The Income-Tax Department has conducted searches at 60 locations linked to four asset reconstruction companies in multiple cities, on the charge that they adopted fraudulent trade practices in acquiring the non-performing assets (NPA) from lender banks and had nexus with the borrower groups.

“More often than not, the underlying assets had been re-acquired by the same borrower group, albeit at a fraction of their real values,” said the agency.

Maze of shell/dummy entities

During the searches in Delhi, Mumbai, Ahmedabad and other places, the I-T Department found that a maze of shell/dummy entities were used by these companies. The amounts at which the assets were acquired by them were far less than the real value of the collateral securities covering the said properties.

The minimum cash payout made out by these companies to lender banks for acquiring the stressed assets was part of the funds of the borrower groups. “Such funds have been routed through several layers of dummy companies controlled by the borrower group or through ‘hawala’ channels,” said the agency.

The asset reconstruction companies concealed the profits made on disposal of the underlying assets by diverting the funds to their related concerns under the garb of consultancy receipts or unsecured loans/investments. Therefore, as alleged, they evaded the payment of due taxes and also deprived the lender banks of their share of actual profits.

Parallel

set of accounts

One of the companies maintained a parallel set of accounts on Tally accounting software. A pen drive containing the records was seized from the custody of employees. “This parallel set of accounts contained cash transactions aggregating to more than ₹850 crore,” the agency said.

The I-T Department also found that the promoter group had used a network of middlemen to layer the transactions. The funds were also routed through offshore structures to acquire the assets. The agency has so far seized ₹4 crore, apart from documentary and digital evidence.