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Nirav Modi illegally diverted diamonds worth Rs 1,216 cr to domestic market for profit: I-T dept

The income tax department in 2016-17 found that the Nirav Modi group, which had units at the Surat SEZ, diverted to the domestic market high quality diamonds imported for processing and export for a huge profit.

business Updated: Feb 20, 2018 18:14 IST
Indo-Asian News Service, New Delhi
Nirav Modi,Nirav Modi group,PNB fraud
A Nirav Modi showroom pictured in New Delhi on February 15, 2018. The diamond jeweller is being investigated for fraud. (Reuters)

The income tax department has found that in the last financial year diamond jeweller Nirav Modi group had illegally diverted Rs 1,216 crore of diamonds meant for export from its special economic zone to the domestic market, selling them in cash.

The investigations division of the director-general of income tax (DGIT) in 2016-17 found that the group, which had units at the Surat SEZ, diverted high quality diamonds imported for processing and export, to the domestic market for huge profit. Instead, low-quality diamonds were exported to associate units abroad to keep up appearances.

Nirav Modi and his uncle Mehul Choksi, along with directors of the Modi and Gitanjali groups are under investigation by the Central Bureau of Investigation and the Enforcement Department for allegedly committing fraud amounting to Rs 11,300 crore against Punjab National Bank, whose Letters of Undertaking and Foreign Letters of Credit were illegally used to raise and rollover money. Both Modi and Choksi, along with other family members left the country in January this year.

The DGIT also found in its probe that the group had claimed deduction on 100 per cent of the profits from exporting diamond as allowed under section 10AA of the Income Tax Act for the SEZ. It had claimed deductions to “the tune of hundreds of crores in last six years”.

“The assessee has not been able to explain the reason for the drastic difference in valuation satisfactorily,” the investigative wing of the Central Board of Direct Tax said in its report. It also said that availing of deduction under 10AA was wrong.

“The difference in stock valuation of SEZ units has been worked out to the tune of Rs 1,216.31 crore in financial year 2016-17 which represents the unaccounted sale of imported diamonds diverted to domestic markets,” the report said.

The DGIT raided Nirav Modi’s premises and offices in Surat’s SEZ in January 2017.

First Published: Feb 19, 2018 22:10 IST