Rs 500 crore black money trail unearthed in tax raid on two top Bengaluru & Hyderabad real estate groups

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THe Income Tax Department has detected a black money trail of over Rs 500 crore in search and seizure operations carried out on two leading real estate groups of Bengaluru and Hyderabad, according to a Finance Ministry statement released today.</p>
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The search action on the two groups which also have a strong presence in the education and hospitality sector has led to the seizure of undisclosed gold and silver jewellery worth Rs. 18.5 crore and Rs 3.5 crore in hard cash, the official statement said.</p>
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The search action covered more than 40 premises located in Bengaluru, Hyderabad and Chennai.</p>
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According to the official statement, several incriminating documents and digital evidence has been seized during the course of the search operations. A preliminary analysis of this evidence has revealed that the two groups had entered into a joint development agreement as land owners with a Bengaluru-based developer. They have received super built-up area from the developer in lieu of the land that they gave for the construction of various real estate projects. However, the land owners failed to declare the capital gains accruing from the transaction, even though completion certificates for the projects have been obtained. The amount of such undisclosed capital gains is estimated at more than Rs. 400 crore.</p>
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The initial analysis of the seized documents has also revealed that these groups have suppressed income to the tune of Rs 90 crore in respect of the revenue recognizable from the sale of units in real estate.</p>
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Apart from this, both the groups have indulged in tax-evasion by inflation of expenses in the construction and development business to the tune of Rs 28 crore. They have claimed bogus purchases and resorted to over-invoicing of construction materials.</p>
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It has also been found that interest-bearing borrowed funds have been diverted to related entities for non-business purposes by the main entities of both the groups. Instances of the transactions involving loans between the group companies have also been found, which partake the character of deemed dividend and hence are liable to be taxed as income.</p>
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In the case of a trust covered in the search action, it has also been found that the trust has failed to utilize, within the specified permissible time limit, the accumulated amount of Rs 40 crore for the specified purpose as per the objects of the registered trust deed.</p>
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Further investigations are still in progress.   </p>