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Several real estate firms in state evaded sales tax, says SIT report
January, 16th 2015

Several real estate firms have been found to have evaded the sales tax (ST) in Haryana by the special investigation team (SIT), formed by the Lokayukta to look into the matter.

Headed by inspector general of police Shrikant Jadhav, the SIT formed by Lokayukta justice (retd) Pritam Pal about six months, submitted its report to Lokayukta here on Thursday.

Meanwhile, justice Pal said he would comment on the report only after studying it.

The SIT, sources said, citing two Supreme Court judgements of May 5, 2005 and September 26, 2013 which held that a builder or developer who transfers property to his prospective buyers executes a works contract and is liable to pay sales tax/VAT on the transfer of property in goods involved in the execution.

However, no tax was collected from the builders, including the two companies in Haryana from 2005 till the mid-2013, though thereafter several such instructions were issued to these companies by the excise and taxation department to frame assessment or revision in cases of under-assessment by builders and developers as per the judgments of the apex court, sources said citing the report.

While several of builders got licences from the department, they had neither got themselves registered under VAT Act, nor given any tax. Several others got the licences but did not carry out any construction but sold their land and licence at enhanced rates. Some filed wrong returns and their assessment was framed “at the lower side” (under-statement).

The SIT also found that though the department assessed several such cases of unregistered firms with tax liability running into crores, they did not pay any tax and instead moved the Punjab and Haryana High Court on various grounds, despite the said order of the apex court.

MAJOR ST EVASION IN VARIOUS TRADES, DISTS

The SIT is said to have pointed out huge ST evasion in different trades, including real estate business, in different districts.

According to the sources, the SIT in Kaithal found that tax relief was allowed in the assessment files of several rice sellers without verification and in several cases forms were found to be bogus to evade taxes. In some cases, surcharge on tax was not levied while in several other cases interest on due demand was not levied. In several refund cases, no input credit was verified.

Likewise, in Sonepat and Karnal, there were huge irregularities detected in rice by-products, including chhilka, rice bran, broken rice. Tax relief was given in several cases on the inter-state sales concealed under the garb of consignment sales for which there is a relief on tax. Several firms have their own offices in different cities and showed sales of products as their consignment sales, thus evading tax, the SIT report held.

In Sonepat and Sirsa, it was found that the claims of tax refund on cigarettes sales were allowed proper verification of forms only and no effort was made to make verification of bank transactions to verify the genuineness of inter-state sales (ISS) claims. In certain cases, bogus letters of verification regarding the genuineness of forms were found placed on record to allow the ISS claims.

The SIT held several officials responsible for huge ST losses to state exchequer and sought action against them.

 
 
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