After demonetisation of rs500 and rs1000 rupee notes on 8th November 2016, various authorities noticed a surge in shell companies depositing cash in banks most probably hiding the real owner of wealth. In the initial analysis it has been found that “Shell Companies” are characterized by nominal paid up capital, high reserves & surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income, high cash in hand, private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments & stock in trade, minimum Fixed Asset.

In a small sample analysis of such companies, it has been found that Rs.1,238 crore cash has been deposited in these entities during November-December period.Serious Fraud Investigation Office (SFIO) has filed criminal prosecution for cheating National Exchequer after investigation of entry operators running a group of 49 Shell Companies and other proprietorship concerns. It has been found that 559 beneficiaries have laundered money to the extent of Rs.3900 Crore with the help of 54 Professionals who have been identified. These information has been shared with SIT, Income Tax Department, Enforcement Directorate,SEBI and The Institute of Chartered Accountants of India (ICAI). Income Tax Department has reopened completed assessment in these cases and Enforcement Directorate has initiated action under Prevention of Money Laundering Act (PMLA), 2002. ICAI has also initiated disciplinary proceedings against its members. Winding up process has been initiated in respect of 49 Shell Companies.

Nisha Sethia

To read the further article please get your copy of Eastern Panorama March issue @http://www.magzter.com/IN/Hill-Publications/Eastern-Panorama/News/ or mail to contact @easternpanorama.in

 

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