How Mahesh Shah tried to leverage IDS to launder black money, and failed

Written by | December 13, 2016 | 0

Ahmedabad: When Ahmedabad-based property dealer Mahesh Shah declared a stunning Rs13,860 crore in undisclosed income under the government’s Income Disclosure Scheme (IDS) in late September, few would have guessed that even more drama was to follow.

Unnamed income-tax (I-T) officials revealed the eye-popping figure to local media on 1 December, days after cancelling his IDS application.

Then Shah, 67, disappeared from public view, only to reappear the next day—inside the studios of a local television channel where he claimed that the money was not his, but that he had plans to go public with any names. “I will disclose all the names to the I-T department,” he said. He added that the people whose black money he was handling were businessmen, politicians and bureaucrats.

I-T officials promptly turned up at the studio and took the man in for questioning. But nearly a fortnight later, there are only more questions about the man who lives in a modest three-bedroom apartment in a middle class neighbourhood.

Who was he helping?   Were any politicians involved?

Or was this a money laundering scheme he engineered that went horribly wrong?

According to Shah’s accountant Tehmul Sethna, a partner in Apaji Amin & Co., he is likely to have revealed at least one big name to the I-T officials. “ He was not my regular client. I knew he had connections with a lot of bigwigs. He had good contacts in Delhi, Mumbai and in south Indian states,” said Sethna.

Sethna suggests that he may have had doubts about Shah’s disclosure, lending credence to theory that the property dealer picked a number out of the air, disclosed it, and hoped to help launder that amount for people with black money (for a commission on top of the 45% penalty).

“When he first approached me sometime in September for IDS I warned him that if he failed to pay up, the I-T department would hound him,” Sethna said, adding that he took him to the top I-T official of Gujarat where they discussed Shah’s safety and security. He said the department also said that it would take care of the logistics required for transporting such a large amount of cash.

According to Sethna, after Shah’s IDS declaration, the I-T department accepted Shah’s IDS Form 2 on 14 October, based on which he was required to pay Rs6,237 crore in tax—at the rate of 45% of the money declared. The first instalment of Rs1,560 crore was to be paid by 30 November.

“Accepting Form 2 shows that a person’s application under IDS has been approved,” said Sethna. But Shah’s Form 2 was cancelled just two days before the 30 November deadline.

A government official aware of the matter said that the department had asked Shah to deposit a sum of less than Rs50 crore based on which it could proceed, but became suspicious when he couldn’t do so till even 28 November.

A tax department official added: “Based on some specific information, we suspected Shah to be involved in money laundering due to (the 8 November) demonetization and hence the searches were conducted.”

Both officials asked not to be identified.

According to a second government official, managing such a huge amount of black money in cash would require huge infrastructure, security and logistics support, none of which Shah possessed.

The Congress, the opposition in the Bharatiya Janata Party-governed Gujarat, has been quick to point fingers.

According to its spokesperson Manish Doshi, Shah was often seen in the power corridors of government offices in Gandhinagar.

“We demand an inquiry into the matter to find out the real culprits behind this. And we want a speedy and reliable one, not where the case is dragged for years,” he said.

The BJP denies that it has anything to do with Shah.

Then, there’s the issue of where the Rs13,860 crore is — that is, if it was ever real

Filed in: National

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