OFFICE OF THE PR. CHIEF COMMISSIONER OF INCOME—TAX, KARNATAKA GOA, BANGALORE
(No. 1, Central Revenue Building, Queens Road, Bangalore)
Phone No. 080-22868044, 22864273 (Ext-512/513) Fax No. 080-22865639
NO.ITO/PR/PRESS/2019-20 Dated: 30/07/2019
A note said to be written by Shri. V G Siddhartha (VGS) of CCD is doing the rounds. Among others it was mentioned in the note about the attachment of Coffee day shares by the Income Tax department. The authenticity of the note is not known and the signature does not tally with Shri VGS’s signature as available in his annual reports
2. The investigation in the case of Shri V G Siddhartha and Café Coffe day (CCD) arose from the search in the case of a prominent political leader of Karnataka. It is based on the unearthing of a credible evidence of financial transactions done by the CCD in a concealed manner.
3. A person holding citizenship of Singapore was also covered in the search action. He was found with unaccounted cash of Rs. 1.2 crores and admitted that the cash belong to Sh. V G Siddhartha.
4. In the Search action, after considering the evidences gathered by the department, Shri. V G Siddhartha admitted the unaccounted income of Rs 362.11 Crores and Rs 118.02 Crores, in the hands of Shri. V G Siddhartha and M/s Coffee Day Enterprises Ltd respectively in the sworn statement.
5. Shri Siddhartha, subsequently filed the Return of Income but did not offer the above undisclosed income as admitted in the sworn statement in both the cases except sum of around Rs.35 Crores in his individual case. Further one of the group company M/s Coffee Day Global Ltd has not paid the Self-Assessment Tax of Rs 14.5 Crores on the returned income. M/s Coffee Day Enterprises Ltd did not offer the admitted income in its part.
6. On 21st January, 2019 major newspapers had reported that Shri V G Siddhartha is planning to sell the equity shares of Mindtree Ltd held by him and his company immediately. Based on this report, an immediate verification of the facts were carried out. It was found that the assessees Shri V G Siddhartha, M/s Coffee Day Enterprises Ltd and M/s Coffee day trading ltd together held nearly 21% of shareholding in Mindtree Ltd. It was also gathered that the deal for sale of shares are set to be finalised in January 2019.
7. The tax effect along with interest and penalty based on the outcome of the search action runs in to hundreds of crores. On the other hand, there was no application filed by the assessees concerned before the assessing officer as required under the statutory provision before transferring any assets when the Income tax proceedings are pending.
8. In order to protect the interests of revenue, the provisional attachment of 74,90,000 shares of Mindtree Limited owned by Shri V G Siddhartha and M/s Coffee Day Enterprises Ltd u/s 281B of the Income Tax Act was made (though they together held 2,29,31,518 shares). This action is a normal requirement to protect the interests of revenue.
9. Subsequently, Shri Siddhartha filed a request letter to release Mindtree shares and in turn offered other security of shares of M/s Coffee Day Enterprises Ltd against the expected demand. This was accepted and the attachment of Mindtree shares were revoked on 13.02.2019 with specific condition that the sale proceeds will be utilized only for repayment of loans availed against the Mindtree Ltd shares by opening escrow account and the remaining balance will be provided for attachment u/s 281B against the tax liability to arise. The alternate attachment of 46,01,869 unencumbered shares and 2,04,43,055 encumbered shares of M/s Coffee Day Enterprises Ltd u/s 281B was also made on 13.2.2019 and 14.2.2019.
10. The assessees had transferred the Mindtree Ltd shares to M/s L&T Infotech Ltd 28.04.2019 and received around Rs 3200 crores. Out of this consideration, the assessee had repaid loan of around Rs 3000 crores and paid expenses related to transfer of 154 crores and the balance of Rs 46 crores was paid towards first instalment of Advance Tax of estimated MAT liability of around Rs 300 crores in the case of shares of M/s Coffee Day Enterprises Ltd. As against the balance MAT liability of Rs. 250 crores and tax liability arising based on search findings to the tune of approx. 400 crores, the provisional attachment made by the department is less than 40% of the likely tax liability.
11. The provisional attachment was made to protect the interests of revenue out of the income admitted by assesse based on credible evidence gathered in search action. The Income Tax department has acted as per the provisions of Income Tax Act.
Income Tax Officer (HQ) (PR)
0/0 Pr. Chief Commissioner of Income Tax