IT raids on Congress leaders reveal Rs 100 crore undisclosed income

The raids, which commenced on Thursday, have continued through Saturday

Parameshwara, Kumaraswamy file bhanu (File) Former Karnataka chief minister H.D. Kumaraswamy and his deputy G. Parameshwara at a special press conference in Bengaluru| Bhanu Prakash Chandra

The income tax raids on institutions run by two Congress leaders, including a former deputy chief minister, across 30 locations in Bengaluru and Tumakuru have revealed a case of multi-crore tax evasion and smacks of a medical seat scam too.

Undisclosed income of Rs 100 crore has been detected during the income tax raids on two education institutions owned by former deputy chief minister G. Parameshwara and another Congress leader R.L. Jalappa and residences and offices linked to the two politicians.

The Income Tax Department alleged it has found incriminating evidence that substantiates the allegation of conversion of medical seats—which were originally to be allotted by merit through counselling—maliciously into management quota seats that were later sold for a high capitation fee.

The two institutions under the scanner—Sri Siddhartha Academy of Higher Education and Sri Devaraj Urs Academy of Higher Education and Research—had allegedly blocked and converted 156 and 29 seats, respectively, to the management quota in 2019-20.

The raids, which commenced on Thursday, have continued through Saturday, as the IT sleuths have unearthed undisclosed income of Rs 100 crore and also seized undisclosed assets valued at Rs 8.82 crore.

According to a statement issued by the Central Board of Direct Taxes, New Delhi, on Friday evening, evidence also revealed undisclosed investments in real estate. "Overall, the total undisclosed income detected so far is around Rs 100 crore, considering the cash donations received for 185 seats, averaging Rs 50 lakh to Rs 65 lakh per seat, and total seizure of undisclosed assets of Rs 8.82 crore," said the note.

Stating that the income tax searches had revealed the modus operandi of conversion of merit seats maliciously into institutional quota seats through the drop-out system, the statement said,"Incriminating evidence has been found in the search, substantiating conversion of seats, commission payments to brokers and sale of seats in exchange of receipt of cash. Evidence of use of multiple agents for conversion of MBBS and PG seats has also been found.”

The Income Tax Department states that it has established the diversion of funds in the form of payment of money for the purpose of purchase of immovable assets for the benefit of trustees and found cash in possession of sellers, commission in the hands of brokers and strong written and audio evidence found in possession of the parties concerned.

Hinting at Hawala transactions, the Income Tax Department states the evidence of handling of such cash generated and diversion for construction of hotels has also been found.

A total of Rs 4.22 crore of unaccounted cash has so far been found, including Rs 89 lakh in the house of the main trustee (Parameshwara).

"Certain students, whose names were used in conversion of seats, have made statements establishing the modus operandi. Agents have admitted to having aided in sale of seats, brokers have admitted to be witness and accomplice to diversion of such cash generated," says the note.

The modus operandi of making cash deposits in the accounts of certain employees and their families and diversion of these to fixed deposits—which are used to services loans taken by trustees—has been unearthed, according to the statement.

Trustees have opened bank accounts in the names of their employees to deposit some of the capitation fees received in cash. Fixed deposits amounting to Rs 4.6 crore in the names of eight employees made in the above manner have been seized. It was further found that the interest from such benami fixed deposits had been used to service the loans taken by the trustees in their personal capacity.