Income Tax Appellate Tribunal (ITAT) has pointed out that despite the Indian government’s order against the appointment of middlemen in defence deals by foreign companies, Bofors had entered into a fresh consultancy agreement with AE Services Limited of UK on November 15, 1985, at the behest of Ottavio Quattrocchi, whom the CBI in its chargesheet had described as having unhindered access to 7, Race Course Road (the residence of Rajiv Gandhi, the then Prime Minister).

AE Services was appointed to support Bofors in its bid for the contract of the howitzer guns and to keep the Swedish company informed of the progress of negotiations.

Bofors had told AE Services it would receive 3% of the total value of the contract of Rs 1,437 crore if the deal came through before April 1, 1986, or else the agreement would fall through.

In short, AE Services were to get its hefty fee only if the contract was awarded to Bofors by March 31, 1986; and the contract was, indeed, awarded a week before that deadline. However, Bofors suppressed this agreement of November 15, 1985, with AE Services in its letter dated March 10, 1986, to defence ministry, the I-T Tribunal has recorded.

It also noted that immediately after Indian government paid SEK 16,82,132,196.80 as 20% of contact value to Bofors on May 2, 1986, the latter remitted nearly SEK 50,463,966 (or nearly Rs 9 crore) on September 3, 1986, to account No. 18051-53 of AE Services Ltd at Nordfinanz Bank, Zurich, which was opened just a fortnight earlier, on Aug 20.

From this account of AE Services, $7,123,900 was transferred to Colbar Investment Ltd Inc, Panama, with UBS, Geneva. An amount of $7,943,000 was further transferred from the said account of Colbar to Wetelsen Overseas, SA with UBS, Geneva.

Thereafter, on May 21, 1990, an amount of $ 9,200,00 was transferred from the account of Wetelsen to account No. 123983 of International Investments Development Co an Ansbacher (CI) Ltd, St Peter Port, Guernsey. These accounts of Colbar as well Wetelsen were being controlled by Ottavio Quattrocchi and his wife Maria.

CBI can’t be trusted, reopen case: BJP

 

BJP leapt on the Income Tax Appelate Tribunal’s order confirming payment of commission to Italian businessman Ottavio Quattrocchi in the Bofors deal, to try to put the government in the dock and demand another round of investigations into the case by a special investigation team.

Taking a dig at UPA chairperson Sonia Gandhi, BJP leader of opposition in Rajya Sabha Arun Jaitley said the government needed a one-point programme, and not five-point, of punishing the guilty to check corruption.

“After this tribunal order, you need to reopen the matter and the CBI surely can’t be trusted with it. There is no better case to have a SIT to reinvestigate the matter which was closed fraudulently,” said Jaitley, adding that it was not a mere case of bribery because it was accompanied by a huge cover-up operation which lasted for decades.

“How can this country have a situation where the criminal investigation agency says there are no kickbacks. And the highest revenue agency says taxes are payable on these kickbacks. Nobody has still answered the question which this order raises — in 1986 why was Quattrocchi paid this money,” he said.

 

Rs 52.6 crore went to Chadha through Svenska

 

The Income Tax Appellate Tribunal, while asking late Win Chadha’s son Hersh Chadha to pay up tax on the commission income recieved by the father from the Bofors gun deal, has delineated the money trail to Win Chadha’s company, Svenska Inc, which was incorporated in Panama.

In other words, commission was paid by Bofors to two entities — AE Services Ltd of UK whose account was operated by Italian businessman Ottavio Quattrocchi and his wife and Svenska. The Bofors agreement with Svenska was a consultancy agreement.

“By this so called agreement, Bofors committed to pay a commission to Svenska Inc out of any contract signed by Bofors in India, Sri Lanka, Nepal etc,” the ITAT has said, while pointing out that this went against the Indian government’s policy which required foreign bidders to remove their agents in order to reduce cost. “This agreement (with Svenska) was modified from time to time and it was agreed in January 1986 that commission to the extent of 3.2% of the ex-works value would be paid to Svenska. Out of this 2.24% of the total ex-works value was to be paid without delay when the advance payment had been received by Bofors. The remaining 0.96% was to be paid pro rata without delay when the payments for deliveries had been received by Bofors,” said the ITAT. The I-T department, whose findings have been upheld by the ITAT, had concluded that “there is sufficient evidence to show that W N Chadha was recepient of commission amounting to Rs 52.6 crore through its front company — Svenska Inc, Panama. Since Chadha has not disclosed the aforesaid commission income, the same is added to his income in this assessment order.”

‘I-T tribunal’s order will not reopen Bofors case’

Former Bofors investigators and government sources are convinced that the Income Tax Appellate Tribunal order may not change the disappointing course of CBI’s criminal investigation into the kickbacks in the controversial arms deal.

The CBI spent considerable time and money investigating the trail of commission paid by the Swedish arms manufacturer for contract to supply artillery guns to the Indian Army in the mid-80s. Among those accused in the bribery scandal were then Prime Minister Rajiv Gandhi and several others. The CBI case fell through at several stages as political manipulation and official lethargy crippled the investigations into the political scandal that abruptly turned the political tide against Rajiv Gandhi in the late 80s.

The Income Tax Appellate Tribunal said in its order on December 31 that it was convinced that both Win Chadha and Ottavio Quattrocchi, an Italian businessman who was close to the Gandhi family, received commission from Bofors.

“You know the political situation, there would be no change,” a senior source with first hand knowledge of the investigations into Bofors scandal said. In recent years the CBI filed a closure report with the trial court, did not go in appeal against high court orders absolving many accused, and the government in a bizarre twist asked the UK authorities to defreeze accounts of Quattrocchi.

“CBI is not an autonomous body. It is dependent on the government. Unless you give constitutional status to CBI in the lines of Election Commission etc, the problem will continue,” former CBI chief Joginder Singh said. He pointed out that the tribunals order is based significantly on CBI’s findings.

A former CBI officer, who had been part of Bofors investigations for sometime, said he does not expect the tribunal order to make any impact on the course of the criminal investigations into the scandal. “The corruption case will never be reopened. You know the government of the day,” he said, pointing finger at the Congress-led UPA government.

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