Protecting revenue interest: I-T
In response, the I-T department on Tuesday issued a press release on behalf of the principal chief commissioner for Karnataka. This is a lightly-edited version of the release:
1. A note said to be written by VG Siddhartha (VGS) of CCD is doing the rounds about the attachment of Coffee Day shares by the I-T department. The authenticity of the note is not known and the signature does not tally with VGS's signature as available in his annual reports
2. The investigation of VGS and arose from a search in the case of a prominent political leader of Karnataka. It is based on the unearthing of credible evidence of financial transactions by CCD in a concealed manner.
3. A person holding citizenship of Singapore, who was also covered in the search action, was found with unaccounted cash of Rs 1.2 crore, which he said belonged to VGS. Numerous messages found on his mobile indicate his active involvement in hawala transactions.
4. In a sworn statement, VGS admitted to unaccounted income of Rs 362 crore and Rs 118 crore in his and a Coffee Day Enterprises' (CDE) hands respectively.
5. However, VGS in his subsequent I-T return did not offer the undisclosed income he had admitted in his sworn statement either for himself or CDE except for around Rs 35 crore in his individual case. CDE did not offer the admitted income in its part.
6. On January 21, 2019, major newspapers reported that he was planning to sell the equity shares of Mindtree Ltd held by him and his company. Based on these reports, an immediate verification of the facts was carried out. It was found that the assessees VGS and CDE together held nearly 21% of shareholding in Mindtree. It was also gathered that the deal for sale of shares was set to be finalized.
7. The tax effect along with interest and penalty based on the search ran into hundreds of crores. But there was no application filed by the assessees before the assessing officer as required under statutory provisions before transferring any assets when IT proceedings are pending.
8. In order to protect the interests of revenue, provisional attachment of 7.49 lakh Mindtree shares owned by VGS and CDE under section 281B of the I-T Act was made (though they together held 2,29,31,518 shares).
9. Subsequently, VGS filed a request letter to release Mindtree shares and in turn offered other security of shares of CDE against the expected demand. This was accepted and the attachment of Mindtree shares was revoked on February 13 with the specific condition that the sale proceeds would be utilized only for repayment of loans availed against Mindtree shares by opening an escrow account and the remaining balance would be provided for attachment against the tax liability that would arise. An alternate attachment 46,01,869 unencumbered shares and 2,04,43,055 encumbered shares of CDE was also made on Feb 13 and 14.
10. The assessees transferred the Mindtree shares to L&T Infotech on April 28 and received around Rs 3200 crore. Out of this consideration, the assessee repaid loan of around Rs 3000 crore and paid expenses related to transfer of Rs 154 crore; the balance Rs 46 crore was paid towards the first instalment of advance tax of estimated MAT liability of around Rs 300 crore in the case of CDE shares.
11. The provisional attachment was made to protect interests of revenue out of the income admitted by the assessee. The I-T department has acted as per the provisions of I-T Act.
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References
- ^ CCD (timesofindia.indiatimes.com)
- ^ Mindtree (timesofindia.indiatimes.com)
- ^ Coffee Day shares (timesofindia.indiatimes.com)
- ^ VG Siddhartha (timesofindia.indiatimes.com)
- ^ Coffee Day Enterprises' (timesofindia.indiatimes.com)
- ^ I-T Act (timesofindia.indiatimes.com)
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