I-T Dept Finds Unholy Nexus between Borrowers and ARCs in Buying Stressed NPAs
Moneylife Digital Team 16 December 2021
The Income-tax  (I-T) department, which carried out search and seizure operations on four asset reconstruction companies (ARCs), has found a nexus between the borrower group and ARCs and a maze of shell or dummy companies used in acquiring non-performing assets (NPAs).
In a release, the Central Board of Direct Taxes (CBDT) says, “The search has revealed that the minimum cash payout made out by the ARCs to lender banks for acquiring the stressed assets or NPAs have usually been using the funds of the borrower group. Such funds have been routed through several layers of dummy companies controlled by the borrower group or through hawala channels.”
The search and seizure operation covered 60 premises spread over Mumbai, Ahmedabad, and Delhi belonging to four ARCs.
The I-T department has not revealed the names of the ARCs searched.
The I-T department found that the ARCs have been following non-transparent methods in the disposal of assets acquired by them from the banks. It says, “More often than not, the underlying assets had been re-acquired by the same borrower group, albeit at a fraction of their real values.” 
“The ARCs are found to have concealed the profits on disposal of the underlying assets by diverting the actual profit to their related concerns, under the garb of consultancy receipts or unsecured loans or investments. Through this method, the ARCs have not only evaded the payment of due taxes but also deprived the lender banks of their share of actual profits,” it added.
One of the ARCs was found to be maintaining a parallel set of accounts on Tally accounting software, in a pen drive, recovered from the custody of the trusted employees of the promoter. 
“This parallel set of accounts contained cash transactions aggregating to more than Rs850 crore. Handwritten diaries have also been found during the search, containing detailed entries substantiating the deliberate act of layering transactions by the promoter group and using a network of middlemen for the same. There are also pieces of evidence of routing of funds through offshore structures to acquire the assets,” the I-T department says.
The tax authorities also seized cash of Rs4 crore during the search operation. It says, “Large volumes of documentary and digital evidence seized are being further analysed for detection of violations under the income tax and allied acts.”
2 years ago
This case is a perfect reflection of Indian culture. We Indians deserve such types of fraud and it mirrors our age old tradition. From a daily wage labourer to the Prime Minister all can be measured by the same scale, only the magnitude is different. We have laws of every type but the responsibility to implement them lies with the hands of crooks.
2 years ago
ARC names are not mentioned as well as promotors.
2 years ago
financial criminals are smarter than revenue agencies that is reason they are one step ahead or employ revenue agency experts to spook the banks and IT may not be clean and mabe complicit
2 years ago
Cannot understand why such news is not reported in more popular financial newspapers. These big news companies have far greater resources to obtain such news than moneylife.
Thanks Moneylife.
2 years ago
As there is no transparency in most transactions,the ARC's play game and bankers which are state owned have minimum interest in getting higher recoveries,which formally is National loss.
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