Mumbai: The investigation wing of the income tax (I-T) department in Mumbai has unearthed a record Rs1,315 crore in undisclosed income in the first nine months of the fiscal year, I-T officials said. The cases involve 16 companies, including 10 that are publicly traded.
“Our searches have significantly improved collection of corporate taxes in Mumbai. More and more firms are voluntarily disclosing their income and paying up tax,” an income-tax official told Mint on Friday.
Under I-T norms, search and seizures are conducted when tax authorities have authentic information about a taxpayer who has undisclosed income. The department can also search a taxpayer who has failed to respond to an income-tax notice.
Net direct tax collections in the first three quarters of fiscal 2010 until December amounted to Rs2.5 trillion, up 8.5% from Rs2.3 trillion a year earlier. Corporate tax collection in the period increased 13.47% to Rs1.66 trillion from Rs1.46 trillion. Mumbai makes up about one-third of India’s total direct tax collections.
According to data compiled by the I-T department, the 16 firms pulled up for alleged tax violations during the first nine months of 2010 declared they had concealed income of Rs1,315 crore, 56% more than the disclosures made in full fiscal year 2009.
According to the income-tax official cited above, who did not want to be named because he is not authorized to speak with the media, the department had never searched so many listed companies in the past.
The firms searched belong to different sectors such as logistics and cargo, real estate, food processing, ship building, civil construction, and wires and cables.
“While investigation in some cases has been concluded, others are still pending,” said a second income-tax official who also didn’t want to be named.
The listed entities searched by the department include Housing Development Infrastructure Ltd (HDIL), ABG Shipyard Ltd, Allcargo Global Logistics Ltd, Juniper Networks India Ltd and Polycab Wires Pvt. Ltd.
According to an I-T investigation report reviewed by Mint, HDIL admitted to the biggest amount of undisclosed income among the firms under scrutiny—Rs350 crore. The income- tax department searched HDIL offices on 10 September for alleged tax evasion and seized Rs86 lakh. HDIL is India’s third largest realtor by market value, with a market capitalization of Rs13,014 crore at the end of trading on Friday.
Sarang Wadhawan, managing director of HDIL, confirmed the development. “During the course of raid, the company has agreed to offer Rs350 crore as income to be booked in remaining quarters of financial year 2009-10. Income of Rs350 crore, as calculated by income-tax department, is based on initial entries in books of accounts mostly relating to current financial year, which the company would have booked during the year on completion of transaction and taxes paid as per provisions of Income tax Act,” he said.
ABG Shipyard admitted a pending tax liability of Rs122.40 crore after the department searched the offices of the firm on 7 October, when it seized Rs78 lakh, according to the income-tax report, but Dhananjay Datar, the chief financial officer of the company, denied this.
“I-T department had a search at the office and chairman’s residence but there was no cash seizure of Rs78 lakh and pending claim of the said amount,” Datar said.
A search was conducted on Allcargo Global Logistics on 10 July in which the department seized Rs55 lakh, according to the I-T investigation report. Later, the company admitted an outstanding tax liability on an income of Rs45.74crore, going by the I-T report.
Allcargo Global Logistics chairman and managing director Shashi Kiran Shetty, however, denied any such seizure or pending claims with the income-tax department.
Polycab Wires, a Mumbai-based cable company, also came under the I-T scanner on 15 September for alleged violation of tax norms. The firm, according to the department, has disclosed concealed income of Rs114.50 crore.
“We do not want to offer any comments,” said an official at the legal and taxation affairs department of the company who identified himself only as Kothari and refused to share his first name or title. Mint was directed to Kothari by D.S. Patel, an accounts executive at the firm.
In the case of Juniper Networks, the income-tax department has observed that the firm had inflated the cost of purchased equipment to the tune of Rs566 crore.
“Juniper does not comment on pending tax audits or inquiries,” Sridhar Sarathy, managing directory of Juniper Networks, said in an email response to queries from Mint. “However, we can confirm that we have had discussions with the income-tax department in India. Juniper has consulted with several experts and the special counsel, and believes it has paid all applicable taxes.”