In one of its biggest coordinated crackdowns on black money, the Enforcement Directorate (ED) on Saturday carried out simultaneous raids in 100 different locations, targeting nearly 300 shell companies in 16 states across the country.
Among the cities where the Enforcement Directorate teams were conducting raids are Kolkata, Chennai, Delhi, Ahmedabad, Chandigarh, Patna and Bengaluru.
Preliminary Research by the PMO
A shell corporation is a corporation without active business operations or significant assets, used as a vehicle for various financial manoeuvres or kept dormant for future use in some other capacity.
There are about 15 lakh registered companies in India, but only six lakh of them file their annual returns. The Special Investigation Team to fight Black Money set up on the Supreme Court’s directions had pointed that proactive detection of such shell companies was going to be a key to the success of the government’s campaign.
The Prime Minister’s Office (PMO) had also last month identified paper companies which do not conduct any operations but are used to launder money and evade taxes by other firms, as a big challenge to the war against black money.
As part of this exercise, the government had decided to create a database of shell companies and their directors. A task force chaired jointly by the Revenue Secretary and Corporate Affairs Secretary was mandated to coordinate action against these dubious companies.
So far, the probing agency has managed to uncover around 2300 shell companies. An official told NDTV that it had been found that 1,155 shell companies had been used as channels by more than 22,000 beneficiaries to conceal around Rs 13,300 crore in the past three years. In Mumbai and Delhi alone the ED has discovered over 1000 such companies.
Early Results of the Raid: Corrupt Politicians Bared
About the raids, a senior ED official said, “They said the action is being carried out under the provisions of the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) to check instances of money laundering and illegal foreign exchange transactions.
“The action is part of the mandate given to the ED under a Special Task Force (STF) that was recently created by the government on the directions of the (PMO). The agency has recently attached assets worth crores of such firms in over a week’s time.”
In the ongoing raids by the Enforcement Directorate, officials have zeroed down on a few individuals who allegedly helped politicians convert money into black. A Jagdish Purohit ran 700 companies from a single address – 1301, La Sarina Building, JP Road, Andheri (W), Mumbai.
From this location Purohit was running 700 companies, of which details of 200 have been found by the ED so far. Purohit is accused of helping jailed NCP leader Chaggan Bhujbal convert Rs 46 crore black money into white.
While the Enforcement Directorate is going through the records of the operators who run these shell companies, about the total black money expected to be unearthed, the official said, “We can comment only after searches are complete.”
Demonetization to Take the Credit?
The companies came into the spotlight after the ED found dubious and illegal transactions being carried out during demonetization. Most of these companies were formed and are alleged to have transferred money during the brief period after November 8, 2016 when the exchange of old Rs 500 and Rs 1000 notes was still allowed.
We have all cursed demonetization at one point or another, and fairly so – the collateral damage suffered by the unsuspecting common man is inexcusable.
But is it possible that the actual positive outcome of this controversial decision is only now coming to the fore? Is India finally going to reap the benefits of demonetization?
Either way, it’s safe to say that the war against black money is just beginning.
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