CA booked for IT refund scam
Tribune News Service
Chandigarh, January 29
A multi-million rupee scam of fraudulent claim of income tax refunds on the basis of fake TDS certificates has been unearthed in Chandigarh by the north-western region of the Income Tax Department. An FIR regarding this has been registered tonight in the police station of Sector-17. Senior officials of the IT Department say the scam may run into “several crores.”
After preliminary investigations by the IT department, an FIR under Sections 420, 468, 471, 474 and 120B of the IPC has been lodged against Mr N.K. Garg, a practising Chartered Accountant (CA) on charges of claiming IT refunds fraudulently on the basis of TDS certificates from the accounts of employees of as many as 30 companies based at Delhi, Bombay and Chandigarh regions.
Mr Vijay Khanna, Chief Commissioner, IT, North-Western region told TNS that the fraud detected so far amounts to Rs. 50 lakh but might run into several crores. He did not rule out the possibility of similar frauds in other regions also.
He said the main accused in this case Mr N.K. Garg used to forge TDS certificates of employees of existing as well as fake companies to withdraw their IT returns. “We have so far detected only 30 such cases against the main accused but further investigations have been initiated into the IT cases being handled by this CA as well as others also in the region”, he disclosed.
According to the FIR, Mr P.K. Sidhu, Additional Commissioner, IT Department, Range-4, Chandigarh has complained against Mr N.K. Garg, a practising CA from his office in Sector-35 that he had withdrawn millions of rupees from the Income Tax Department as refunds on fake TDS documents.
According to the FIR, during preliminary investigations by the IT Department, it was found that the accused forged documents of Robbin Enterprises, ITO, Ward No. 51, New Delhi, to withdraw money from the accounts of the employees on false TDS certificates. The fraud came to light when it was found that instead of using form No. 26C by the “deductor company”, the returns were filed on form 26J, meant exclusively for rental payment.
In another case of fraud, the accused forged documents of Victory Traders and Merchants, Chandigarh, the firm which does not exist. Sources revealed that there is a possibility of floating a fake firm in the name of his family members and then operating the fake accounts in the names of family members as employees. “No such firm has so far been listed in the IT department”, revealed another senior official of the IT Department.
Investigating Officer, SI Janak Singh revealed that the TDS certificates of employees of various companies were printed on the same computer and using the same fonts. It has been learnt through sources in the IT Department that a section of the employees were long protesting against such frauds with in the department but no one bothered about this as there was a possibility of higher officials of the IT Department being involved in the scam. However, Mr Vijay Khanna, Chief Commissioner ruled out the possibility of involvement of any official of the IT Department in the scam.
Contrary to this, a senior official of the IT Department when contacted revealed that the fraud occurred due to ‘system failure of the IT department’. “It is very difficult to detect forged documents/certificates until unless a proper tip-off is provided”, he said. “Due to computerisation of work it has become very easy to withdraw money from returns on forged documents”, he added.
Meanwhile, the local police has sealed the office of Mr N.K. Garg and a massive hunt has been launched to arrest him. Raids were conducted at his residence and other places of possible hide-outs late in the night but so far he has eluded arrest when the reports last came in.
A message has also been flashed by the UT police to the Delhi and Mumbai police along with addresses of possible hide-outs of N.K. Garg.
Raids on CA’s office continue
Tribune News Service
Chandigarh, January 30
The police along with income tax officials today conducted search at the Sector 35 office of Mr N.K. Garg, a practising Chartered Accountant.
The searches continued till late in the night. Some persons working in the Sector 35 Quiet Office of the Chartered Accountant were reportedly questioned. However, the main suspect is yet to be arrested by the police. Sources said police teams were being sent to suspected hide-outs of the Chartered Accountant in different cities.
After preliminary investigation, the Income Tax Department had got a case registered against the Chartered Accountant for claiming IT refunds fraudulently on the basis of TDS certificates from the accounts of employees of genuine and fake companies at Delhi, Mumbai and other cities in the northern region. The Income Tax Department has so far identified over 28 such companies.
Sources in the police said the several files were seized by the raiding parties after warrants to search the office and residence of the Chartered Accountant were procured from a local court. The search at the Sector 40 residence of Mr N.K. Garg will be conducted tomorrow.
Police parties were also being sent to Delhi and Mumbai to verify the records of the companies against whom the Chartered Accountant had drawn refunds on the basis of fake documents. It is learned that the police was keeping a tab on the calls being made on the mobile phones by the suspect and his family members.
Though the income tax officials denied involvement of its employees in the scam, the facts indicate to the contrary. Some lower rung officials of the Income Tax Department could be in the net once Chartered Accountant was interrogated, said a police official.
The Chartered Accountant went missing a week before the FIR was registered. Sources in the Income Tax Department said though the preliminary inquiry by the Additional Commissioner, Range-4, Mrs Poonam Sidhu, was given about six days ago the FIR was registered only yesterday._______________________________________________--
IT Dept for random verification
Tribune News Service
| Finance Ministry takes serious note |
* Following the expose of the multi-million scam of claiming income tax returns on the basis of forged documents, the Union Ministry of Finance is reported to have taken a serious note. Perhaps, such a scam has come to light for the first time. * The police has alerted the Airports Authority of India (AAI) and the Union Ministry of Shipping about the chances of the Chartered Accountant, Mr N.K. Garg escaping from the country. Enquires reveal that details of the passport of the Chartered Accountant were being sought from the local passport office. |
Chandigarh, January 30
The Income Tax Department has decided to approach the Institute of Chartered Accountants to get the registration of controversial Chartered Accountant N.K. Garg cancelled, that would ultimately bar him from practising in future. It has also been decided to carry out random verification of all IT returns filed during the past couple of years involving big refunds.
Talking to TNS, in an exclusive interview here, today, Mr Vijay Khanna, Chief Commissioner, IT (North-Western region), said he had ordered to investigate all IT returns filed by the controversial CA during the past few years. “The IT Department suspects that he might have claimed returns on fake documents in the past also”, said Mr Khanna.
He said they were writing to the Institute of Chartered Accountants to cancel the registration of N.K. Garg. As per the instructions of the Union Ministry of Company Affairs, it was mandatory for a person to be a member of the Institute of Chartered Accountants to practise.
The IT Department has also marked an inquiry into all suspected cases of IT returns in the region. A proper policy is likely on cards to get the TDS certificates verified from the ITOs in all cases of returns filed beyond certain limit of amount. When asked about the limit of amount, Mr Khanna replied that it was yet to be worked out.
However, at present verification is not carried out in all cases. The verification was mandatory only in suspected cases. “We are going to carry out a random verification of all IT returns filed during the past couple of years involving big refunds”, he added.
In reply to another question, the Chief Commissioner said: “Suspicion is that the controversial CA must have withdrawn IT returns in other regions also. It would be premature to say anything about the total amount of fraud done by him”.
He said it would take at least one week to investigate into the returns filed by him. He made it very clear that separate FIRs would be lodged against the controversial CA in all cases of fraud. They will not club all the frauds in a single FIR.
Meanwhile, Mr Khanna spoke to the local SSP, Mr Gaurav Yadav, over telephone this afternoon and stressed upon joint investigations into the fraud.
It is learned that the police had earlier sought the help of IT Department for further investigations into the case._________________________________________________________
Mastermind behind income tax refund fraud
Tribune News Service
Chandigarh, February 8
The preliminary inquiries conducted by the Income Tax Department into the fraudulent withdrawal of IT returns on the basis of fake documents reveal that the fraud was intelligently designed by professional Chartered Accountant N.K. Garg. He withdrew a total of Rs 24 lakh through 52 returns filed in different wards at different times.
Presently, the accused is under police remand for investigation by the UT police. He surrendered before Mr C.S. Mohal, CJM, on February 1 following the registration of an FIR against him. He will again be produced before the relevant court on February 11. As many as 297 files, two registers and 12 PCs were seized from his office by the investigating officer of the local police.
The Chief Commissioner of IT Department, North-Western region, Mr Vijay Khanna, said N.K. Garg had filed a number of returns on behalf of several persons. All the returns had certain tax deduction certificates attached with them. In all such cases, the claim of tax deducted was more than the tax liabilities of the person. Consequently, a refund was claimed in all such cases.
Raising suspicion, some of the returns were picked up for verification of TDS certificates. In TDS certificates of Delhi, it was found that no tax was deducted and paid to the Union Government of India on behalf of the persons who filed their returns in Chandigarh and subsequently, claimed refunds. In other words, the TDS certificates issued by Delhi concerns were only fake documents and did not actually certify the deposit of taxes in government treasury.
The inquiry officials also recorded statements of the directors of the payer companies who admitted that the TDS certificates purported to be issued by them were actually not issued or signed by any official concerned of the company. After going through the records of the companies, it was revealed that the companies that deducted on behalf of the persons claiming their refunds in Chandigarh through Garg had no dealing with the assesses. Therefore, TDS certificates attached with the returns filed by Garg were clearly forged with the intention of claiming refunds only.
Further investigations carried out by the officials of the IT Department in respect of the refunds that were issued in some cases prior to this verification revealed that Garg was himself operating the accounts of a number of persons for whom he had filed returns. The refunds that were credited into these accounts were withdrawn and used by Garg himself. Addresses shown against certain companies in the bank did not exist in most of the cases. Mr Khanna did not rule out the possibility of bank officials involved in this scam.
Income Tax Officer of ward 4(3) was deputed along with a technical assistant to go to the SBI, treasury branch, Sector-17, to establish the trail of four refunds that were issued on the strength of fake documents. Verification of refunds issued in the case of M/s Sagar Traders and Contractors revealed that a refund of Rs 75,759 was encashed through HDFC account in Sector-35 where the address given was 11, Quiet Office, Sector-35, and the account was operated by N.K. Garg, auditor.
Stop payment instructions were issued for two refunds in the case of Shivalik Chemicals and Allied Industries and Krishna Enterprises. Interestingly, the copies of account opening documents, received in the case of Victory Traders and Krishna Enterprises showed N.K. Garg HUF as partner. However, in the IT returns, he was not shown as partner.
A refund of over Rs 1 lakh in the case of Robin Enterprises for the accounting year 2002-2003, came for approval from Ward-4(3). The case was processed on AST. The PAN was found genuine. However, after manual verification of the files, it appeared to be an “entry” case. Total receipts of Rs 46,23,745 were balanced by payments for labour charges of Rs 32,22,330. TDS was deducted on gross contract receipts but not on these sub-contract payments. The net profit was only 0.5% and was overwritten to show 3.9% in the tax audit report of N.K. Garg as partner in Bajaj Ajay and Company. The audit report was perfunctory. The TDS certificates did not mention the name of the ward where the return was filed.
In reply to a question, Mr Khanna said there was also a possibility of involvement of postal officials in helping the accused in receiving the registered letters at fake addresses. It is worth mentioning that refund vouchers are dispatched through registered post to the applicants.
Refund vouchers a puzzle for cops
Tribune News Service
Chandigarh, February 8
Even as senior income tax officials yesterday ruled out the possibility of involvement of its officials in the IT scam, the refund vouchers landing at fake addresses of the firms and companies floated by Chartered Accountant, NK Garg remain a mystery.
As per the set procedure, the IT Department sends a refund voucher to the claimant, which could be a company, a firm, an individual or a Hindu Undivided Family (HUF’s), through a registered post.
The Chartered Accountant did receive return vouchers at fake addresses. Some of the addresses of SCF or residential houses mentioned by the claimant do not exist. Then who received the return vouchers and who gave information about the vouchers being dispatched ?
The IT officials shrugged responsibility, saying that delivering registered post at fake addresses could be a mistake of the postal department.
Though police officials refuse to comment on the progress of the case, sources said the CA had opened at least 74 accounts in six banks — Bank of Punjab, Punjab National Bank, HDFC, Vyasa Bank, Punjab State Cooperative Bank, Corporation Bank. Details of the accounts opened by the CA in other cities could not be ascertained.
So far information on accounts of nine companies, 12 firms, 37 individual accounts and 16 Hindu Undivided Family (HUF’s) accounts have reportedly come to light. _______________________________________________________
4 Feb, 2003 l 0201 hrs IST
lTIMES NEWS NETWORK| | |||||
The accused, chartered accountant N K Garg, was remanded to police custody till February 11 by chief judicial magistrate (CJM) C L Mohal at the district courts on Monday.
The police is conducting preliminary inquiries into the scam by questioning IT officials. Subsequent investigations might open a can of worms as many IT officials and several people with fake identity have colluded with Garg, leading to a loss of huge sums of money for the state exchequer. The police had sought Garg’s custodial interrogation in order to ascertain his modus operandi, gather documentary evidence and know the sources from where he procured fake TDS certificates.
The police, in its argument before the court, said that police remand was needed for verifying some documents and getting possession of the seals of different companies used by Garg. The defence also moved an application before the CJM, pleading that the sealed house and office of the accused be opened as his family was suffering inconvenience. During the preliminary investigations it had come out that Garg had floated several fake firms and companies.
He had opened many bank accounts and lockers to run his operations.
The scam, which police sources said had all the elements of ‘‘an intelligent white collar crime’’, will have to investigated thoroughly so as to lead to the persons who had even gave their photographs so that fake firms and bank accounts could be opened.
The police said that the voluminous documents and 11 computer hard discs that it had seized would require Garg’s help in order to be decoded. The scam came to light when the IT department detected fake documents as Garg, who had ‘‘become greedy’’, went to draw income tax returns of more than Rs one lakh.
Upon verification, the IT department found that the name of the company, Robin Enterprise, New Delhi, was fake. And later on, the IT department came to know that another firm, Victory Traders, in house number 1543, Sector 32, never really existed. It was found that though these companies and firms were unrelated, they had similar markings. The police is now busy preparing a list of fake firms floated by Garg, after which it will tally the accounts to establish the magnitude of the scam. Burglary in Garg’s house The sealed house of Garg, located in Sector 40, was broken into on Monday morning.
Three youths entered the house after breaking open the iron grill at the rear of the house. The burglars could only manage to take away coins worth a few hundred rupees. One of them, identified as Amit Chauhan, a resident of a village near Moradabad, Uttar Pradesh, was caught on Monday afternoon on the basis of the description given by labourers employed in a nearby house, who had seen the burglars and had raised an alarm. The other two burglars, who are at large, are said to be residents of Burail.
A case has been registered.
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2 Feb, 2003 l 0007 hrs IST
lTIMES NEWS NETWORK| | |||||
The accused surrendered at 10.15 am. The CJM remanded him to police custody till February 3.
The court also issued notice to the SHO of Sector 17 to produce Garg in the court on Monday. The I-T department had unearthed the scam that involved fraudulent claim of I-T refunds on the basis of fake TDS certificates. An FIR in this regard was registered on January 29; Garg had been on the run since then.
The I-T department had said the fraud detected was to the tune of Rs 50 lakh but could run into several crores.
Garg, a Sector 35-based chartered accountant, was accused of forging TDS certificates of employees to get their I-T refunds.
The fraud came to light when it was found that the returns were filed on a form meant exclusively for rental payment.
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