A task force comprising members of various Ministries and enforcement agencies has been set up for a major crackdown on shell companies, which are used for large-scale money laundering and tax evasion.
1. About 560 beneficiaries, who laundered Rs. 3,900 crore, and 54 chartered accountants, who were involved in the racket, have already been identified.
2. The task force has been constituted under the co-chairmanship of the Revenue Secretary and the Corporate Affairs Secretary to monitor the actions taken by various agencies.
What the agency will do?
1. The agencies will invoke the stringent Benami Transactions (Prohibition) Amendment Act against the shell companies, freeze their accounts and strike off the names of dormant companies.
2. Disciplinary action will be initiated against professionals abetting the companies and entry operators, who are used to launder unaccounted-for incomes into the banking system for projecting them as white money.
Reason for suspicion
There are about 15 lakh registered companies in India and only 6 lakh of them file their annual returns, raising suspicion that a large number of these companies are indulging in financial irregularities.
The move comes days after the government, during a small sample analysis of such companies, found that Rs. 1,238 crore in cash was deposited in these entities during the November-December period, after demonetisation.
New approach adopted to identify shell companies
The government has adopted a “Whole of Government Approach,” through coordinated efforts and by leveraging technology. Appropriate red-flag indicators will be used to identify these companies and a database of their directors will also be built.The database will capture Aadhar number of individual directors.
What are Shell Companies?
A shell company is a company without active business operations or significant assets. These types of companies are not all necessarily illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public in order to avoid taxes.