4 asset reconstruction companies under I-T scanner, 60 premises searched

NEW DELHI: At least four asset reconstruction companies are under the scanner of the income tax department for alleged irregularities in acquiring bad debt from banks and their disposal, with 60 premises linked to them searched last week.
The search operations were carried out in Mumbai, Delhi and Ahmedabad, among other cities, the I-T department said in a statement.
In the past too, the functioning of several ARCs and especially the valuations has raised questions, but this is the first time that a tax department probe has come to light. "The search action has revealed that the ARCs had adopted various unfair and fraudulent trade practices in acquiring the non-performing assets (NPA) from lender banks. It has been found that an unholy nexus existed between the borrower groups and ARCs and in the process, a maze of shell / dummy concerns have been used," an official statement said.
One of the allegations is that the value of the assets acquired by the ARCs was far below the real value of the collateral securities covering the loan in question.
The I-T department alleged that the search also revealed that the minimum cash payout made out by the ARCs to the lenders for acquiring the stressed assets 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," it said.
Some of the ARCs were also accused of following "non-transparent methods" in disposal of assets.
"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/investments. Through this method, the ARCs have not only evaded the payment of due taxes but also deprived the lender bank(s) of their share of actual profits," the tax department said.