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Income tax department grapples with Benami Deal allegation against Cascade

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by August 22, 2017 General

MUMBAI: Who are the men behind Cascade Energy Pte? It’s a question that the income tax department in Chennai is grappling with one of the first instances of an allegation of ‘benami transaction’ in the corporate world.

Curiously, the allegation has been made by the CEO of a company against its joint-venture partner holding a substantial equity stake. The tax office was taken aback when Rohit Rabindernath, CEO and a member of the family which promoted Zynergy, a provider of solar power solutions, filed a complaint pointing fingers at Cascade Energy of Singapore which came in as an investor in 2015.

Cascade Energy Private Limited shows up on the Internet as a company that was set up in July 2015 — shortly before it invested in India — with its registered office in Hougang Street, Singapore. Based on investigations undertaken, the I-T department has served a provisional attachment order on the equity bloc comprising Cascade’s shareholding in Zynergy.

Cascade has moved the Chennai High Court against the order questioning the jurisdiction and the power of the officer who issued the order. The court order that the “impugned proceedings shall remain stayed subject to the condition that the petitioner (i.e, Cascade) shall not alienate the shares and debentures in question..”.

Cascade officials or the company’s authorised signatory Rajiv Pradhan could not be located. There was no response to a text message, seeking comments, from Cascade Energy counsel P Chidambaram.

The tax department is understood to have subsequently issued a clarification that attempts to justify the timing and jurisdiction of the officer who had issued the attachment order.

Cascade Energy has invested Rs 30 crore in Zynergy through various instruments. The JV partners have other disputes relating to operations. What led Rabindernath to make the allegations is unclear. He refused to speak to ET on the matter due to its sub judice nature and did not reply to ET’s email query. According to industry sources, Candice was introduced to Zynergy by some “UK party”.

They said Rabindernath approached the tax department after certain information came to his knowledge. Tax officers refer cases and complaints (even anonymous ones) to the department’s benami prohibition cells only if the complainant shares information and basic details. Besides acting on complaints, the IT office simultaneously carries out investigation by cross-checking large transactions with the PAN and tax return details of the persons in question.

In case of mismatches – where assets and transactions cannot be explained by declared earnings – the department asks assesses to reveal their source of fund. The proceedings under the new Benami Act is initiated if the department is unconvinced about the fund source. The Benami Transactions (Prohibition) Amendment Act, 2016 came into effect from November.

Benami property, as per law, includes movable or immovable property, tangible or intangible property, corporeal or incorporeal property. The Act empowers provisional attachment and subsequent confiscation of benami assets (properties as well as securities).

It also allows for prosecution of the beneficial owner, the benamidar, the abettor, and the inducer to benami transactions. Prosecution may result in rigorous imprisonment up to seven years and fine up to 25 per cent of fair market value of the property.

Income tax authorities have launched a crackdown on benami properties and identified more than 400 such transactions, including deposits in bank accounts, plots of land, flats or jewellery, according to a PTI report dated 26 July 2017.

The apex body Central Board of Direct Taxes has set up 24 benami prohibition units across the country. Till now there has been provisional attachment of properties worth Rs 600 crore in more than 240 cases.

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