Three Reasons the Strange Case of Mahesh Shah May Be Bad News for Modi

The Ahmedabad property dealer who was a proxy for politicians and businessmen who sought to benefit from the Modi government’s undeclared income amnesty scheme has said he will name names.

Ahmedabad property dealer Mahesh Shah at the studios of ETV Gujarati on December 3 night. Credit:

Ahmedabad property dealer Mahesh Shah at the studios of ETV Gujarati on December 3 night. Credit:

Even as fears mount, post-demonetisation, of vast sums of black money being laundered through the bank accounts of proxies, a Gujarat man has come forward to make the sensational disclosure that the huge unaccounted wealth he had declared earlier this year under the Modi government’s income declaration scheme (IDS) actually belonged to other people.

Property dealer Mahesh Shah, who had declared a whopping Rs 13,860 crore of undisclosed wealth under the IDS, appeared on a television show in Ahmedabad on Saturday night claiming that the money did not belong to him but to politicians and businessmen on whose behalf he made the wealth declaration as a proxy.

Minutes later, he was detained by the police and income tax officials for questioning.

Shah’s disclosure under the Centre’s IDS, which ended in September, accounts for over 20% of the total of Rs 65,000 crore declared under the scheme – an amount finance minister had described as a “major success”.

The city-based property dealer, who was missing since the I-T department raided his residence earlier this week, appeared in the studios of ETV Gujarati and said he had made the declaration under his name out of “compulsion” and to “earn commission”.

“The amount of Rs 13,860 crore that I declared under IDS was not mine, I will tell the names of those behind it before income tax officials,” Shah said, adding that he “made the declaration out of compulsion and to earn commission.” “Everything will come out, I will bring everything out,” he told the channel.

Income tax searches were conducted on Shah’s office and residential premises on November 29, 30 and December 1 after he failed to pay the first instalment of tax due – Rs 1,560 crore – on the declaration of Rs 13,860 crore he made under the IDS.

“Those whose money was disclosed under the IDS backed out at the last moment, so I could not pay the first instalment of tax to the income tax department,” he said.

“I will expose everything soon. I have committed a mistake but I will reveal everything soon,” Shah said.

No sooner did Shah appear on the channel to make the dramatic claim than he was taken away for questioning by I-T officers in the presence of Sarkhej police officials.

Asked by the channel’s anchors if the money belonged to any businessman or politician, Shah said it belonged to “several persons”.

He, however, refused to reveal the names, saying he would do that only in front of income tax officials.

Police and Income tax officials detain land dealer Mahesh Shah, who declared Rs 13,860 crore under the IDS, in Ahmedabad on Saturday. Credit: PTI

Police and Income tax officials detain land dealer Mahesh Shah, who declared Rs 13,860 crore under the IDS, in Ahmedabad on Saturday. Credit: PTI

The property dealer claimed he has not done anything wrong and appealed to the authorities for cooperation as he was ready to reveal everything. “Everything will come before the media very soon. But now I cannot say anything to you. Sorry. I will tell the IT officials.

For the Modi government – and the Bharatiya Janata Party which has been in power in Gujarat for nearly two decades now – the drama surrounding Shah’s sensational disclosure raises three specific concerns.

First, if the names Shah reveals to the IT department – and eventually to the media – include individuals who are connected to or associated with the BJP or its leaders in any way, the taint of association and the need to be seen as acting against those persons could prove politically costly for the party.

At least one critic of the government, Prashant Bhushan – who is arguing the plea filed by Common Cause for a Supreme Court-led probe into documents that allegedly disclose payoffs between Aditya Birla and Sahara groups and various politicians – has taken to social media to express his misgivings about how Shah’s disclosures will be handled:

Second, Shah’s disclosure will likely serve to undermine public confidence in the wisdom of Modi’s demonetisation move, sold as it has been as a measure to counter the menace of black money. Apart from mounting anecdotal evidence of the rich and the corrupt finding ways of circumventing the constraints of demonetisation, the fact that the IT department was blissfully unaware of  Shah being a proxy for other tax evaders will fuel cynicism about the utility of the government’s November 8 decision to withdraw high-denomination currency notes. On the other hand, if the government acts quickly and transparently against the individuals who allegedly used Shah to launder their unaccounted-for wealth, it could restore public faith in the anti-black money campaign.

Third, Shah’s confession makes it apparent that the IDS was anything but a  ‘major success’. Indeed, if the peculiar case of a Hyderabad man who has also now been accused of falsely inflating his undeclared wealth by Rs 10,000 crore is taken together, then the IDS yielded not Rs 65,000 crore but Rs 41,400 crore. Apart from allowing the opposition to score propaganda points against the BJP, the Rs 23,860 crore hole means less tax revenue for Arun Jaitley to balance his books.

Update, December 4, 2016

The Ministry of Finance issued a press release on Sunday, December 4, 2016 seeking to discredit Shah as a person whose declaration of possessing unaccounted wealth was treated as “suspicious” at the time it was made and not included in IDS 2016. The ministry press release clubbed Shah together with a Mumbai family of four that had made a declaration of an astonishing Rs 200,000 crore and said “these declarations … were kept pending for investigation about the genuineness of the same and were not included in the total value of declarations announced on 1st October, 2016. After due enquiry, it was found that these declarants were persons of suspicious nature and very small means and the declarations could have been misused. Therefore, after due consideration, the Income Tax Department decided by 30th November, 2016 , to reject these two sets of  declarations of Rs.Two Lakh Crore and Rs.Thirteen Thousand Eight Hundred and Sixty Crore respectively. The Department has  since commenced enquiries against these declarants to determine the intention behind these false declarations.” (original emphasis).

What is not clear is why, if Shah’s declaration was not included in the tabulation of Rs 65,000 crore announced as part of IDS 2016, he was expected to pay the first instalment of tax due – an amount he was unable to, leading to tax investigators allegedly knocking on his door.

Also, what drove the government to make the  disclosure about the two lakh crore rupee declaration only on Sunday is not clear. Whatever the reason,  the ‘new’ development  pushed Shah’s sensational claims off the headlines.

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    Now that he has come out in the open with ‘ partial Disclosure’, he might find himself in jail and he might be a ‘ missing Case’ before full disclosure. The civil rights activist must file a case in court to protect him. Full details should be made available in public domain.