In an official statement, the Income Tax department said it had detected alleged tax evasion on Rs 700 crore of income over six years by the Dainik Bhaskar group.
The Income Tax department on Saturday said it has detected that DB Corp, also known as the Dainik Bhaskar Group, allegedly evaded taxes on Rs 700 crore of income over a period of six years.
In its official statement, the tax department said that the conglomerate was evading taxes by operating companies in the names of its employees to “book bogus expenses” and “siphon off profits”.
The Dainik Bhaskar Group has denied the allegations and claimed the income tax raids came only after its media coverage during the devastating second wave of Covid-19 in India exposed the government’s lapses.
On Thursday, tax officials had initiated a search operation on the Dainik Bhaskar Group. Raids were conducted at several locations including 20 residential and 12 business premises spread over nine cities including Mumbai, Delhi, Bhopal, Indore, Noida and Ahmedabad.
IT DEPT ALLEGES BOGUS EXPENSES, ROUTING OF FUNDS
The Income Tax department said in its statement, “DB Corp is involved in various sectors including media, power and real estate. The group has a turnover of more than Rs 6,000 crore per annum. It has more than a hundred companies including the holding and subsidiary companies.”
“During the search, it was found that they [DB Corp] have been operating several companies in the names of their employees, which have been used for booking bogus expenses and routing of funds. Several of the employees, whose names were used as shareholders and directors, have 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,”Income Tax department
According to the tax department, the group allegedly siphoned off funds from listed companies into closely held companies to make investments and circular transactions.
“The nature of the bogus expenditures booked varies from the supply of manpower, transport, logistics and civil works to fictitious trade payables. The quantum of income escapement using this modus operandi, detected so far, amounts to Rs 700 crore spread over a period of six years,” added the Income Tax department’s statement.
Further, the Income Tax department alleged that cyclical trading and transfer of funds among Dainik Bhaskar Group companies “engaged in unrelated business” to the tune of Rs 2,200 crore had been found.
“The enquiries have confirmed that these have been fictitious transactions without any actual movement or delivery of goods. The tax effect and violation of other laws are being examined,” the department said.
REAL ESTATE LOAN DIVERTED: INCOME TAX DEPARTMENT
Additionally, tax officials claimed that a real estate entity of Dainik Bhaskar Group had been sanctioned a term loan of Rs 597 crore from a nationalised bank. The company was operating a mall. Out of the loan amount, Rs 408 crore was allegedly diverted to a sister concern as a loan at the interest rate of one per cent.
According to the Income Tax department, the group’s real estate company claimed expenses of interest from its taxable profit while diverting the same for “personal investments of the holding company”.
Finally, the Income Tax department suggested that the Dainik Bhaskar Group engaged in barter deals for advertisement revenues, “whereby immovable properties are received in lieu of actual payments”.
“Evidence has been found indicating cash receipts in respect of the subsequent sale of such properties. This is under further examination. Evidence has also been found indicating receipt of on-money in cash on the sale of flats by the realty arm of the group. The same has been confirmed by two employees and one director of the company. The modus operandi as well as the corroborating documents have been found. The exact amount of out-of-books cash receipts are being quantified,”Income Tax department
The Income Tax department found 26 lockers during the search operations at the residential premises of the promoters and key employees of the group. Searches at several premises linked to the group are still underway.
WHAT HAS DAINIK BHASKAR GROUP SAID ON THE INCOME TAX RAIDS?
The Dainik Bhaskar Group expressed surprise at the fact that a statement had been issued by the Income Tax department while searches were still on. The group said it does not agree with the allegations and findings of the tax department.
After the raids on Thursday, the Dainik Bhaskar Group’s digital news website had the following statement under the headline ‘Swatantra Bhaskar’, “I am independent because I am Bhaskar. Only readers’ will prevail at Bhaskar.”
The group also claimed that the Income Tax raids had come only after its media company had brought to light “the government’s lapses during the second wave of coronavirus”. In its statement, the group said the tax department had raided the houses of its employees, seized their mobile phones and not allowed them to leave.
During the second wave of Covid-19 in India, the group’s digital news site had put out reports, along with pictures, on dead bodies of suspected coronavirus patients floating down the river Ganga in Uttar Pradesh and Bihar which had led to nationwide outrage, a PTI report stated.
The Income Tax department’s actions have attracted criticism from opposition parties and on social media.
Madhya Pradesh Congress chief Kamal Nath said on Thursday that the tax raids on Dainik Bhaskar on charges of tax evasion were an attempt by the Union government to suppress the “fourth pillar of democracy” and prevent the truth from coming out.
“Income Tax raids on the offices of Dainik Bhaskar newspaper and Bharat Samachar news channel is an attempt to suppress the media. The Modi government cannot tolerate even the slightest criticism. This is the fascist mentality of the BJP, which does not like to see the mirror of truth in democracy,”Ashok Gehlot – Rajasthan Chief Minister