OpIndia Impact : IT Dept launches investigation into the business dealings of Kapil Sibal and his wife

In March this year, senior Congress leader and former Union Minister was in the dock after OpIndia published a report highlighting a business deal by him, where things were a little opaque. Sibal had appeared to buy a company real cheap, possibly for just one lakh rupees, while the company owned a prime property in Delhi worth 89 crores.

Although Kapil Sibal never clarified the details of the deals despite OpIndia reaching out to him as well as the previous owners of the company that was acquired by Sibals, now a report by Times of India (TOI) suggests that Sibal could indeed have bought the company – Grande Castello – for just one lakh rupees, and in the process, acquired land in New Delhi worth Rs 89 crores.

The Income Tax department, according to TOI, searched the premises of World Window Impex India, in connection with the transfer of 100% shares of its subsidiary, Grande Costello, to Kapil Sibal and his wife for just Rs. 1 Lakh.

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We had reported earlier how Grande Castello, with no business in Financial Year 2013-14, commenced purchase of a piece of land which eventually cost Rs 45.21 crores. To fund, this, the company raised interest-free loans and book overdrafts.

It was unclear from public documents, as to who provided this finance, and how could a company with nil business convince a lender to offer unsecured interest-free loans running in crores of rupees.

In the Financial Year 2014-15, the company revalued its land from Rs 43.79 crores to Rs 89 crores, almost doubling the value. Oddly, in the very next year i.e. in the Financial Year 2015-16, the company changed its accounting policy and devalued the land, bringing back to its original cost. Incidentally, Kapil Sibal and his wife purchased the company in the very next year after this devaluation. As mentioned earlier, Sibal and his wife became the owner of the company by acquiring 100% of the shares, the face value of which comes to 1 lakh rupees as the paid-up capital of the company.

Further, the TOI report makes another stunning claim. It says that their sources have confirmed that Kapil Sibal extended a Rs 51.2 crore loan to Grande Costello which had absolutely no business other than the land they owned.

It is not clear when was this loan advanced and for what purposes, as Grande Castello had no business activity. The TOI report suggests that it might have been done to escape income tax liability.

TOI quotes a source saying, “The property was transferred to Sibal and his wife through a share swap in 2016-2017 for 1 Lakh Rupees and a loan of Rs. 51.2 crore”. TOI’s source also said that if the land was purchased, Income Tax and Stamp Duty would be due.

The income tax is reportedly investigating whether it is a case of avoiding tax by not accounting for the property acquisition. Section 56(2)(vii)(b)(ii) of the IT act states that where any immovable property is acquired for a consideration which is less than stamp duty, it shall be chargeable under the head “income from other sources”.

This raises some important questions:

1. Was the loan given by Kapil Sibal to Grande Castello only to avoid tax? This is something the Income Tax department is investigating and we hope to have an answer.

2. Prior to the company being acquired by Sibals, it already had a lot of liabilities running over 45 crore rupees. What purpose did extending another loan of 51.2 crore rupees serve, adding to the liabilities?

3. Was the loan by Kapil Sibal extended to Grande Castello to enable the company to repay the earlier liabilities that were mostly unsecured interest-free loans from unknown parties? It should be noted that South African journalists suspected that Grande Castello was a shell company possibly involved in money laundering.

4. Piyoosh Goyal, the businessman who owned substantial stakes in the company (World Window Impex) that owned Grande Castello, while talking to OpIndia in March, had claimed that Kapil Sibal indeed had paid 50 crores to buy the company. Was he referring to this loan of 51.2 crores (but somehow referred to the amount as being a crore less)? We tried to reach Mr Goyal again, but he didn’t answer our calls.

The questions raised by OpIndia back in March remain unanswered by Mr Kapil Sibal and Piyoosh Goyal and now some new questions have popped up. We can only hope that the ongoing investigations shed more light over what exactly happened. We will try to find out more on our end too.

Editor, OpIndia.com since October 2017

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