Former CM Chandrababu Naidu gets show-cause notice from I-T department

The notice, reviewed by HT, was issued by the Central Circle, Hyderabad, on August 4

The Income Tax department has issued a show-cause notice to Telugu Desam Party (TDP) chief and former Andhra Pradesh chief minister Chandrababu Naidu, asking why an amount of ₹118 crore, allegedly received by him as kickbacks from some infrastructure companies, should not be treated as “undisclosed income” and be processed as per law.

The Income Tax department has issued a show-cause notice to Telugu Desam Party (TDP) chief and former Andhra Pradesh chief minister Chandrababu Naidu (File)

The notice, reviewed by HT, was issued by the Central Circle, Hyderabad, on August 4 after rejecting Naidu’s preliminary objections that the tax proceedings against him could not have been initiated by the Central Circle before the jurisdictional assessing officer undertook the exercise of reassessment of his income for the impugned financial years.

“Once the case is notified to this office (Central Circle), immediately to commence the proceedings, notice under section 153C was validly issued and the proceedings are in progress,” stated the show-cause notice, adding the department has recorded statements and seized materials to prime facie show that unaccounted income generated through bogus sub-contracts was given back to the former CM.

Section 153C of the I-T Act allows the revenue department to proceed against a party other than the person who has been searched, if certain incriminating materials are found against that party.

Naidu, the Central Board of Direct Taxes (CBDT), and the finance ministry did not respond to an email query on this matter.

The I-T investigation against Naidu stems from searches carried out at the premises of Manoj Vasudev Pardasany (referred to as MVP in the notice), who, the notice said, was taking part in the tendering process in Andhra Pradesh since December 2017 on behalf of Shapoorji Pallonji & Co. Pvt Ltd (SPCL), and at the premises of Pardasany’s associates in November 2019.

In hie statements, Pardasany admitted to having arranged bogus contacts and work orders for siphoning off of funds by SPCL to generate cash through sham sub-contractor companies, the notice added.

“Several incriminating messages, chats and excel sheets have also been recovered from MVP and his associates during search operations which show siphoning off of funds and cash generation by several major infrastructure companies. Delivery of such cash to you (Naidu) has also been unearthed during the course of search,” it said.

According to the notice, MVP got in touch with Naidu’s personal secretary P Srinivas in August 2016 (when Naidu was CM), who asked him to arrange for funds for the party.

“From the statements of MVP recorded on 01.11.2019 and 05.11.2019, it has been found that funds were siphoned off from projects allocated to SP by the Andhra Pradesh Government without doing any actual work...Apart from Shapoorji Pallonji (SP), funds were also siphoned off from L&T and delivered for use by you through companies such as Phoenix Infra & Pour Trading,” the notice to Naidu stated.

The department claimed that several incriminating messages, chats and excel sheets were recovered during search operations that show delivery of cash to Srinivas for Naidu. “When these evidences were confronted to MVP, he revealed in his statements recorded during the Search the entire modus operandi by which money was taken out from infrastructure projects through bogus contracts and delivered to Srinivas,” read the notice.

Listing out details of sub-contractors which were allegedly issued bogus work orders, the I-T department alleged that Naidu was the ultimate beneficiary of the payments received by these entities.

Adding up the amount that MVP allegedly siphoned off from various sub-contractor companies and paid to Naidu, the notice stated: “Please state as to why an amount of ₹118,98,13,2071- for AY 2020-21 should not be treated as your undisclosed income.”