I-T department detects alleged tax evasion by real estate developers


Roger Pettingell Sarasota Real Estate

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NEW DELHI : The Income Tax department said on Monday that it has detected undisclosed capital gain and alleged tax evasion in transactions involving two real estate developers in Bengaluru and Hyderabad. 

The alleged irregularities came to light during search operations conducted on the two real estate groups engaged in the business of construction, sale and leasing of commercial and residential space, and educational and hospitality services. The search action covered more than 40 premises located in Bengaluru, Hyderabad and Chennai. 

During the search, incriminating documents and digital evidences have been seized, the department alleged. Preliminary analysis of evidence showed that some land owners had entered into joint development agreement with a Bengaluru-based developer. They received super built-up area from developer in lieu of the land given to the developer for the development of various projects. However, the land owners failed to declare the capital gains accruing from the transaction, though completion certificates for the projects have been obtained. The amount of such undisclosed capital gains is estimated at more than Rs. 400 crore, the department said.

Initial analysis of the seized documents showed that these groups have allegedly suppressed income to the tune of Rs. 90 crore in respect of the revenue recognizable from the sale of units in real estate, the department said. 

Both the groups have allegedly indulged in tax-evasion by inflation of expenses in the construction and development business to the tune of Rs. 28 crore by claiming bogus purchases and resorting to over-invoicing of the construction materials, the department said.

It has also been found that interest-bearing borrowed funds have been diverted to related parties for non-business purposes by the main entities of both the groups, the department alleged. In the case of a trust covered in the search action, it has been found that the trust has failed to utilize, within the specified permissible time limit, the accumulated amount of Rs. 40 crore for the specified purpose as per the objects of the registered trust deed, the department said. So far, the search action has led to the seizure of undisclosed cash of 3.50 crore and jewellery worth Rs. 18.50 crore, the department said. 

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