius, evasion of taxes through contrived, fictitious and sham losses in share transaction, rigging of share prices in market, changing the nature of income, and issuance of secured premium notes.
The search proceedings have revealed that the group has formed a fully controlled company in Mauritius. The control and management of this company is in India.However, the group has shown management of the company outside India, so that it escapes tax liability in respect of its overseas operations, as per the findings of the I-T department.
It says that arrangements have been made so that the company in Mauritius will receive royalty for sales effected outside India at the rate of five per cent. Therefore, on sales effected outside India, the group has no intention of paying taxes.
* During search operations in Delhi, the I-T department found that some tax-haven based OCBs which are closely related to Indian group companies purchased shares of those companies and sold the same in the open market in India.
The OCBs earned considerable profits on which they haven’t paid any tax in India. It has been found that the control and day-to-day running of the OCBs are from India and also these OCBs are associated concerns of Indian group.
* In another case in Ahmedabad, a search was carried out in February 2002 on a singer, who has carved a niche for himself in the rap-pop genre. Now, the artist has distinguished himself in the entertainment industry as a popular singer and is the highest paid and most sought after artist during the nine-day festival of dandia and Ras Garba in Gujarat.
He also writes the lyrics and composes music for all his albums.
However, the most important and lucrative aspect of his portfolio is performing live on stage shows along with his troupe, say in parts of UK having a large Gujarati population. The singer charges exorbitant sums to perform live, in what he calls his Musical Cocktail.
The findings during the search operation indicated that the singer has substantial taxable income, but does not file returns. During the course of search, forged income tax returns along with challans for payment of taxes were found bearing seals and stamps of the I-T department and banks.
These documents have been used for obtaining visa for overseas performances. In the rough cash books from 1995-96 to 2000-01 seized during the operation, total unaccounted receipts reflected are Rs 2,82,52,500.
* Among other search and seizure operations carried out by the department is an infertility specialist in Hyderabad. The income tax department has found that the clinic offers specialised services to childless couples. The specialist’s clinic also has branches outside Hyderabad and the nature of treatment is such that the doctor-patient interaction is generally prolonged and involves high expenditure.
Search and seizure operations against the specialist showed suppression of pharmacy receipts from sale of medicines and also concealment of receipts from treatment.
At Hyderabad, the assessee was using a computer programme which was designed in such a manner that two distinct and parallel series of voucher numbers were automatically allotted for general drugs and fertility drugs. The receipts from sale of fertility drugs which are costlier than general drugs were found unaccounted for in the books.
In the mofussil centres, the total pharmacy receipts were systematically divided into two parts with one part being deposited in the bank accounts of two sister concerns, found to be paper companies and had never filed their returns of income.
According to the department’s findings, total concealment in the hands of the assessee and the fertility clinic were estimated at Rs 11.60 crore.