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December 4, 2021

Fake Input Tax Credit racket worth Rs. 12 crores busted by Thane CGST; One Arrested

by CA Shivam Jaiswal in Income Tax

Fake Input Tax Credit racket worth Rs. 12 crores busted by Thane CGST; One Arrested

The officers of CGST Thane Commissionerate acting on specific intelligence developed by CIU, Mumbai CGST Zone, booked an anti-evasion case and arrested the Proprietor of M/s. Star Scrap Steel. The firm is involved in trading of Ferrous Waste and Scrap; remelting scraps ingots of Iron or Steel. The investigation has revealed that firm was indulged in fraudulent availment and utilization of Input Tax Credit (ITC) to the tune of Rs 12 crores without receiving the goods or services in violation of the provisions of CGST Act 2017.

The firm was getting Input Tax Credit from many trading companies and was further passing it on to Rolling Mills. This was done by getting inadmissible Input Tax Credit on the basis of invoices issued by fraudulent entities without receipt and supply of goods.

Searches were carried out at various premises of taxpayers located across Thane, Mumbai, Navi-Mumbai and Raigad, which were involved in issuing fake credit to M/s. Star Scrap Steel without actual supply of goods. The Proprietor of M/s. Star Scrap Steel was arrested under provision of CGST Act 2017 and produced before the Hon’ble Judicial First-Class Magistrate Court, Thane on 3rd December,2021 and was remanded to 14 days judicial custody. Further investigation in the matter to identify others involved in tax fraud is under progress.

Income Tax Department conducts search operations in Madhya Pradesh

The Income Tax Department initiated search and seizure operations on two major business groups of Indore on 25.11.2021. The first group is engaged in the business of mining, media and providing cable TV services and the second group is running a coaching academy. The search action has covered more than 70 premises in Madhya Pradesh and 5 other states.

During the course of search action, various incriminating documentary and digital evidence including parallel set of financial records of some of the businesses have been found and seized. A preliminary analysis of these evidences show evasion of taxable income by adopting various malpractices, particularly suppression of sales in mining business. Similar large-scale tax evasion has been found in the business of cable TV service. Evidences of other malpractices such as payment of on-money, suspected benami transactions, unaccounted expenditure incurred in cash, undisclosed investment in immovable properties, etc. have also been found. 

Investigations have revealed that the group has also taken accommodation entries in the form of bogus unsecured loans exceeding Rs. 40 crore from various shell companies managed by entry operators. The main entry operator, the key handler, and several dummy directors of the shell companies have been identified, traced and covered during the search operation. The dummy directors and key handler have admitted that the companies are merely paper entities, and they are working at the behest of the main entry operator.  

Documentary evidence found and seized from the search operation of the coaching group clearly shows suppression of cash receipts from students which is in excess of Rs. 25 crore. The analysis of seized evidence also indicates that this group is systematically suppressing its royalty receipts and profit share income from its various franchisees. Unaccounted cash exceeding Rs. 10 crore has been received on such accounts. The search operations have resulted in the seizure of unaccounted cash of Rs. 2 crore.

Further investigations are under progress.

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