Above The Law?

Officials claim Sahara is just a massive money-laundering operation
Above The Law?

THE more they dig, the more the Income Tax (IT) officials seem to find. When Outlook decided to go into the details of the charges being levelled against Sahara, the findings were intriguing.

After officials turned the heat on the group prior to serving a demand notice of Rs 365 crore earlier this year, Roy replied by releasing full-page advertisements in national dailies about the "high-handedness" of the authorities. He says that the demand notice is "infructuous" since a petition challenging the Rs 365 crore claim notice is pending before the director-general (investigation). But last week, IT officials  also attached six Lucknow bank accounts of the group, since, they say, the company had failed to pay the sum of Rs 4 crore per month to clear its dues, as it had agreed to.

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The authorities believe that the company is a money-laundering operation not engaged in any genuine business, collecting deposits from fictitious people. In fact, the four group firms engaged in parabanking don't even have any employees on their rolls. While financial details of the companies were not made available to Outlook despite Roy's promise to do so, he says "prima facie" no political bigwigs had deposited any money in any of the Sahara schemes.

Never in its corporate history has the group produced its books of account before the assessing officer. Checking the ledgers in some Sahara branches, IT officials found cases where they did not even have depositors' addresses, and sometimes not even names, with only amounts mentioned as having been deposited! Worse, pages of the ledgers were found to have been torn out. There were many instances of cash deposits of over Rs 20,000 in violation of Section 269 SS of the Income Tax Act. When the department tried to contact Sahara depositors, it found many of the names and addresses were fictitious. When it asked Sahara to produce 62 depositors, the group could manage to get hold of only 12.

Officials also noticed the large number of defaults in one of Sahara's recurring deposit schemes. The company took the stand that these were partly paid up accounts and that Reserve Bank of India (RBI) rules did not permit forfeiture of the idle money in a depositor's account. IT officials are construing the idle money as the income of the company since these cannot be claimed back by depositors, and wants Sahara to pay taxes on it.

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The RBI has also pointed out a mass of irregularities. For instance, it found that receipts issued to depositors often did not contain the name of the company which was running the scheme. The central bank says that the group has intricately interlaced financial transactions so that the ultimate benefit accrues to Sahara India. But Roy is blase: "You cannot blame any institution because certain people in the institution may be at fault." Group companies had also given generous loans to employees for purchase of land in Lonavala, where the group is promoting a massive housing project. J.P. Upadhyay, whose annual income from his Sahara job is Rs 70,000, has received a Rs 85 lakh loan at an annual interest of 24 per cent. When questioned by IT officials, he said he had never seen the land he has purchased nor has he ever visited Lonavala. Other employees who have similarly received generous loans include T.N. Mishra (Rs 30 lakh), Khalid Chaudhary (Rs 16 lakh), Sanjay Singh (Rs 22 lakh), Ghanshyam Singh (Rs 28 lakh) and S.K. Sharma (Rs 24 lakh)—all attracting 24 per cent annual interest. Most were not even aware of the terms at which the loans had been advanced to them.

Roy admits this is a way to circumvent the Land Ceiling Act; the employees are owners only in name: "For some obvious reasons in the law, we are putting his name also, his name also...Right in the beginning, they have given full authority to Sahara India Housing to develop the land. Everything is with the company. Now, which is secure? Giving money to a third person outside the company or in the company?" IT officials and Roy have very different answers to that question.


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