ICAI takes disciplinary action against eight CA’s arrested in invoice fraud.

The government had arrested eight chartered accountants (CAs) in its nationwide drive against fake GST fraud launched since mid-November to nab unscrupulous elements using fake invoices to fraudulently claim input tax credit.

They were operating multiple non-existent firms and fake entities to dupe the exchequer with fraudulent ITC utilisation in connivance with fraudsters and fly-by-night operators.

The CA Institute (ICAI) has initiated disciplinary proceedings against the eight chartered accountants who have been arrested in the nationwide drive against fake GST invoice frauds in the last two and half months since November 2020.

The Revenue Department’s letter formed the basis for initiation of disciplinary proceedings against these eight Chartered Accountants.

The eighth Chartered Accountant was arrested along with his four business accomplices in Jaipur for operating 25 fake firms to fraudulently avail and pass on Input Tax Credit (ITC) through bogus invoices without actual supplies of goods/services.

Deepak Kochhar threatened to ruin my name says Venugopal Dhoot

Videocon Industries promoter Venugopal Dhoot told the Enforcement Directorate (ED) that Deepak Kochhar had threatened to declare his loans as non-performing assets (NPAs) prematurely and ruin him. Fearing it happen, he transferred the South Mumbai flat shares to Quality Advisors, showing loss in the books of QTAPL of over Rs 3.5 cr.

The ED probe in a money laundering case registered against Deepak Kochhar, his wife and former CEO of ICICI Bank, Chanda Kochhar and Dhoot has revealed the money trail on the suspected quid pro quo between Kochhars and Dhoot for the loans sanctioned to the latter.

Dhoot has revealed that Rs 64 cr were transferred to Deepak Kochhar's company Nupower Renewable Private Limited (NPRL) for sanction of loans from ICICI Bank in 2009.

The ED filed the first charge sheet in Nov-2020 and Dhoot’s statement says that he was forced by Chanda Kochhar to invest in her husband's firm before sanctioning the loan to Videocon group.

Chanda Kochhar was part of the committee which heard the proposals of Videocon for loan.

Videocon Group had made 28 proposals to ICICI Bank and eight were sanctioned. Chanda Kochhar was part of the sanctioning and recommending committee in four such proposals.

Dhoot's statement was recorded thrice by ED officials this year. He alleged that Deepak Kochhar asked him to invest funds in his wind power project and while he required a loan, Deepak Kochhar asked him to meet his wife Chanda Kochhar.

Chanda Kochhar asked him to help Deepak Kochhar in his wind power project and invest in NRPL and when the loan of Rs 300 cr was sanctioned, he transferred Rs 64 cr to NRPL.

If he didn't transfer funds to Deepak Kochhar and accept Chanda Kochhar's deal, the proposal for loan to ICICI Bank would be kept on hold indefinitely. The transfer only happened when ICICI Bank disbursed Rs 300 cr to Videocon Industries.

ICICI Bank sanctioned loans worth Rs 1,875 cr to Videocon Group and the companies associated with it between 2009 and 2011. Most of these loans were in complete violation of banking regulations and ICICI Bank policies.

Chanda Kochhar was the CEO and Managing Director of the ICICI Bank then.

Dhoot's statement mentions that it was a well-devised scheme of Chanda Kochhar as per which, Deepak Kochhar's company received Rs 64 cr of the Rs 300 cr loan from ICICI Bank. The transfer of the Rs 64 cr happened from the Videocon group to NRPL just a day after the disbursement of Rs 300 cr loan from ICICI Bank in 2009.

ED had registered a case on the issue in Jan-2019. An investigation against Deepak Kochhar, Chanda Kochhar, Dhoot and their related companies began following the case registered by Central Bureau of Investigation (CBI) in Jan- 2019.

ED found that loans sanctioned to Videocon group were kept alive by evergreen IMG or refinancing of loans worth around Rs 1,730 cr which turned into NPA in June 2017.

Chanda Kochhar's Suspicious South Mumbai Flat Deal

ED, during its investigation, found that Videocon group had transferred ownership of the flat which was valued Rs 5.25 cr in 2016, to Quality Advisors for just Rs 11 lakh which is a family trust of Chanda Kochhar.

Dhoot, while being questioned by the ED, said it was Deepak Kochhar who had asked him to retain the flat. Deepak Kochhar had threatened to make his loans declared as NPAs prematurely and ruining him.

Fearing the same, he transferred the flat shares to QTAPL to Quality Advisors, showing a loss in books of QTAPL of over Rs 3.5 cr.

The ED has provisionally attached movable and immovable assets worth Rs 78.15 cr consisting of a flat, plot, cash, and machinery of wind farms in Tamil Nadu and Maharashtra belonging to Deepak and Chanda Kochhar.

The proceeds of crime as per ED is around Rs 78.15 cr, which includes Rs 74.54 cr held in the name of NRPL, flat in Mumbai valued at Rs 3.5 cr and an amount of Rs 10.50 lakh seized from a firm of Deepak Kochhar. He is presently in judicial custody.

Dhoot was found equally responsible for the money laundering and siphoning of the funds from the ICICI Bank in name of loans.

GST officials reveal massive tax fraud of Rs 2,350 crore

The GST officials have arrested three persons – Sachin Bhoruka, Mahesh Kinger and Deepak Kumar Prajapati - involved in massive frauds of GST of over Rs 2350 cr.

Investigations revealed that Prajapati had set up an intricate web of over 22 firms that indulged in circular trading for the purpose of artificially inflating their turnover.

This is done to use Input Tax Credit (ITC) in the GST regime. Circular trading is a type of cycle that takes place when a company tries to create a flow of fake sales transactions with conspiring parties by producing fake invoices.

The GST Intelligence has spotted yet another case of fraud related to the utilization and passing on of ineligible ITC, with bogus invoices. 

Sachin Bhoruka, Director/Partner in various firms such as Erman Metals, Pioneer Trading, Marshal Multiventures, etc, was arrested for availing ITC amounting to Rs 485.64 cr and passing on fictitious ITC amounting to Rs 485.55 cr. Thus, the total quantum of the fraud committed involved GST amounting to Rs 971.19 cr.

In a parallel investigation, another person Mahesh Kinger, authorised signatory of Blue Sea Commodities and Director of Theme Lights was also found engaged in the fraudulent availment and utilization, as well as passing on of ineligible ITC on the basis of bogus invoices issued and received without actual supply of any goods or services. These entities had availed ineligible ITC amounting to Rs 580.23 cr and had passed on ineligible ITC amounting to Rs 579.76 cr. The total quantum of the fraud committed involved a GST of nearly Rs 1,159.99 cr.

Further, the GST officers arrested Deepak Kumar Prajapati, Director of Udyog Kiran Ltd. due to a similar fraud. The subsequent investigations revealed that Prajapati had set up an intricate web of over 22 firms that indulged in circular trading for the purpose of artificially inflating their turnover so as to avail higher bank loans and credit facilities. Based on the investigation conducted till date, it has been noticed that the firms operating Prajapati had passed on bogus ITC amounting to nearly Rs 126 cr, and have availed ITC amounting to R. 94 cr taking the total fraud amount to Rs. 220 cr.

The Govind Agarwal Story till Now

Police presume Govind Agarwal’s arrest may unveil the mystery of Madam Rose Valley stumbled upon in 2016 after the demonetisation. 

The suspected scheme of routing money from one company to another will reveal the nexus between entry operators – or jama kharchi companies – and a section of officials. Agarwal was arrested for assisting Neeraj Singh park money got from dubious means.  

Agarwal’s role, being probed by the Enforcement Directorate (ED), may lead investigators to many unanswered questions in the Rose Valley chit fund scam. CBI is probing the Rose Valley case. The links were revealed during a cash haul of demonetized funds in December, 2016. The cash was to be deposited at Agarwal’s office. When the cops started searching the office they found two folders – Rose Valley and Madam Rose Valley. Madam Rose Valley had details of several crores being transferred to a specific person.

Agarwal’s name surfaced for the second time when police registered a case against former Income Tax Additional Director Neeraj Singh in April 2017. Police alleged that Agarwal was the front man of Singh; helped him transfer money obtained through illegal gratification. Singh says he knew Agarwal through his father; not spoken to him for years. Says he knew Agarwal’s connection with the Rose Valley Group after the case started. Since Agarwal had a number of clients, he never shared the details with Singh.    

When ED started probing the Singh-Agarwal nexus they found that Sing took Agarwal’s help to route money through a web of companies and bought property. They also attached a property in Mumbai worth Rs. 3.20 cr in July. Singh claimed that the property was never owned by him or his wife.

Kolkata Police has not specified the quantum of fraud although Agarwal has been charged with cheating.   

Kolkata Police arrest middleman Govind Agarwal

In a massive breakthrough, the Kolkata Police on Sunday arrested dubious accountant Govind Agarwal in a case related to setting up hundreds of shell companies to launder the alleged "ill-gotten" wealth of multiple senior revenue officials (both current and retired), based on long-running investigations against Agarwal by multiple central agencies.

Interestingly, Agarwal had been accused by the Central Bureau of Investigation in the Rose Valley Chit Fund case and by the Enforcement Directorate in a money-laundering case related to controversial IRS officer Neeraj Singh.

Significantly, the Kolkata Police have arrested Agarwal in the 2017 case where Singh has also been named as an accused. Based on seizures from raids at premises used by Agarwal in Kolkata, the police had recovered hordes of sensitive and confidential documents belonging to the Income Tax Department, CBI, Financial Intelligence Unit, Directorate of Revenue Intelligence and others, leading to questions of how a low-profile accounts manager had access to such documents.

Sources aware of the investigations against Agarwal told Millennium Post that once central agencies had taken over the Kolkata Police FIR and examined Agarwal multiple times and raided multiple locations in connection with the money-laundering case, a large part of the findings was shared with the city police, who then took the probe forward.

The Kolkata Police was then made aware that Agarwal was handling the finances of at least 10 senior central agency officials, which included a former Chief Vigilance Commissioner, a former member (Investigation) CBDT, an Ex-DG (Investigation) posted in Kolkata and at least five other Commissioners/Chief Commissioners of Income Tax.

Furthermore, before Agarwal's arrest, the Kolkata Police had also raided premises of three chartered accountants namely Santosh Chaudhury, Pradeep Agarwal and Naresh Agarwal, based on which sources say police believe the racket could go into the hundreds of crores, involving alleged kickbacks received by the government officials.

Agarwal — a 12th fail — had such clout in bureaucratic circles that he had entered restricted sections of the Netaji Subhas Chandra Bose International Airport more than 100 times using a daily permit issued by the Air Intelligence Unit of the I-T Department under his name.

Agarwal's job in the racket was simple — if tax officials conducted raids or started any serious investigation, the accountant would broker a deal to settle the case and accept kickbacks on behalf of the concerned public official, which he would then launder through his web of paper companies. One senior official said such payments to the civil servants were part of the racket and were laundered with extreme care to avoid detection, with complex layers of structuring that veiled the money-trail.

Officials with direct knowledge of the matter said several private entities that were under the scanner of probe agencies would pool their resources, earmarked for pay-offs in a host of shell companies — run and operated by the likes of Agarwal. The accountant would then bounce the money across the paper concerns through fictitious transactions to finally reach the end benefactors — in this case, senior revenue officials.

The ED has already attached assets worth Rs 3.88 crore belonging to a now-suspended Neeraj Singh and alleged that these were part of kickbacks received by him from HM Diwan Jewellers through Agarwal. HM Diwan was also raided by central agencies.

According to the initial probe by the Kolkata Police's Anti Fraud Section, which set the ball rolling, seizures from Agarwal's "official" premises in North Kolkata had shown he was operating at least 98 shell companies with rubber stamps and other documents recovered. In fact, further probe by Millennium Post had found many companies registered to Agarwal or linked to him had the same address - the same room, on the same floor, of the same building. When asked about these companies, some of which include Lilac Suppliers, Tobu Engineering and Essencia Beverages, security guards in the building told investigators from the I-T department that they knew of no such companies operating from the building.

What is interesting is that the investigation involving these senior revenue officials, Agarwal, Neeraj Singh and others, is to a large extent, being conducted by central probe agencies who later shared the evidence with local police here, following which the probe was carried ahead by the Kolkata Police.