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Hawala links: Maharashtra Sales Tax wonders why no action on heads-up given to IT Dept in 2014

Rahul Wadke Mumbai | Updated on March 12, 2018 Published on December 11, 2017

Sources in the Income Tax Department said all departments and agencies of State and Central governments share vital information and leads during monthly intra-agency meetings   -  REUTERS

Income Tax Dept sources say standard operating procedure followed, but no punitive action taken

The Maharashtra Sales Tax Department which has shared information on over 2,000 companies with suspected Hawala links to the Income Tax Department in Mumbai, is still awaiting action. In a large number of cases, the Income Tax Department has not pressed for the prosecution of the tax-evading companies even though the information was shared in 2014, sources close to the development said.

Sources in the Income Tax Department said all departments and agencies of State and Central governments share vital information and leads during monthly intra-agency meetings. The Sales Tax Department had also shared the info under the same arrangement.

The suspect companies were tax evaders of both departments. Based on the information, IT officers had carried out investigations.

In many of the cases, IT officers, following standard operating procedures of the department, sent notices under the IT Act, subjected the companies’ incomes to scrutiny procedures and raised the demand for paying income tax. But the next level, which is launching prosecution procedure under sections such as 276 of the Income Tax Act, has not been launched, sources said. Prosecution under Section 276, 277 and 278 of the Income Tax Act are punitive.

Sources said that in some cases, Hawala operators and their bogus companies merely existed on paper. Such companies and their directors shut down their operations after completing a certain number of transactions, in an effort to wipe out evidence. However, directors of such bogus companies continue to hold management positions in other companies, but no action has yet been taken against them, sources said.

Sources said that since the Modi government took over, the prosecution cases pushed by the IT Department in Mumbai have risen, and new lawyers have been appointed for helping with the process.

A senior Sales Tax Department officer confirmed to BusinessLine that the information has been shared with the Income Tax Department. Increased computerisation, web-based tracking and use of Taxpayer Identification Number (TIN) number for VAT transactions helped the Sales Tax Department zero down on the Hawala operators.

When the operators started availing themselves of VAT refund based on bogus billings, alarms started ringing in the Sales Tax headquarters. A list was collated, prosecution under the Sales Tax Act launched and the list was shared with the Income Tax Department, the officer said.

Neither the Chairman of the Central Board of Direct Taxes nor the Principal Chief Commissioner of Income Tax, Mumbai, was available for comments as phone calls and emails remained unanswered.

Published on December 11, 2017

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