Modi Government to prosecute 10 lakh dubious companies

New Delhi, Mar 1 (PTI) A government task force on action against shell companies has decided to prosecute about 10 lakh such firms and prepare an Aadhaar-based KYC registry to check future black money generation through them.

The special task force, with members from various central probe and enforcement agencies, has also sought creation of new ‘red flag indicators’ by banks so that the elite Financial Intelligence Unit (FIU) can effectively identify their transactions and activities and alert investigators.

Officials privy to the task force, created on directions of the Prime Ministers Office (PMO) last month, said various agencies have been asked to provide information and cases of detection of shell firms, under the exclusive laws they enforce, to the Income Tax department so that it can register cases against them under the new Benami Transactions Act and the Income Tax Act and initiate prosecution cases in courts.

Cases which lead to black money stashed abroad will be booked under the new anti-black money Act and the Prevention of Money Laundering Act, they said.

They said all the agencies have been asked to identify such firms by this month-end so that the tax department can subsequently take action.

“Preliminary estimates state that 10 lakh such firms, out of the total 15 lakh, are in the dubious activities category.

Some whose KYC is strong and activities look to be normal are also under the scanner.

“The idea is to identify them on a case-to-case basis and either order for their shutdown or initiate prosecution action under the new Benami act,” sources said.

They said the task force is also mulling to create an Aadhaar-based Know Your Customer (KYC) registry of the Directors of such firms under the Corporate Affairs Ministry so that either black money routing could not be attempted by any company from the beginning itself or if done, investigators can join the dots and reach them to initiate legal action.

The task force, they said, has already made it clear in a statement that a ‘whole of government approach’ will be adopted through coordinated efforts and by leveraging technology to combat the menace of money laundering and tax evasion perpetrated by shell firms.

“The focus as of now is to ascertain those companies who have been very active in transacting funds post demonetisation. The outcomes of the analysis of such firms will help agencies in checking black money generated post the notes ban and even before that,” they said.

Shell companies, the statement had said are characterised by nominal paid-up capital, high reserves and 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 and stock in trade and minimum fixed asset.