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Firms providing fake invoices now under taxmen's lens

Tax officials have questioned these firms – or entry operators, as they are known – over the past two months, said a person familiar with the development.

, ET Bureau|
Updated: Sep 28, 2017, 10.44 AM IST
NEW DELHI: Following raids on benami property and questionable cash deposits during demonetisation, tax officials are now going after firms based in New Delhi and Mumbai that help create black money by issuing fake invoices to companies.

Tax officials have questioned these firms ­ or entry operators, as they are known ­ over the past couple of months, said a person familiar with the development.

The tax department got a whiff of something fishy after big data analytics raised red flags on the invoices of some companies.

The data analytics tool was introduced by the tax department recently to go through a maze of information including bank accounts, phone re cords, credit card and PAN details, tax returns and social media plat forms.

The data showed that one set of firms had provided a variety of goods and services to companies in different sectors. When tax officials visited these firms, it was found that they were merely operators providing fake invoices to companies.

The modus operandi of these firms is to get registered as suppliers on the books of companies. They then issue fake invoices for supplying goods or provi ding services, receive payment by cheque and return the amount in cash after deducting a 2% commission.

A major entry operator who was nabbed recently may have helped companies generate about Rs 1,000 crore in unaccounted money over the past few years, said the person in the know.

“The data that is being thrown at us is so huge that it's impossible for us to go through it all at once. Going ahead, many such cases would be investigated," a tax officer told ET.

The tax department has also started questioning companies and businessmen generating cash through these entry operators, the person said.

"My client had generated about Rs 6 crore in cash after arranging such an invoice," said a tax advisor on condition of anonymity.

“Now the tax department is questioning him and if one includes tax, interest and fines, he would end up paying about Rs 6 crore to the tax department."

Businesses will likely find it tougher to generate cash through such fake invoices in the future, according to industry experts.

"Data analytics would catch the fake invoices and would throw red flags of such same or similar transactions," said Rakesh Nangia, managing partner at Nangia & Co. All such information is likely to get captured under the goods and services tax regime and tax officials will have a data mine to validate such invoices and the companies providing them, Nangia said.

Industry experts said some businessmen use this avenue to siphon money from their companies. So, while on the company's books it would appear that suppliers are being paid, the money is actually taken out by the promoters.

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