The IT department had finalised the probe report on Modi and Choksi on June 8, 2017. However, the report had not been shared with other agencies such as CBI, ED, SFIO and Directorate of Revenue Intelligence until February 2018.
PNB Scam: Fugitive diamond jeweller Nirav Modi and his maternal uncle and partner Mehul Choksi managed to escape after routing about Rs 13,500 crore worth of fraudulent transactions through India’s state-run lender Punjab National Bank. Delayed in sharing the crucial findings by the Income Tax department with other agencies was one of the major reasons that left the fleeing door open for the two. The scam, which is the biggest in the biggest banking scam in India, not only shook the financial sector in the country but also triggered a massive probe and regulatory changes.
The IT department had finalised the probe report on Modi and Choksi on June 8, 2017, in which it waved red flags such as huge over-valuation of stocks, bogus purchases, dubious loans and suspicious payments to relatives. However, the report had not been shared with other agencies such as Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO) and Directorate of Revenue Intelligence until February 2018, the time when the PNB scam came into light. Both Modi and Choksi left India in the first week of January 2018, weeks before the PNB scam became public.
The IT department searched Modi’s firms and surveyed Choksi’s companies in January 2017, a total of 45 residential and commercial premises across India. The department did not share the findings with other agencies as, according to a senior tax official, there was “no protocol” for sharing such reports with other agencies at that time, The Indian Express reported. The department started sharing information since July-August on a real-time basis, the official told the newspaper.
Key findings of the June 2017 report of the IT department:
- In the financial year 2013-14, Cyprus-based Jade Bridge Holdings Pvt Ltd and Mauritius firm Forcom Worldwide Investment transferred Rs 284.14 crore to Firestar International, a company owned by Modi. Singapore-based firm Islington International Holdings Pte Ltd, owned by his sister Purvi Mehta also sent Rs 271 crore into the accounts of Firestar.
- IT report showed that documents submitted by Jade Bridge and Forcom were prepared at Nirav Modi’s office in India. Source of these funds remained ‘suspicious’ and Modi could not establish the “creditworthiness” of these foreign firms.
- For the financial year 2016-17, the over-valuation of diamonds and gems lying in the Modi’s firms in the Special Economic Zone (SEZ) in Surat was to the tune of Rs 1,216.30 crore.
- The partnership composition of Solar Exports, Diamond R US and Stellar Diamonds was changed on January 4, 2016. As a result, these firms were no longer managed by Modi. However, the new partners had “meagre capital contribution” and did “not seem to have worth to justify their introduction” in the firms.
- Companies owned by Modi provided the huge amount of “interest-free loans and advances to group firms” when the concerns giving loans and advances had themselves taken “huge bank loans”. Diamond ‘R’ US gave an interest-free loan of Rs 528 crore to NDM Family Trust, despite trust having just 0.5% equity in the firm.
- Iris Mercantile and Premier Intertrade, the top two creditors of Choksi-owned Gitanjali Group, were a part of Gitanjali Group till fiscal 2014-15. The partnership composition of these firms subsequently got changed and new partners were brought on board. The IT department found that the two companies did not exist at their registered address.
- Both Gitanjali Group and TheNirav Modi Group made “bogus purchases” of Rs 2021 crore and Rs 344.4 crore, respectively, from three accommodation entry firms in Mumbai.
- Moreover, The Nirav Modi Group did not report international transactions of Rs 515.87 crore entered with its associates.