Lok Sabha Question No. 5013 (UNSTARRED), answered on 2017-03-31
Subject: Committee on Legitimacy of Companies
Ministry: FINANCE
Asked by: SHIVAJI ADHALRAO PATIL, DHARMENDRA YADAV, Shrirang Appa Barne, ANANDRAO  ADSUL, SHRIKANT EKNATH SHINDE, VINAYAK BHAURAO RAUT, RAHUL RAMESH SHEWALE, PRITAM GOPINATH MUNDE

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE LOK SABHA

UNSTARRED QUESTION NO. 5013

TO BE ANSWERED ON FRIDAY, THE 31 ST  MARCH, 2017

CHAITRA 10, 1939 (SAKA)

## COMMITTEE ON LEGITIMACY OF COMPANIES

5013: SHRI ADHALRAO PATIL SHIVAJIRAO:

SHRI DHARMENDRA YADAV:

SHRI SHRIRANG APPA BARNE:

SHRI ANANDRAO ADSUL:

DR. SHRIKANT EKNATH SHINDE:

SHRI VINAYAK BHAURAO RAUT:

SHRI RAHUL SHEWALE:

DR. PRITAM GOPINATH MUNDE:

Will the Minister of FINANCE be pleased to state:

- (a) whether his Ministry investigating several dubious/shell companies in the website of Ministry of Corporate Affairs and if so, the details thereof;
- (b) whether his Ministry has constituted a committee to check the legitimacy of such companies and if so, the details thereof;
- (c) whether the aforesaid committee has submitted its report and if so, the details thereof; and (d) the action taken/proposed to be taken by his Ministry against the shell companies?

## ANSWER

## MINISTER OF STATE FOR FINANCE

(SHRI SANTOSH KUMAR GANGWAR)

- (a) : Investigations conducted by the Income Tax Department and other law enforcement agencies have revealed existence of a number of companies which exist and operate only in form and are used as conduits for non-genuine transactions such as bogus purchases, sales, expenses, donations, loans, advances, long term capital gains in shares, layering of transactions etc. Action against such companies and persons associated with them who are found in violation of laws (such as Income Tax Act, 1961, Companies Act, 2013, PMLA 2002) is a continuous process.
- (b)  &  (c):  A  'Task  Force  on  Shell  Companies'  has  been  constituted  in  February,  2017  for effectively tackling the malpractices by such companies in a comprehensive manner. The Task Force has been set up under the Joint Chairmanship of Revenue Secretary and Secretary, Ministry of  Corporate  Affairs.    The other  members of the Task Force are  from Department of

Financial Services, Central Board of Direct Taxes, Central Board of Excise & Customs, Central Bureau  of  Investigation,  Enforcement  Directorate,  Serious  Fraud  Investigation  Office  and Financial Intelligence Unit and has held two meetings so far.

(d):  During  last  three  financial  years  (2013-14  to  2015-16),  investigations  by  the  Income-tax Department have led to detection of more than 1155 shell companies/entities which were used as conduits by over 22,000 beneficiaries. The amount involved in non-genuine transactions of such beneficiaries was more than Rs 13,300 crore. Action against such companies, as also against the beneficiaries of non-genuine transactions under the Direct Taxes law is a continuous process and includes searches, surveys, enquiries, assessment of income, levy of taxes, penalties, etc. and filing of prosecution complaints in criminal courts, wherever applicable.

The CBI has also registered 30 cases against 201 shell companies during the last 3 years viz 2014, 2015, 2016 and the current year as on 28.2.2017.  Out of these charge-sheets have been filed in 17 cases.

Till  17.03.2017, show cause notices under section 248(1)(c) of the Companies Act, 2013 have been issued to 94713 companies which are prima-facie not carrying on any business or operation for  a  period  of  two  immediately  preceding  financial  years  as  they  had  failed  to  file  financial statements  for  the  said  period  and  their  directors  as  to  why  the  name  of  the  company  be  not removed from the register of companies by the Registrar of Companies.

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