Smelling the possibility of major tax evasion and routing of unaccounted income, the income tax department has started re-opening cases pertaining to the sale of sites in Special Economic Zones (SEZs) by developers, especially to associated entities.A senior I-T department official associated with the process told Business Standard it had been noticed that huge profits had been made by developers through such sales and tax exemptions had been claimed.The department is also investigating the source of income utilised by the purchasers of SEZs, especially if the entity is associated with the developer.“The idea is to find if there is routing of funds from unaccounted sources for such purchases and money laundering,” said the official, adding the department had already slapped tax demands in a few cases in Gurgaon and Delhi.Cases of 2007-08 and 2008-09 had been re-opened and a detailed report sent to the Central Board of Direct Taxes. Declining to provide details about the SEZ developers under their scanner, as investigations were on, the official said it was found that SEZs were sold to the associated entities, such as co-developers, at a huge premium and tax exemption claimed.
“There are indications that developers might have misused SEZ laws to do money laundering and this needs to be investigated thoroughly. We are looking at the possibilities and where the money came to the sister concerns,” he added.The thinking is that tax evasion through this mode across the country could be at least Rs 10,000 crore.In some cases, the revenue department had objected during the Board of Approval clearances but the permissions were granted on the premise that the implications would be handled by the assessing officer at the time of assessment, the official said.Under the SEZ provisions, full I-T exemption is available on export income for units under Section 10AA of the I-T Act for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed-back export profit for the next five years.And, I-T exemption on income derived from the business of development of the SEZ in a block of 10 of the first 15 years, under Section 80-1AB.
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