In the first major breakthrough in its crackdown on 25,000 beneficiaries of hawala transactions, the income-tax department found Rs 7,222 crore worth of fake bills had been presented by 189 assessees in Mumbai and Pune in their returns - to artificially deflate taxable income.
These 189 assessees are among the 25,000 hawala beneficiaries from the construction, pharmaceuticals, chemicals and steel sectors.
The department's investigations into 150 cases in Mumbai unearthed Rs 6,500-crore bogus bills, while Rs 722-crore fake ones came to light through 39 cases in Pune. A large number of taxpayers obtained "bogus/non-genuine bills for purchases/expenses from hawala dealers and used those to suppress taxable income", the department said in a statement.
A senior tax official, currently associated with the drive, told Business Standard: "The modus operandi is quite unique. Dealers and sellers show inflated expenditure while obtaining bills from others. The first way is, the payment is made at the time of purchase, but with undisclosed cash. The second way: The real supplier is paid, but after 8-10 months. The third: A person takes bills but gives those to somebody else who is part of the hawala chain."
The official added, in some cases, both purchasers and sellers showed higher turnovers and profits to float public issues. In some other ones, bogus bills were produced to obtain high credit.
The I-T department had received information about the bills from Maharashtra's value-added tax (VAT) and sales tax department at the meeting of the Regional Enforcement Intelligence Council, the official informed. "This information was rechecked with the authorities and the I-T department subsequently launched its own investigation, which would continue," he added.
The crackdown is set to be extended to other business centres of the country, with the tax officials closely examining the possibility of tax evasion in a planned and concerted manner through forged bills.
"This (over Rs 7,200 crore worth of fake bills from just 189 returns) is just the tip of an iceberg. The department knows this method is being used at various centres to avoid tax. The modus operandi, involving both domestic and international players, is also known. The department is set to act on credible information gathered from across the country," said a senior I-T department official close to the exercise.
He added the department had succeeded this time by gathering critical information and swiftly acting on that. A similar exercise was now expected to be carried out at other industrial locations of the country.
The business centres in Gujarat and the southern states would particularly be on the department's radar.
An official from Maharashtra's VAT & sales tax department recalled Rs 1,000-crore tax evasion, involving 1,150 hawala dealers and 37,000 beneficiaries, had been unearthed in July 2011. The sales tax department had formed a special cell, the Economic Intelligence Unit, three years ago, which looks into cases of dealers claiming false credits and hiding turnovers, even hawala transfers.
Hawala entails making bogus invoices to allow traders to claim tax credits. In this, the hawala operator, posing as the seller', exists only on the paper and gets a cut in return.