As part of its crackdown on black money, the Modi government has been on an overdrive when it comes to identifying shell companies in the past couple of years. In 2017-18, the Registrar of Companies (RoCs) had struck off around 2.26 lakh companies for failing to file financial statements for the previous two fiscals or more. "For the second drive to be launched during 2018-19, 2,25,910 companies have been further identified for being struck off [the registry]," a finance ministry statement had said earlier this month.
But identification is only a part of the battle, as the RoC is now finding out. Officials in the Ministry of Corporate Affairs (MCA) told The Business Standard that the government has not been able to trace the Permanent Account Numbers (PANs) of 80,000 companies from the first lot. This, they added, is hampering investigations.
"Banks were asked to furnish the transaction data of these shell companies. But they did not respond despite multiple reminders. Banks have told us that without PAN card details, it was not possible to track these companies," a source told the daily. The report added that the government, so far, has transaction details of only 73,000 companies. These companies deposited Rs 240 billion at the time of demonetisation.
The Task Force on shell companies - constituted in February 2017, three months after demonetisation - has already identified 16,537 confirmed shell companies among them. The MCA, earlier this month, also disclosed that another 16,739 companies had been identified on the basis of 100 per cent common directorships with the confirmed shell companies. The Task Force now has 80,670 companies on its 'Suspect List', which has been drawn up by the Serious Fraud Investigation Office (SFIO) using certain red flag indicators.
With a second list already identified in the efforts to clean up the registry, more shell companies are expected to be unmasked. Citing a source, the daily added that out of the 1.1 million companies registered with the RoC, it is possible that only around 500,000 would be fully operative.
The report added that in a recent communication to the MCA, the income-tax department had asked the RoC to re-activate companies with tax liabilities and pending cases. The taxman reportedly also wants the ministry to inform them before striking companies off the registry.
In a letter to the principal chief commissioner of Income Tax in March, Central Board of Direct Taxes (CBDT) chairman Sushil Chandra had called for fast-track prosecution proceedings in cases where the settlement commission had rejected entry operators who claimed advantages of long-term capital gains. The report added that the department has ordered officers to file cases against the dormant companies before the National Company Law Tribunal by the end of this month. The noose is certainly fast tightening around shell companies.
With PTI inputs