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Justice A.P. Shah Demands Income Tax Governing Body Review Sahara Case

The Citizens’ Whistleblowers Forum has demanded that the IT department’s records on the Sahara and Birla groups be forwarded to the CBI for a “thorough criminal investigation”.

File picture of the Chairman of Sahara India Pariwar Subrata Roy, as he arrives at the Supreme Court for a hearing in 2014. Credit: PTI/Shahbaz Khan.

File picture of the Chairman of Sahara India Pariwar Subrata Roy, as he arrives at the Supreme Court for a hearing in 2014. Credit: PTI/Shahbaz Khan.

New Delhi: Even as the Union government has maintained a conspicuous silence about the alleged involvement of important politicians in the Sahara-Birla bribery scandal, anti-corruption civil society organisations have started to raise their voices against what they say is one of the biggest scandals in recent memory.

On Monday, Justice A.P. Shah (Retd),  head of the Citizens’ Whistleblowers Forum (CWF) – a forum consisting of prominent judges, lawyers, intellectuals and civil liberties activists – wrote to the Central Board of Direct Taxes (CBDT), the governing body for income tax management, asking it to review and set aside the November 10, 2015 Income Tax Settlement Commission (ITSC) order, which absolved Sahara of all penalties under the Income Tax Act, 1961.

The Wire on January 5 had reported on how the ITSC ignored crucial evidence against Sahara, presented by the IT investigators during the unprecedentedly hurried hearings. Although the ITSC deemed the IT department’s appraisal report to be insufficient, in effect, it accepted Sahara’s explanation that the papers recovered by the IT department in a series of raids in 2014 were fictitiously prepared by a disgruntled employee to malign another employee of the company.

Anti-corruption activists, while criticising the ITSC order, termed Sahara’s explanation as a “cock and bull story,” and viewed the ITSC’s decision as one made under the influence of the Modi government.

Ever since the Sahara diaries were released, which list the “CMs” of four states – Gujarat, Chhattisgarh, Madhya Pradesh, and Delhi – and many other prominent public figures as beneficiaries between May 2013 to March 2014, Prime Minister Narendra Modi, who was the chief minister of Gujarat at the time, has been at the receiving end of numerous attacks by opposition parties.

This is the first time in the prime minister’s tenure, since he took office in May 2014, that his allegedly direct role in a corruption scam has been flagged by his opponents. His silence on the matter has only encouraged political adversaries to up the ante.

The decision to let Sahara off the hook, activists allege, is an instance of backroom dealings between the ITSC and the government – which has also been accused of influencing the IT department’s investigation into the matter. The report of a senior official’s abrupt transfer just before the Sahara hearings began at the ITSC has also added fuel to this allegation.

The CWF’s demand

It is in this context that CWF’s letter to the CBDT assumes great significance. The CWF – chaired by retired Justice A.P.Shah, and founded by former bureaucrats Aruna Roy and E.A.S Sarma, former management professor Jagdeep Chhokar, former chief of Indian navy Admiral Lara Ramdas, senior advocate Prashant Bhushan, former Supreme Court Judge Santosh Hegde and ex- chief information commissioner Wajahat Habibullah – questioned the ITSC’s decision to gloss over the IT department’s evidence for the case.

“Even as per section 132 (4A) of the Income Tax, 1961, when any books of accounts or other documents are seized, their contents are deemed to be treated as true and correct,” the letter said.

The CWF reiterated the IT department’s corroborative explanation that on the basis of the same evidence, Sahara had voluntarily surrendered Rs 1217 crores and, hence, there was no reason to uncritically accept the company’s “disgruntled employee” theory. It added that Sahara has had a history of inflating its expenditures to reduce its tax liability, as was exposed by the Indian Express recently.

It demanded that the CBDT immediately forward the IT department’s records, documents and appraisal reports against the Sahara and Birla groups to the Central Bureau of Investigation (CBI) for a “thorough criminal investigation”.

Fearing that even the Birla case, in which the “Gujarat CM” has been alleged to have received Rs 25 crores, would meet the same fate at the ITSC, the CWF has listed detailed evidence, as found by the IT department’s investigations, against the company.

The Wire in November 2015 first broke the story about the Sahara-Birla diaries in which many prominent politicians were alleged to have taken massive bribes from the two companies.

The CWF is of the opinion that since these cases are one of the biggest pieces of evidence for the existence of an illegal politics-business nexus, the CBDT should “direct its officers concerned to challenge the ITSC order by moving appropriate legal proceedings”.

It further said that the circumstances of the raids – in which huge amounts of unaccounted cash were recovered – and extensive investigations by the IT department thereafter, are adequate enough to conduct a “credible and independent investigation.”

Extracts from Justice A.P. Shah’s letter

In the Birla case, IT Department interrogated in detail senior officers of the Birla Group, including their DGM (Accounts) Mr. Anand Saxena who made certain startling admissions. IT Department in its report states that “Shri Anand Kumar Saxena in his statement recorded on oath u/s 132(4) of IT Act, 1961 has admitted that the note book marked as Annexure A-1 is written by him in his handwriting and was maintained by him, inter alia, to also record unaccounted cash transactions of the group. The huge cash of approximately Rs. 25 crores seized from the office premises of M/s ABMCPL at 4th floor, UCO Bank Building, Parliament Street, New Delhi was admitted to be unaccounted by Shri Anand Kumar Saxena as the same was not recorded in the regular books of accounts of M/s ABMCPL or any other company. In this context, Shri Anand Kumar Saxena stated that he was custodian of the almirahs in which the cash was kept and also stated that he was in charge of handling cash amounts received at this premises from time to time and keeping it in safe custody.

In his interrogation, Mr. Saxena told the IT Department that he was responsible for handling the cash. However, “Mr. Subhendu Amitabh, Group Executive President gives me the direction to receive the cash as well as its disbursal or payment.” He also stated that he “received the cash from one person namely Mr. Jaluram in the range of Rs. 50,00,000/- (Rs fifty lacs) approximately…” and said that “Mr. Jaluram is Angadia who are local hawala operators.” Mr. Saxena said that “Mostly cash is received in the range of approximately Rs. 50 lakhs to Rs one crore each time. There is no fixed interval. Sometimes we receive twice a day and sometimes there may be a gap of 3-4 days.” He further said that “We are instructed by Shri Subhendu Amitabh to disburse or make payment of a particular amount through our senior officers of the company to some persons but the purpose of such disbursal or payment is not communicated to us. The procedure adopted for making the disbursal or payment in cash is such that we can not identify the persons to whom it is paid.

IT Department in their appraisal report said that transactions were indeed taking place. IT Department stated: “… the following facts clearly emerge from the statement of Shri Anand Kumar Saxena: i) That he used to maintain record of unaccounted transactions for last about 5 years continuously and used to receive unaccounted cash through certain angadias on regular basis and that for this purpose, he used to remain in touch with persons like Shri G K Tulsian, Shri R K Kasliwal and Shri A N Agarwal etc. to receive such cash. ii) That aforesaid persons are employees of different companies of Aditya Birla Group. For example, Shri A N Agarwal is an employee of Ultratech Cements Ltd. And Shri R K Kasliwal is an employee of Hindalco Industries Ltd. The search team found a note book which was seized as Annexure A-1 and contains transactions of such unaccounted cash for period July 2010 to March 2012…

The Department disbelieved the stand taken by the Group Executive President Mr. Shubhendu Amitabh that the unaccounted cash of Rs. 25 crores seized from the office belongs to him and it was his unaccounted income. The report states: “It is clear from the statement of Shri Anand Kumar Saxena that unaccounted cash used to be received in various account heads maintained in the names of the Aditya Birla group companies… The claim of Shri Shubhendu Amitabh that the unaccounted cash of Rs 25,01,41,100/- seized from the office premise of M/s ABMCPL belong to him and it was his unaccounted income does not seem to be convincing. The unaccounted cash seized during the search action was the balance of the HQ a/c reflected in the seized documents.

The emails seized by the IT Department from the laptop of Mr. Shubhendu Amitabh clearly show evidence of bribery of the officials of Department of Revenue Intelligence (DRI) by the Birla Group. These emails are contained in Volume 3 of the Appraisal Report. These are the emails sent by one Bhuvan Chandra to Mr. Shubhendu Amitabh. Mr. Chandra in these emails is apparently updating on developments in the pending investigation case with DRI involving the Birla Group and is suggesting strategies for the same. Mr. Chandra wrote on 02.01.2013: “DRI officials would support our contentions in Settlement Commission and request for settlement directives.” On 07.04.2013, he wrote: “BGH had desired that no other can of worms to be opened and the investigations be restricted to iron ore exports only. Accordingly, the matter was designed, file papers were constructed, approval of all the concerned in DRI was obtained and the matter was proceeded upon. The statements of officers of BGH have also been recorded on those lines only. The investigations have been carried out and moulded in such a manner so as to exhibit that the exports of iron ore alone were only questionable thereby indirectly declaring that there are no other irregularities in the operations of BGH… It was categorically stated that the information DRI has seized has not been shared/given to any other agency including their own other offices… Further all the seized information/documents including computers would be returned to us, then where is the question of other Agencies being able to lay their hands on it. …As the investigation report has already been seen and clearance accorded from the TOP why would any other matter will get reopened. Sources in DRI hold the view that it is in their own interest that the issue is buried completely after the understanding is executed completely as agreed upon. Therefore there cannot be any bigger guarantee – as they also run the risk of exposure.” On 03.05.2013, he wrote: “Accordingly suggest immediate action on delivery of commitments so that the process of Show Cause can be expedited and the issue is put behind us.

There is an email sent by one id ‘asir66554’ to Mr. Shubhendu Amitabh on 01.03.2013, which was forwarded by Mr. Amitabh to himself on 13.05.2013 The said email shows certain transactions, which reflect several incriminatory and illicit payments. One sentence reads: “Mahan matter MOEF- 9cr final. (20 cr) – initially only if Done on 1st March, 2012- in the GoM. OK again by GC on 3rd March @ B’by. Upon completion.” At the time this email was written, Hindalco Industries, a Birla Group company, was reportedly building a 359 kilo tonne per annum aluminium smelter and a 750 MW power plant which was supposed to draw coal from the Mahan Coal Block located in the Singrauli fields, Madhya Pradesh. There is another entry in the same email that states: “Verappa M – GC – Cement OPP – CCI report/penalty – 2 cr – OK. Received.” It is to be noted that the Competition Commission of India (CCI) had imposed a hefty penalty on the Birla Group’s cement business unit along with other cement companies. Another entry in the said email states: “RJM+EC of Jhilling…(10cr). After a lit of beeseeching he agreed to lower it to 2.75 (NO) ultimately come to 3.10 mtr…Mani). Recd 5cr + 5cr.” Jhilling, Odisha has mines run by M/s Essel, a Birla group company. This email entry is corroborated by entries of payments made for purpose of the “Jhil+RJM” amounting to Rs 5 crores between 26.06.2012 to 07.08.2012. Environmental clearance was reportedly granted for expansion of Jilling Langlota Iron and Manganese Ore Mining on 07.06.2012.

The records seized during the search operation at Delhi revealed payment or proposed payment of Rs. 7.50 Crore made during the period from 09.01.2012 to 02.02.2012 under the heading “Project-J – Environment & Forest”. It is to be noted that during the tenure of the then Minister, Environment & Forest, as many as 13 projects of the Aditya Birla Group companies were cleared by MOEF between 08.11.2011 and 17.06.2013. From the documents seized from the Birla Group, marked as Annexure A-1 by IT Department, certain transactions under account heads ‘Carbon Min’ were recorded saying “to receive 5 crores”. This can be correlated to the grant of coal blocks to Hindalco (a Birla group company) by the Coal Ministry and further developments relating to those coal blocks.

The laptop of Mr. Shubendu Amitabh was also found to contain evidence of other highly incriminating money transactions. An email dated 16.11.2012 containing a cryptic entry, “Gujarat CM – 25 cr (12 Done- rest?)”, was also recovered from the said laptop. When Mr. Amitabh was questioned about this transaction and specifically asked as to what the letters C and M in the above entry stood for, he told the Income Tax Department that “These were purely personal notes. Not meant for SMS or email transmission. And the first note is only to note for my knowledge and consumption – a business development at Gujarat Alkali Chemicals, a company engaged in Caustic soda as well. This was an update for my self knowledge only. Only for personal consumption. As they were personal random notes, I used abbreviations Guj CM- stands for Gujarat Alkali Chemicals… In personal diaries and notings, I use a lot of abbreviations. I cannot vouch for others in my Group. However, you may please note that in this very note-page, I have written ‘WEF’ twice. In my regular communication through email/sms I might have at least written Gujarat Chemicals or World Eco Forum, but since this was a note for my personal consumption only, I did not expand upon them.” It is submitted that the above transaction could have been easily verified by checking the accounts of Gujarat Alkali Chemicals since this has to be a on the book transaction.

The Income Tax Department in its appraisal report dated 27.02.2014 stated: “…considering the highly incriminating nature of transactions in the data retrieved from the laptop and hard disc of Shri Shubhendu Amitabh and evasive replies and unsubstantiated claims made by him, it would be imperative for the Assessing Officers to scrutinize the data available in seized documents including the laptop and hard disc and determine the quantum of income concealed by Shri Shubhendu Amitabh, M/s ABMCPL, and other persons, if any.