TDS refund fraud: ED arrests 3, including former I-T official

The money laundering probe is based on a case registered by the Central Bureau of Investigation (CBI) in Delhi on receipt of a written complaint from the additional director general (Vigilance-4) of the Central Board of Direct Taxes (CBDT)

The Enforcement Directorate (ED) on Friday arrested three persons, including a former Income Tax (I-T) official, Tanaji Mandal Adhikari, in connection with its money laundering probe into alleged fraudulent issuance of Tax Deducted at Source (TDS) refund of Rs.263 crore from the I-T department.

ED office in Mumbai (Representative Photo)

The fraudulent refunds were undertaken by a few accused persons, including Adhikari, a senior tax assistant, who had allegedly misused his access to the login credentials of his supervisory authorities to perpetrate the fraud, officials familiar with the matter said.

It was alleged that a firm had fraudulently obtained hefty TDS refunds of Rs.263 crore in lieu of genuine claims worth only around Rs.16 lakh spread over two assessment years with the help of Adhikari, said officials, who did not wish to be named.

The agency’s probe so far has revealed that between November 2019 and November 2020, a total of 12 fraudulent TDS refunds were generated allegedly by Adhikari, who is said to have orchestrated the fraud in connivance with others and transferred the proceeds in various bank accounts, including that of a proprietary firm of a co-accused.

The money laundering probe is based on a case registered by the Central Bureau of Investigation (CBI) in Delhi on receipt of a written complaint from the additional director general (Vigilance-4) of the Central Board of Direct Taxes (CBDT).

The probe revealed that the conspirators had also allegedly generated dummy orders on an I-T department platform, on which transactions linked to the usage of Permanent Account Numbers (PAN) are monitored and analysed. This was done in order to make fraudulent transactions look authentic, claimed the officials.

They said that the beneficiary firm had given details of its current account with a public-sector bank in its ITR. However, in November 2019, an additional savings bank account with another public-sector bank’s branch in Panvel was added in the name of a proprietary concern of an individual and the first fraudulent credit was made in that account. Later in July 2021, this additional savings bank account was removed from the I-T department’s system, they added.

The CBI has filed a charge sheet against Adhikari and other accused in its case for committing offences under the Indian Penal Code, the Prevention of Corruption Act and the Information Technology Act, including those related to public servants taking gratification other than legal remuneration in respect of an official act and criminal misconduct by any public servant.

According to the officials, against the total proceeds of crime of Rs.263 crore, assets worth Rs.166 crore have been seized/frozen/attached provisionally so far.

Besides the agency has also provisionally attached immovable properties at Lonavala, Khandala, Karjat, Pune and Udupi (Karnataka), flats in Panvel and Mumbai, and three luxury cars - BMW X7, Mercedes GLS400d and Audi Q7 - held in the name of accused persons and suspected to have been procured via the proceeds of crime, agency sources said.

Earlier, orders were issued to freeze 33 bank accounts of various accused and the entities involved in the case.