There is a Television company, operating out of New Delhi, which we shall call MDTV for convenience sake. MDTV is run by a popular News anchor, whose name is Annoy Roy I think. There a few more characters to this story:
Another anchor who used to work for MDTV – Abhisar Besharma
Besharma’s wife, who is an Income Tax Officer, and who handled MDTV cases – Sumana Insane
Income tax officer who caught MDTV – OK Srivastava
Lawyer & Chartered Accountant who is fighting the cases – S Heromurthy
An influential politician: B Chidamboringam
In this entire story, there are some facts & some allegations, and it is imperative to separate the two. In the first part, let us tackle only the indisputable facts:
Fact 1: MDTV sold and bought back shares of its subsidiary company in a short span of time, thereby making huge money.
MDTV had 21 subsidiary companies all over the world, many in tax haven companies. MDTV itself had incurred losses in most years. MDTV had a subsidiary, which also was loss making. Book value of its shares was negative, face value was around Rs 45. This company had no business and no track record, only a postal address in a foreign country. Yet, this company managed to sell its shares, whose face value was just Rs 45, at Rs 7015 per share. No valuation of these shares was done by either by buyer or seller company. More astoundingly, these very shares were soon bought back by another MDTV group company, for only Rs 634.17 per share. Thus MDTV group made a cool Rs 6381 per share, by just selling and buying back the shares of a loss making subsidiary company. This profit, multiplied into the number of shares, amounted to Rs 634.17 crores. Eventually these shell subsidiary companies were either closed or merged.
MDTV tried to justify the above transaction to Tax authorities saying it managed to “sell a dream” to a foreign buyer, when the economy was booming, and when the “dream went bust” thanks to failing economy, the buyer sold them their own shares back. This story was of course rejected by multiple tax authorities who did not believe that these were genuine transactions. In other words, this was a clear case of roundtripping money using legal loopholes. The tax authorities concluded that MDTV introduced its own unaccounted “black” income under the garb of sale and repurchase of shares.
Fact 2: MDTV raised $100 Million through Bonds issued by subsidiaries, and later redeemed the Bonds for only $ 72.5 Million
In a somewhat similar modus operandi, MDTV via one of its many subsidiaries, issued “Step-Up” Coupon bonds worth $100 Million to some investors. Most of these investors were again based in tax havens like Cayman Islands etc. MDTV was repeatedly asked for details of the investors etc, but they kept replying that such information was already submitted in previous tax cases. The Tax Department checked their records and found no such evidence and eventually MDTV had to submit the details. But MDTV was unable to prove the creditworthiness and genuineness of these investors.
The issue before the Tax Authorities though was about the currency fluctuation on such bonds, and not the actual issue and redemption, hence eventually such currency fluctuation was not taxed. Also, from S Heromurthy’s letters to Annoy Roy it emerges that MDTV could not prove the details of the money repaid to the bond holders, the source of such money nor the amount.
Fact 3: MDTV raised Rs 254.75 Crores of Unsecured Loans again from one of its foreign subsidiary shell companies.
MDTV, took an unsecured loan of Rs 254.75 crores from one of its subsidiary companies. When the tax department asked for the details of the same, MDTV replied saying they had already provided details in earlier years. The Income Tax Department could not find any such details in its records. Eventually MDTV submitted a letter, with “annexures” claiming to explain the issue. But the Tax authorities found that neither were any annexures attached, nor did the letter contain anything related to the above issue. The authorities also noted that whatever documents submitted were only unverified photocopies, which could not be relied upon. Hence it concluded that MDTV could not prove the genuineness of the transaction and hence this loan was also added as unaccounted “black” Income.
Fact 4: MDTV’s tax cases at the first level, were handled by the wife of an MDTV employee (Conflict of Interest)
MDTV had hired a reporter named Abhisar Besharma. Besharma’s wife Sumana Insane was a Tax Officer. She was the Assessing officer of not only MDTV, but of all its group companies. Thus she was in a clear conflict of interest position. When she came in the position, she should have informed the Government that she has a conflict of interest. This is mandate by the rules governing the conduct of Income Tax officers. Neither did Insane do the needful and abstain from this post, nor did MDTV inform the Income Tax Department of this, and let Insane handle all their tax cases.
Fact 5: Abhisar Besharma was given Rs 39 lacs by MDTV via undisclosed underpriced shares and foreign trips.
When the Tax department heard the case of Besharma, in his personal taxation matters, it found that Besharma was issued 15000 shares in MDTV, by MDTV at only Rs 4 per share. The market price of such shares was Rs 32 lacs at that time. It is not illegal to issue such shares at low rates, but the market price should have been included in Besharma’s income by MDTV. But nowhere in his Form 16 or other documents, did MDTV disclose this amount. MDTV also gave an all-expenses paid vacation to Besharma and his family including parents and in-laws to United Kingdom. Besharma claimed that the expenses were borne by him, but could not prove the same. The Tax department worked out the value of such trip to be Rs 7.51 lacs. In total, MDTV had given Besharma benefits worth Rs 39.51 lacs, and hence they were added to Besharma’s income as unaccounted “black” income. This in fact is proof that MDTV indeed “bribed” Besharma and through him, his wife Insane, who was also MDTV’s Tax officer.
Fact 6: Sumana Insane gave an illegal tax refund of Rs 1.47 crores to MDTV
Within a short span of time after the above gratification to her husband, Sumana Insane issued a tax refund of Rs 1.47 crores to MDTV u/s 143(1). This, in-spite of the fact that MDTV’s case for that year was already open u/s 143(2), thus making the refund illegal. This was noticed by the Audit team of IT Department in 2014 and the refund was declared illegal. Also, Sumana had taken permission from the IT department to go with her husband Abhisar, employee of MDTV, on a foreign trip. IT department had given a conditional approval stating that she should not accept any hospitality from MDTV, and she must also not be involved with MDTV tax matters, either in past or future. Obviously Sumana had violated both these conditions.
Fact 7: OK Srivastava caught MDTV in the act
In 2007, OK Srivastava an honest Income Tax Officer and Commissioner, caught MDTV’s hanky-panky. At that time, he only filed an “inspection note” alleging tax-evasion of Rs 200 crore. But as he went deeper into the case, he found much more data, which resulted in him writing to the Prime Minister in 2012, asking him to grant permission to initiate action against MDTV and even B Chidamboringam who he believed was the king pin in the money-laundering.
Fact 8: Within a month of OK Srivastava’s inspection note on MDTV, he was suspended on charges of Sexual Harassment.
Instead of being rewarded for his unearthing of a potential scam, OK Srivastava was suspended within a month, by his senior, on charges of sexual harassment of 2 women officers. Who were the 2 women officers? One was the very Sumana Insane who was involved in the MDTV illegal refund case. The same Sumana Insane who was the wife of Abhisar Besharma who was an MDTV employee.
Fact 9: OK Srivastava was cleared of these fake sexual harassment charges
Firstly, in 2010, the Central Administrative Tribunal set aside the suspension because there was no substantial progress in the case, and it was not as per guidelines. It noted that the suspension was biased and unreasonable, and that OK Srivastava was an officer with excellent service record. Next, in 2012, the preliminary report of the investigating committee (of which a majority were females), found that the allegations were baseless as at no point of time were OK Srivastava and Sumana Sen in the same office, neither were they ever in a senior/junior position. So there was no chance for any kind of harassment.
Fact 10: OK Srivastava continues to be targeted by these women in-spite of being cleared
In a last ditch attempt, now in 2015, these two ladies have filed a “PIL” in Supreme court against OK Srivastava, claiming that he is harassing them and hence the tax orders passed against them must be quashed. The importance of quashing these orders is as follows: At “Fact 5″ above, IT Department determined that Abhisar Besharma, husband of IT officer Sumana Insane, had received benefits from MDTV, which were never disclosed. This amounts to proving that MDTV had bribed Abhisar and wife Sumana. If this order stands, it becomes very easy to prove that all of Sumana’s favours to MDTV flow from this bribe, thereby nailing her and MDTV.
These are the facts. Things which have been proved and cannot be disputed. But some things maybe unclear. Like how is Chaidamboringam involved. These will be dealt with Part 2, which will spell out all the allegations on MDTV by various people of repute. All of them may or may not be true.
(P.S.: Since the above post is purely fiction and does not bear any resemblance to any real-life Television Company from New Delhi, there are no sources cited for any of the above)