I-T Dept. conducts raids on Indian firms controlled by China-based entity

The Income-Tax Department has conducted searches on the premises of some companies and their associate concerns in Delhi, Gujarat and Maharashtra for alleged tax evasion.

These firms, engaged in the business of chemicals, ball bearings, machinery parts and injection-moulding machinery, are reportedly controlled by a China-based entity. The search operation covered about 20 premises in Delhi, Mumbai, Ahmedabad and Gandhidham, Gujarat.

According to the agency, the companies were indulging in tax evasion through manipulation of books of accounts. An analysis of the evidence gathered so far has revealed that they had transferred ₹20 crore to China via a network of shell entities in the last two years.

The I-T Department found that a Mumbai-based professional firm not only assisted in floating the shell entities, but also provided dummy directors who were either its employees/drivers. During questioning, the directors admitted that they were not aware of the activities of these entities and that they had been signing on documents as per the instructions of the key functionaries.

The firm was also instrumental in assisting foreign nationals by providing its addresses for banking and other regulatory requirements, said the agency.

One of the companies under scrutiny, which trades in chemicals, had routed the claim of purchases through the Marshall Islands, a low-tax jurisdiction. It bought items worth ₹56 crore from a company in China, but the same was billed from a Marshall Islands-based company that was paid through a bank account held in China.

The Indian company was also involved in taking illicit purchase bills to reduce its tax liability and it also paid unaccounted cash for purchase of land in India, it was alleged.

The agency has put under restraint the bank accounts of some companies with a total balance of about ₹28 crore. During the searches, ₹66 lakh in unaccounted cash was also seized.

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