Income Tax Department Questions VG Siddhartha’s Signature In Letter
VG Siddhartha, who went missing on Monday evening, is the founder of Coffee Day Enterprises, which runs the Cafe Coffee Day chain of coffee shops in India. (Photographer: Dhiraj Singh/Bloomberg)

Income Tax Department Questions VG Siddhartha’s Signature In Letter

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The Income Tax Department on Tuesday questioned VG Siddhartha’s signature on an unverified letter, saying it didn't match with those on documents submitted with it by the Cafe Coffee Day founder.

The taxman also denied charges of harassment that the letter levels against it, adding that Siddhartha had admitted to holding black money after income tax raids were conducted against him and his companies.

In the unverified letter, Siddhartha, who went missing on his way to Mangaluru from Bengaluru in Karnataka on Monday evening, said he faced a lot of harassment from the previous director general of the Income Tax department in the form of attaching "our shares on two separate occasions to block our Mindtree deal and then taking position of our Coffee Day shares, although revised returns have been filed by us".

"This was very unfair and has led to a serious liquidity crunch," stated the letter, signed apparently by Siddhartha.

Refuting these charges, the Income Tax Department in a statement said the shares were provisionally attached to protect the "interests of revenue", a norm in cases of large tax evasion. The action was based on "credible evidence" gathered in the search action that was undertaken against Siddhartha’s Coffee Day Enterprises Ltd. in 2017.

"The department has acted as per provisions of the Income Tax Act," it said.

The authenticity of the note circulating on social media cannot be vouched for as Siddhartha’s signature “does not tally” with what is available with the department in the form of annual reports of the company, the statement read.

The statement said Siddhartha fetched Rs 3,200 crore by selling his stake in Mindtree Ltd. but paid only Rs 46 crore out of the Rs 300 crore Minimum Alternate Tax payable on the deal.

"As against the balance MAT liability of Rs 250 crore and tax liability based on search findings to the tune of about Rs 400 crore, the attachment made by the department is less than 40 percent of the likely tax liability," the statement read.

The income tax raids against the Coffee Day group were carried out as a result of a similar action against a prominent Karnataka politician, the statement read.

Siddhartha, in a sworn statement, "admitted" to unaccounted income of Rs 362.11 crore and Rs 118.02 crore in his hands and at Coffee Day Enterprises, the statement added.

A Singaporean citizen was searched in this case and he was found with unaccounted cash of Rs 1.2 crore. This person told tax officials that it belonged to Siddhartha, the department claimed in the statement.

According to the Income Tax Department, Siddhartha filed his I-T returns but "did not" mention the undisclosed income, as admitted in the sworn statement, in both the cases except an amount of around Rs 35 crore in his individual case.

"Even on this admitted sum, Coffee Day Global Ltd. has not paid the self-assessment tax of Rs 14.5 crore on the returned income. Coffee Day Enterprises Ltd. did not offer the admitted income in its part," it said.

The department got to know through media reports in January that Siddhartha was planning to sell his stake in Mindtree on an immediate basis. The officials then found that Siddhartha and Coffee Day Enterprises together held nearly 21 percent stake in Mindtree and that a deal for the sale of shares would be finalised in January itself.

As the tax revenue from this deal was in crores of rupees and the assessee had not taken permission from the taxman for selling these shares, they were attached as per the norm, the statement read.

Siddhartha then filed a request to release these shares and offered other shares of Coffee Day Enterprises Ltd as security against the expected demand. The department accepted this request and the attachment of Mindtree shares was revoked on Feb. 13.

The department, however, put in a condition—the proceeds from the Mindtree stake sale will be utilised only for repayment of loans availed against the Mindtree shares by opening escrow account, and the remaining balance will be provided for attachment to the department against the tax liability to arise.

"The alternate attachment of 46,01,869 unencumbered shares and 2,04,43,055 encumbered shares of Coffee Day Enterprises Ltd was made on Feb. 13-14," the department said.

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