The Income Tax Department conducted a search and seizure operation on 06.08.2019 in the case of one of the major producers of beer and IMFL in Tamil Nadu. The search action was launched in the early hours of Tuesday at 55 premises in various places in Tamil Nadu including Chennai, Coimbatore, Thanjavur, etc and also in Kerala, Andhra Pradesh and Goa. The premises included residences of the promoters, key employees and some of the suppliers of materials.

The search action was based on intelligence gathered over several months that the business group was indulging in large scale tax evasion by inflating its expenditure on materials used in its production processes. During the search action, the search teams found telltale evidence of the modus operandi of the group. The modus operandi involved over-invoicing of purchase of raw materials and bottles which constituted a major portion of the cost of production. The suppliers received payment at the inflated value by cheque or RTGS, but paid back the excess value in cash to key confidante employees of the group. The search teams gathered evidence of such over-invoicing and return of cash by suppliers. Such inflation by over invoicing amounted to suppression of taxable income  of almost ₹ 400 crore over a period of six years.

The search also resulted in unearthing of evidence of similar tax evasion by another leading business group in the same liquor industry. Consequently, the Department launched search operation in the case of the second group also on 09.08.2019. About seven premises of this group at Chennai and Karaikal were covered in the second phase of the search operation. The search is still in progress and the suppression of taxable income detected in this group has been estimated to be about ₹ 300 crore.

Based on a tip off during the search action, the tax officers tracked down employees moving with unaccounted cash and intercepted them and recovered ₹ 4.5 crore cash from the car in which they had concealed it. The search action has thus far resulted in detection of undisclosed income of ₹ 700 crore which had not been disclosed for taxation.

Tax evasion detection leads to discovery of large undisclosed income after searches in liquor industry. Income tax authorities executed intelligence led search and seizure operations at multiple premises of major liquor producers, uncovering a scheme of over invoicing of raw materials and bottles where suppliers received inflated payments by bank transfer and returned excess cash to company employees. Documentary and electronic evidence and interception of employees with concealed cash established supplier collusion and cash circulation, enabling recovery of unaccounted cash and detection of substantial suppression of taxable income for enforcement and assessment.