In a significant development, the Income Tax Department of India conducted a thorough search and seizure operation on October 12, 2023, targeting government contractors, real estate developers, and their associates across various locations in the states of Karnataka, Andhra Pradesh, Telangana, and New Delhi. This operation encompassed a total of 55 premises and was executed with the intention of exposing tax evasion and undisclosed assets.
The Central Board of Direct Taxes (CBDT) issued a press release in which they revealed that the operation yielded a wealth of incriminating evidence, including loose sheets, hard copies of documents, and digital data, all of which were seized during the search. The evidence uncovered points towards a systematic modus operandi employed by these contractors to reduce their taxable income. This involved the inflation of expenses through activities such as booking bogus purchases, making non-genuine claims for expenses through sub-contractors, and asserting ineligible expenses.
One striking revelation from the operation was the irregularities detected in the utilization of contract receipts, which led to the generation of a substantial amount of unaccounted cash and the creation of undisclosed assets.
Further investigation unearthed evidence of expense inflation in the form of discrepancies in Goods Receipt Note (GRN) validation, as well as glaring disparities in the documentation related to purchases booked and the actual physical transportation of goods. These irregularities were particularly evident in transactions with sub-contractors, some of whom were also implicated in the search operation. Additionally, the contractors were found to be booking expenses for non-business purposes, including the dubious claim of liaison expenses.
Large-scale unaccounted cash transactions that had not been recorded in the official books of accounts were also discovered during the search. These were traced back to the premises of the assessees, sub-contractors, and their associates, including certain cash handlers.
As a result of this extensive operation, the Income Tax Department seized unaccounted cash amounting to approximately Rs. 94 crore. Additionally, a substantial cache of gold and diamond jewelry valued at over Rs. 8 crore was seized. In total, the value of the assets recovered in the form of unaccounted cash and jewelry exceeded Rs. 102 crore.
In a surprising turn of events, a cache of about 30 luxury wristwatches of foreign make was found within the premises of a private salaried employee who was not engaged in the business of wristwatches. The investigation into this discovery is ongoing.
