On October 12, 2023, the Income Tax Department carried out a comprehensive search and seizure operation targeting government contractors, real estate developers, and their affiliates. This operation covered a total of 55 locations across the states of Karnataka, Andhra Pradesh, Telangana, and New Delhi.
According to a statement from the Central Board of Direct Taxes (CBDT), a substantial volume of incriminating evidence was discovered and confiscated during the operation. This evidence included loose sheets, physical documents, and digital data. The investigation revealed a systematic pattern of tax evasion among these contractors, involving the manipulation of their financial records to understate their income.
This was achieved through various means, such as falsely inflating expenses, making fictitious purchases, and making unwarranted claims for expenses related to subcontractors. In essence, these actions allowed them to artificially reduce their taxable income. Additionally, discrepancies were found in the utilization of receipts from contracts, resulting in the generation of substantial unreported cash and the establishment of undisclosed assets.
The search revealed evidence of inflated expenses through discrepancies in the validation of Goods Receipt Notes (GRN). Furthermore, significant disparities were found in the documentation associated with purchases and the actual physical transportation of goods. These irregularities were linked to fictitious transactions with subcontractors, some of whom were also subject to scrutiny during the operation. The contractors were also found to have recorded expenses for non-business purposes. Notably, evidence of claims for liaison expenses was uncovered and seized as well.
The search operation unearthed substantial unaccounted-for cash transactions that were not recorded in the official accounting records. This cash was discovered in the premises of the taxpayers, their subcontractors, and associates, including certain individuals involved in handling cash.
In total, the operation resulted in the seizure of approximately Rs. 94 crore in unaccounted cash and gold and diamond jewellery worth over Rs. 8 crore, bringing the total to more than Rs. 102 crore. Additionally, a collection of around 30 luxury wristwatches of foreign origin was discovered in the residence of a private salaried employee who was not engaged in the business of selling wristwatches. Ongoing investigations are being conducted to further delve into these matters.
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