Nirav Modi Illegally Diverted Rs 1,216 Crore Of Diamonds Meant For Export From SEZ To Domestic Market, Reveals IT Dept Probe

The Logical Indian Crew

February 21st, 2018

Courtesy:  The Economic Times, India Today | Image Credits: NDTV

Diamond mogul Nirav Modi recently came under the CBI scanner when the Brady House branch of Punjab National Bank (PNB), Mumbai was sealed by CBI officials on Monday, 19 February, 2018.

Reportedly, The Income Tax Department found that Nirav Modi illegally diverted Rs 1,216 crore of diamonds meant for export from its Special Economic Zone (SEZ) to its domestic market , selling them in cash, in the last financial year.

The DGIT (Inv) also found in its probe that the group had claimed deduction on 100% of the profits from exporting diamonds as allowed under Section 10AA of the Income Tax Act for the SEZ. It had claimed deductions to “the tunes of hundreds of crores in last six years”, the report by DGIT (Inv), according to The Economic Times.


Key Issues Raised By The IT Report

According to India Today, the IT report claims that incriminating evidence was found during the course of each search and analysis of the same revealed that the group was engaged in suppressing their real income to evade taxes.

The investigations carried out by the Director General of Income Tax revealed from a report in 2016-17 that the Nirav Modi group which had units at the Surat SEZ averted high quality diamonds meant for export and processing into the domestic markets for a high profit. In addition, low quality diamonds were exported to associates abroad to keep up the appearances.

This scam also landed Punjab National Bank in the middle of an Rs 11,000 crore fraudulent transactions case. PNB has filed cases against the billionaire diamantaire Nirav Modi and jewellery company Gitanjali Group. The complaint by PNB stated that there was illicit issuing of Letters of Undertaking (LoU) to a set of partnership firms – Diamond R US, Solar Exports and Stellar Diamonds. These firms requested Buyer’s Credit, which is a short term loan facility, extended to an importer by banks to finance goods and services and a finance agency located in the exporter’s country guarantees the loan. The firms had Nirav Modi, his brother Vishal Modi, his wife Ami Nirav Modi and his uncle Mehul Choksi as partners. Choksi is the owner of Gitanjali groups and is under investigation for issuing the LoUs for the illegal raising and rollover of money.

The IT report also claims that in terms of foreign funds, two transactions were done. One involved companies of Nirav Modi i.e., Firestar International Pvt. Ltd. which received total funds of Rs 284 crore between March 2013 and April 2014. The source of these funds and the creditworthiness of the foreign entities that gave the funds remain unexplained. The assessee has also been unsuccessful in providing documentary evidence to establish their creditworthiness.

In the second transaction, Nirav Modi’s Firestar International again received foreign funds amounting to Rs. 271 crore. The assessee was again not able to provide any supporting documents for the company that gave those funds. All in all, the source is still ambiguous.

“The assessee has not been able to explain the reason for the drastic difference in valuation satisfactorily,” the investigative wing of the Central Board of Direct Tax said in its report.

The report further added, “The difference in stock valuation of SEZ units has been worked out to the tune of Rs. 1,216.31 crore in financial year 2016-17 which represents the unaccounted sale of imported diamonds diverted to domestic markets.”

The IT report concluded that flagged issues in it need to be followed up to bring the relevant amount of taxation in the hands of relevant persons.

Nirav Modi and Mehul Choksi have both left India along with their families.

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