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I-T Searches 4 ARCs, Finds Rs850Cr Unaccounted Cash

The income tax department said it has found unaccounted cash transactions of Rs850 crore at one of the four asset reconstruction companies (ARCs) where it had recently carried out search and seizure operations. People in the know of the matter said alleged tax evasion detected at the four ARCs could run into a few hundred crores.

These ARCs had acquired bad loans along with the collaterals from lenders at throw-away prices, often with funds routed to them by the same borrowers who had defaulted on the loans, the tax department claimed in a news release Wednesday. These same borrowers would them acquire the underlying assets from the ARCs at a fraction of their real value through dummy companies, it alleged.

The tax department didn’t name the ARCs A tax official, who sought anonymity, said they were mid-cap companies. “These companies received kickbacks for the transactions,” he added. The I-T department had raided 60 premises linked to the four ARCs, spread over Mumbai, Ahmedabad and Delhi.

The tax department said its probe has shown unfair and fraudulent practices by these ARCs in acquiring non-performing assets from lenders.

“It has been found that an unholy nexus existed between the borrower’s groups and ARCs and in the process, amaze of shell/dummy concerns has been used, “it said. The price paid for acquiring the NPAs has been found to be far less than the real value of the collaterals, the statement said.

The searches have also revealed that the cash payouts made by these ARCs to banks for acquiring NPAs had usually been with the funds of the borrower groups, the department claimed. “Such funds have been routed through several layers of dummy companies controlled by the borrower group or through hawala channels, “it alleged.

It has also been found that the ARCs have been following non-transparent methods in the disposal of the collaterals against the bad loans acquired from banks.

“More often than not, the underlying assets had been re-acquired by the same borrower group, albeit at a fraction of their real values, “the release added. S-ET

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