The Income Tax Department has detected alleged unaccounted income worth over Rs 6,500 crore after it recently raided some “foreign-controlled” mobile communication and handset manufacturing companies and persons linked to them, the CBDT said on Friday. The searches were carried out on December 21 and premises in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and Delhi-NCR were covered.

“The search action has revealed that two major companies have made remittance in the nature of royalty, to and on behalf of its group companies located abroad, which aggregates to more than Rs 5,500 crore. “The claim of such expenses does not seem to be appropriate in light of the facts and evidence gathered during the search action,” the Central Board of Direct Taxes (CBDT), the policy-making body for the I-T Department, claimed in an official statement issued.

It did not identify the entities searched. The raids “brought out the modus operandi of purchase of the components for manufacturing of mobile handsets. “It is gathered that both these companies had not complied with the regulatory mandate prescribed under the Income Tax Act for disclosure of transactions with associated enterprises,” the statement said.

Such a lapse, it said, makes them liable for penal action under the I-T Act and the quantum could be more than Rs 1,000 crore. A modus operandi was detected “whereby foreign funds have been introduced in the books of the Indian company but it transpires that the source from which such funds have been received are of doubtful nature, purportedly with no creditworthiness of the lender.

“The quantum of such borrowings is about Rs 5,000 crore, on which interest expenses have also been claimed,” it said. The CBDT said “evidence with regard to the inflation of expenses, payments on behalf of the associated enterprises, etc. have also been noticed which led to the reduction of taxable profits of the Indian mobile handset manufacturing company.”

“Such amount could be in excess of Rs 1,400 crore,” it said. The statement claimed one of the companies raided had utilised the services of another entity located in India but did not comply with the provisions of tax deduction at source introduced from April 2020. “The quantum of liability of TDS on this account could be around Rs 300 crore,” it said. In the case of another company covered in the search action, the statement said, it was detected that the control of the affairs of the company was “substantively” managed from a neighbouring country.

“The Indian directors of the said company admitted that they had no role in the management of the company and lent their names for directorship for namesake purposes. “Evidences have been gathered on attempt to transfer the entire reserves of the company to the tune of Rs 42 crore out of India without payment of due taxes,” it said.

The CBDT said a survey action was also undertaken against certain fintech and software service companies and it was found that a number of such companies had been created for the purposes of inflating expenses and siphoning out funds.

“For this purpose, such companies have made payments for unrelated business purposes, as also utilised the bills issued by a Tamil Nadu-based non-existent business concern. “The quantum of such outflow is found to be around Rs 50 crore,” it said.