The income-tax (I-T) department will crack down on “shell” or “jamakharchi” (deposit and withdrawal) companies that are used as money laundering tools.
The Central Board of Direct Taxes (CBDT) recently took a decision to focus on such companies as well as individuals and entities engaged in such activities, sources said.
These operators have “laundered several hundreds of crores of black money and have earned commission income,” sources told HT.
Kolkata-based tax authority , directorate of investigation, in its findings has said that a chunk of operators work from Ahmedabad, Mumbai, Hyderabad, Delhi and Bengaluru.
“Principal chief commissioners of income tax Ahmedabad, Mumbai, Hyderabad, Delhi and Bengaluru have been asked to take a suitable action against persons who had laundered black money with the help of such operators,” sources said.
According to the tax department investigations, these operators work through shell companies, which do not have any genuine business, and are formed and used for the sole purpose of giving accommodation entries by taking cash and introducing the equivalent amounts through cheques.
Such conversions are made typically when people want to use illicit money to purchase land, jewellery and other valuable assets, sources said.
In some cases, the taxmen have found that these shell companies are under the control of intermediaries, brokers, agents and even chartered accountants.
“These companies do not have any postal address and are called post-box companies, or suitcase companies, with no real office or employees. They are incorporated with just a few thousands or few lakh rupees as initial capital,” sources said.
In many cases, the I-T department has also found that the so-called directors of these companies are semi-literate, even illiterate, and work for those controlling the operations for a small salary or commission.
The recent leaking of offshore financial records from Panama-based law firm, Mossack Fonseca, had put the focus on the role of shell companies and the global nexus back. The tax authorities are investigating the network of shell companies operating from tax havens, which are used to illegally shift assets and cash from one country to another and using structured transactions to evade tax.
The I-T department has been wanting to take action against such shell companies for quite some time, but since they are formed with a proper legal structure, the government has been unable to nip them in the bud.