In Rush to Let Off Sahara, Tax Commission Ignored Evidence Matching Fund Flow to Alleged Payoffs

Income tax investigators also comprehensively refuted the company's theory that a 'disgruntled employee' was behind incriminating diary entries recording payments to politicians.

New Delhi: In absolving the Sahara group of any wrongdoing under the Income Tax Act in the alleged bribery scandal which has implicated several prominent politicians and unleashed a political storm in the country, the Income Tax Settlement Commission (ITSC) glossed over crucial evidence furnished by tax inspectors, documents related to the case show.

On Thursday, the Indian Express reported that that the group was granted immunity after just three hearings at the ITSC on November 10, 2016.

In what was an unprecedented and exceptionally hurried hearing, the ITSC accepted Sahara’s explanation that incriminating documents seized by IT officials during raids on the company’s premises in November 2014 were prepared fictitiously by one Sahara employee to ‘implicate and malign’ another who headed the Sahara group chairman’s office.

“…the ITSC has concurred with Sahara’s claim that the “evidentiary value” of the “loose sheets” recovered during the raids “could not be proved” by the Income Tax Department,” the Indian Express reported.

What it did not report was the manner in which the commission brushed aside key arguments made by the IT investigators that rendered improbable the “disgruntled employee” theory that Sahara put forward.

Rarely has a matter of such significance been resolved at the ITSC in less than 10 months. The commission, which is usually given around 18 months to settle a dispute, ruled that the Rs 137.58 crore recovered during the raids on Sahara group offices will be taxed in 12 instalments but let the company off the hook without any further liabilities.

IT documents

Documents accessed by Common Cause – the citizen’s collective founded by the late H.D. Shourie – show that the IT department had objected to Sahara’s appeal at the ITSC and given extensive documents to show the company’s culpability in making illegal pay-offs to several public figures, which include the  “CMs” of Gujarat, Chhattisgarh, Madhya Pradesh and Delhi, from May 2013 to March 2014. Common Cause is currently pursuing the matter in the Supreme Court, through its counsel, Prashant Bhushan.

The IT department had produced three excel sheets dated 12.11. 2013, 22.02.14 and 04.03.2014 which show a cash receipt of over Rs 115 crore and cash outflow of Rs 113 crore. All the entries of cash paid to different persons in the three sheets tallied with each other in terms of date of payment, the recipient of the money, place of payment and ‘angadiyas’ or Hawala operators.

These documents are bundled along with the additional affidavit that Common Cause filed today – January 5, 2017 – in its petition against the appointment of the central vigilance commissioner (CVC) and the vigilance commissioner, which is currently pending in the Supreme Court. The top court had directed the petitioners to furnish more evidence in the matter.

The documents show that the sheets were recovered from one Sachin Pawar of Sahara’s marketing communications (MARCOM). Pawar, in his deposition at the ITSC, had claimed that he had fabricated the sheets to malign his colleague V S Dogra to get him punished by the management.

However, the IT officials refuted his claim. The officials said that Pawar, who worked with MARCOM, made two claims which were contradictory in nature.

“In one statement he states that the whole exercise was done to implicate Shri Dogra… On the other hand, in a later statement he says that he intended to pass on information to various government agencies like IT, SIT etc.,” the IT documents said.

The IT officials pointed out that Pawar justified his claim by saying that “the second statement was in continuation and in addition to the first one” but was actually misleading the ITSC.

“It is obvious to us that there is a direct contradiction here – if information was to be given to IT/SIT, it would not hurt Shri Dogra but the entire management and the group itself. Also it is correctly pointed out…that SIT did not even exist at that point of time,” the IT officials said in their deposition, casting doubts on the reliability of anything Dogra had said.

Further, the IT inspectors pointed out that the transactions recorded in the seized documents were done in a “detailed manner with specific amounts and names of persons/premises – something that appears to be true.”

“Also it is observed that so-called ‘meaningless’ transactions (as claimed by Sahara) have been recorded on a regular basis over a period of 4-5 years – [the] contention that it is only for the sake of implicating Shri V.S. Dogra – seems to be unbelievable,” said the IT department in its submissions to the ITSC..

The documents also show that corresponding cash transactions were received from different sources, especially SAHARA’s marketing communications department with which Pawar worked.

“…it is observed that all entries of cash imprest above Rs 1 crore appearing in the books of SAHARA INDIA (MARCOM) in the ledger account of Shri Sachin Pawar have been recorded by Shri Sachin Pawar in the seized documents on the same dates – strongly suggesting thereby that entries made were not fictitious and cannot be called ‘meaningless’.

As corroborative evidence, IT officials also told the ITSC that the Enforcement Directorate and Financial Intelligence Unit under the Union ministry of finance had found suspicious cash transactions in as many as 4,574 bank accounts linked to Sahara. It further said that the company, on the basis of the same seized documents, had voluntarily surrendered income of Rs 1,217 crore and, therefore, there is no reason to accept Sahara’s claims.

The ITSC, however, relieved Sahara of the case, arguing that the IT department could not furnish adequate evidence to implicate the company in the bribery scandal.

Common Cause counsel Prashant Bhushan had written to the ITSC only three days before its decision requesting the commission not to let Sahara go scot-free as the matter was pending in the Supreme Court.

“The documents are highly sensitive in nature. It was in the cause of public interest that the ITSC should not have resolved the matter so soon. Now, if the IT department, which itself is under the influence of the BJP-led union government, does not appeal at the court, Sahara will be in full right to claim the seized documents back. It is quite clear that it is in the interests of the implicated politicians to bury the matter,” Bhushan told The Wire.

Prime Minister’s silence

The Sahara-Birla diaries has created a political storm with both the Aam Aadmi Party’s Arvind Kejriwal and Congress scion Rahul Gandhi constantly attacking Prime Minister Narendra Modi, who was the ‘CM of Gujarat’ during the period the scandal unfolded and is  therefore alleged by the opposition to have received kickbacks of over Rs 55 crore from the company.

The latest developments assume added significance especially at a time when the prime minister has chosen to remain tactically silent in the face of escalating attacks from the opposition, which may now allege that the government is using its influence to scuttle the IT department’s investigation – thereby preventing further investigation by any other agency in to the bribery allegations.

The Wire had first reported about the existence of the Sahara papers and how the Central Bureau of Investigation did not pursue the matter despite the IT department requesting it to do so.

The demand of Common Cause and of the opposition is merely that the diary entries be independently probed.  Bhushan has made the point that in the matter of the Agusta Westland bribery case, the government  and the CBI has put much more store by handwritten entries suggesting payments were made – and that a double standard is now operating. “Cryptic note in Agusta saying AP, FAM enough for Modi’s CBI to inv(estigate) but detailed account of Sahara seized by IT not enough?”, he tweeted, asking, “Bec(ause) 40Cr to Modi?”

The Sahara-Birla papers case will be heard by the Supreme Court next on January 11.