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From overstating expenses to siphoning off of the profits: What the Income Tax dept raids at Dainik Bhaskar group offices revealed

The Income Tax Department said that during the search, they found that the DB group was operating several companies in the names of their employees, which have been used for booking bogus expenses and routing of funds.

Two days after the raids on the Dainik Bhaskar group, the Income Tax Department put out a statement detailing the series of irregularities and violations that the conglomerate had indulged in, prompting them to conduct searches against them multiple locations across the country.

In a statement, the Income Tax Department revealed that it has found evidence of profits being siphoned off from listed companies and fictitious transactions of Rs 2,200 crore during the raids on the offices at Dainik Bhaskar group. Similarly, documents relating to unpaid taxes on Rs 700 crore of income over six years, violations of stock market rules have been found in searches at the Dainik Bhaskar Group.

On Thursday, the Income Tax officials had conducted raids at 20 residential and 12 business premises belonging to the Dainik Bhaskar group spread over nine cities, including Mumbai, Delhi, Bhopal, Indore, Noida and Ahmedabad.

The Income Tax Department said that during the search, they found that the DB group was operating several companies in the names of their employees, which have been used for booking bogus expenses and routing of funds. During the search, several of the employees, whose names were used as shareholders and directors, admitted that they were not aware of such companies and had given their Aadhaar card and digital signature to the employer in good faith.

“Some were found to be relatives, who had willingly and knowingly signed the papers but had no knowledge or control of the business activities of the companies, in which they were supposed to be directors and shareholders,” the statement said.

Booked bogus expenses, siphoned off profits

The Dainik Bhaskar group used such companies for multiple purposes, including booking bogus expenses and siphoning off the profits from listed companies, routing of funds so siphoned into their closely held companies to make investments, making of circular transactions etc.

The nature of such bogus expenditures includes the supply of manpower, transport, logistics and civil works and fictitious trade payables, resulting in evasion of taxes to the amount of Rs.700 crore spread over a period of six years. The Income Tax Department suspects that the quantum of evasion may be more as the group has used multiple layers. The IT department is probing to unravel the entire money trail.

Further, the IT department has found the company was involved in cyclical trading and transfer of funds among group companies to the tune of Rs 2200 crore. The investigations have revealed that the company was involved in fictitious transactions without any actual movement or delivery of goods. The tax effect and violation of other laws are being examined.

“The real estate entity of the group operating a Mall had been sanctioned a term loan of Rs 597 crore from a nationalised Bank. Out of this, an amount of Rs.408 crore has been diverted to a sister concern as a loan at a low-interest rate of 1%. While the real estate company has been claiming expenses of interest from its taxable profit, it has been diverted for personal investments of the holding company,” the Income Tax Department said in a statement.

The Dainik Bhaskar Group, which operates more than 100 companies, did barter deals for advertisement revenues through its media channel, in which it received immovable properties in lieu of actual payments, the department said. The IT department has found evidence indicating cash receipts in respect of the subsequent sale of such properties.

Meanwhile, the IT department has also found 26 lockers at the residential premises of the promoters and key employees of the group, which are being operated. The voluminous material found during the search operations is being examined, it said.

IT Raids against Dainik Bhaskar Group

On Thursday, Income Tax Department carried out raids at media house Dainik Bhaskar’s offices across multiple locations.

The Income Tax Department conducted raids in as many as 40 locations, including Bhopal, Jaipur, Ahmedabad. As per sources, the raids started at around 4:30 AM on Thursday after it received a tip-off of alleged tax evasion by the group.

The IT department said that the group has more than 100 companies, including holding and subsidiary companies. The flagship company is DB Corp Ltd, which publishes the news daily Dainik Bhaskar. Besides media, the group is involved in various sectors such as power, textiles and real estate, with a group turnover of more than Rs 6,000 crore per annum.

Headquartered in Madhya Pradesh, Dainik Bhaskar is one of the leading dailies with over 60 editions in multiple languages.

 

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Staff reporter at OpIndia

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