IT raids at premises of 2 builder groups in Bengaluru, Hyderabad

New Delhi, July 11:  The Income Tax Department on Monday said it has carried out search and seizure operations against two leading real estate groups in Bengaluru and Hyderabad. The two groups are engaged in construction, sale, leasing of commercial and residential space, and in educational and hospitality services.

The IT department learnt that the two groups had undisclosed capital estimated at more than Rs 400 crore and were involved in tax evasion.

The searches covered more than 40 premises located in Bengaluru, Hyderabad and Chennai. Several incriminating documents and digital evidence were seized.

The preliminary analysis of the seized evidence has revealed that the landowners had entered into Joint Development Agreement (JDA) with a Bengaluru-based developer.

They received super built-up area from the developer in lieu of the land given for the development of various projects.

However, the landowners 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 analysis of the seized documents has also revealed that these groups have suppressed income to the tune of Rs 90 crore in respect of the revenue recognizable from the sale of units in real estate.

"Both the groups have indulged in tax evasion by inflation of expenses in the construction and development business to the tune of Rs. 28 crore, having claimed bogus purchases and resorted to over-invoicing of the construction material," the IT department said.

The department learnt that interest-bearing borrowed funds were diverted to related entities for non-business purposes by the main entities of both the groups.

Instances of the transactions involving advances between the group companies were also found, which partake the character of deemed dividend and hence are liable to be taxed as income.

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.

"So far, the search action has led to the seizure of undisclosed cash of Rs 3.50 crore and gold, silver, jewellery worth Rs. 18.50 crore," the IT department said.

Further investigation in the matter is on.