In the aftermath of Cafe Coffee Day founder VG Siddhartha going missing, OpIndia reached out to sources in the government to understand the investigations that he was facing. After Siddhartha went missing, a letter purportedly written by him had appeared where he has talked about “a lot of harassment in the form of attaching shares on two separate occasions” he and his company was facing from Income Tax officials.
He had asserted that first the Mindtree deal was blocked and then Coffee Day Enterprises shares were attached even though revised returns were filed. He had also written that he was facing tremendous pressure from private equity partners who were forcing him to buy back shares.
The entrepreneur also wrote that only he should be held accountable as he had withheld information, and others were totally unaware of the transactions, which were under the scanner the Income Tax department.
Although Siddhartha alleged that Income Tax department had attached his shares despite the submission of revised returns, which had started the allegations of “tax terrorism” against the I-T department, information received from government sources rebute those charges. Here are some details about the cases we have receobed from government sources.
Income Tax department says that VG Siddhartha had admitted to undisclosed income made by himself and CDE before Deputy Director of Income Tax (Investigation). DDIT had estimated undisclosed income of Rs 364.46 crore and Rs 118.02 crore in the case of Siddhartha and Coffee Day Enterprises Ltd respectively, and he had admitted to 362.11 crore and Rs 118.02 crore. But when they filed their revised returns, they didn’t mention those amounts. The I-T department also mentions that one group company Coffee Day Global Ltd didn’t pay its self-assessment tax of Rs 14.5 crore for the assessment year 2018-19. This company is also a regular defaulter of Advance Tax. Here the statement contradicts Siddhartha’s letter that he had disclosed everything in his revised return.
In January this year, major newspapers had reported that VG Siddhartha was planning to sell shares of Mindtree Ltd held by himself and his company. Based on this information, the department conducted verification and found that both Siddharth and CDE owned around 2.29 crore shares in Mindtree, which was valued at Rs 880 per share at that time. The result of this was that the likely amount of undisclosed income had gone up. It was estimated that Siddhartha’s tax liability along with interest and the maximum possible penalty was Rs 447.47 crore and for CDE it was Rs 188.69 crore.
The Income Tax department says that Siddhartha and CDE didn’t seek any permission for sale of the Mindtree shares, which is required when any proceedings are pending. Therefore, the department had provisionally attached the Mindtree shares held by Siddhartha and CDE. But they had requested revocation of attachment of the shares, since all the Mindtree shares held by them were already pledged against a loan of Rs 3000 crore, and offered alternate attachment of 46 lakh shares of Coffee Day Enterprises. The department had considered this request, and released the Mindtree shares with the condition that proceeds of the sale of the shares will be used only to repay the loan and the balance amount will be used to pay the tax liabilities. Accordingly, the balance amount of Rs 46 crore was paid towards the first instalment of estimated minimum alternate tax of around Rs 300 crore.
The department says that assessment for CED is completed for the assessment year 2011-12, while the same is yet to be completed for Siddhartha. It also says that the special audit report received in June this year is in his favour.