Govt finds 9 lakh registered firms never filed I-T returns. Crackdown begins

The Narendra Modi government has in its crackdown against black money identified 9 lakh companies which are registered but not filed any tax returns. A senior official told Mail Today that the issue was discussed at a meeting in the PMO as part of the intensified action black money post-demonetisation.

There are about 15 lakh registered companies in India; and only 6 lakh companies file their annual return. The government suspects that a large number of these companies may be indulging in financial irregularities.

In a small sample analysis of such companies it has been found that Rs 1,238 crore cash has been deposited in these entities during November-December period.

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Serious Fraud Investigation Office (SFIO) has filed criminal prosecution for cheating the National Exchequer after investigation of entry operators running a group of 49 shell companies and other proprietorship concerns. It has been found that 559 beneficiaries have laundered money to the extent of Rs 3,900 crore with the help of 54 professionals who have been identified.

This information has been shared with SIT, Income Tax Department, Enforcement Directorate, SEBI and The Institute of Chartered Accountants of India (ICAI).

In the initial analysis the government has found that 'Shell Companies' are characterized by nominal paidup capital, high reserves & surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income and huge cash in hand. Private companies as majority shareholders, low turnover & operating income, nominal expenses, nominal statutory payments & stock in trade and minimum fixed assets are the other features of such shell companies.

The Income Tax Department has reopened completed assessment in these cases and Enforcement Directorate has initiated action under Prevention of Money Laundering Act (PMLA), 2002. ICAI has also initiated disciplinary proceedings against its members. Winding up process has been initiated in respect of 49 Shell Companies. In order to create a credible deterrence a "whole of government approach" will be adopted through coordinated efforts and by leveraging technology.

It has also been decided that appropriate red flag indicators would be used for identifying shell companies, and a data base of such companies and their Directors would be built by pulling in information from various agencies. The data base will also capture Aadhar number of individual Directors in the companies.

Harsh punitive actions will be taken against the deviant shell companies which will include freezing of bank accounts, striking off the names of dormant companies, invocation of Benami Transactions (Prohibition) Amendment Act, 2016.