The income tax department has said it will take four months to build up a clear case of tax evasion by IPL entities. While the department came across the first case of evidence of unaccounted cash after six days of operations at various locations across the country on Wednesday, top sleuths said it is preliminary to fix responsibility for the evasion yet.
It has communicated these observations to the finance ministry. Based on the scale of the operations, the final additional tax liability from all entities will be about Rs 100 crore. But the department has not been mandated to look at any corruption angle and will only uncover the tax aspects. It is therefore not planning on any arrests to launch prosecution cases. The set of information which has been sent to the finance ministry including on the very first day therefore includes only the details of the searches including the number of premises visited and the nature of the evidence collected. (These are still known as telex messages in the income tax department)
It has meanwhile run up against a major hurdle. India does not have tax agreements with any of the tax havens which might have been used as conduits to finance some of the IPL entities, and so will have to open channels of negotiations with all of them to get details of money laundering. The information will be vitally necessary to get a sense of whether tax was evaded by any of the entities involved in the IPL.
?Except Mauritius, with which we have a very sound relationship, the others will prove difficult?, said a source aware of the developments. For the first time India will therefore send tax officials abroad and also use the Financial Intelligence Unit to obtain access to source foreign bank accounts.
On Wednesday, in the survey operations the income tax department has finally uncovered evidence of unaccounted cash. Department officials tracked e mails and other records at the searches conducted at the offices of World Sports Group and Sony Multi Screen Media about a possible payment made to IPL to reach an out of court settlement around the telecast rights for the IPL matches.
The global broadcast rights for the matches were bought for ten years by WSG in 2008 at $ 918-million for ten years. It gave out the Indian broadcast rights to MSM. But IPL headed by Commissioner Lalit Modi cancelled the contract in 2009. After a tough legal battle, both the parties decided on an out-of-court settlement at a new payment of about $ 1.6-billion for nine years. While there were allegations that MSM had given WSG $ 80-million dollar as facilitation fee, the tax searches have tracked some corroborative details.
Because of the scale of the operations, the survey operations is being coordinated by the newly set up Director General (intelligence) in the department from New Delhi. The first set of operations had been worked out by DG (investigations) Mumbai.