I-T probe into alleged tax evasion by Adani

Group over-valued imported machinery to bring down taxable income: Sources

The income-tax (I-T) department is looking into the possibility of tax evasion by Adani Group. This will add to the woes of the conglomerate that had received a show-cause notice from the Directorate of Revenue Intelligence (DRI) last week for alleged over-valuation of imported machinery by Rs 2,000 crore.

Two finance ministry officials told Business Standard the tax department was investigating the matter because if Adani had inflated its expenditure, this would have brought down its taxable income. It would have also helped the Gautam Adani-promoted group claim a higher concession from the department for a decrease in the value of assets, known as depreciation allowance.

A ministry official said, "DRI has shared the details of the case with us. We are probing if the group has income that escaped tax. They have apparently inflated the cost of imported machinery that would result in a higher claim for tax depreciation."

Another official confirmed a preliminary inquiry had begun as an over-valuation of capital equipment by Rs 2,000 crore could mean substantial under-reporting of income. Equipment imported was worth Rs 5,500 crore.

A tax expert said an over-valuation of assets for book purposes may not result in I-T evasion. "One has to look at the interplay between book assets and those for tax purposes," said Naveen Aggarwal, partner, KPMG.

The DRI notices to Adani Power Maharashtra and Adani Power Rajasthan on May 15 followed a probe by the agency into alleged violation of custom valuation norms by the two while importing capital equipment for power projects from a UAE-based supplier. The companies were given 30 days to reply.

With 10,000 Mw of generation, Adani Power is the largest private power producer and sister company Adani Ports, the largest in its segment in the country, with Mundra Port overtaking state-run Jawaharlal Nehru Port Trust in Navi Mumbai last financial year.

The company had confirmed receiving the notice from DRI and said it was evaluating it and would decide further course of action based on legal advice. Adani Group has been in the eye of a storm for some time with parties dragging its name in their election campaign. The promoters came under attack for their alleged proximity with Gujarat Chief Minister and Prime Minister-designate Narendra Modi.

"There is a partnership between Modi and Adani," Congress President Rahul Gandhi had said.

Though the DRI notice was sent just before the election results were announced, ministry officials have denied any political pressure and said the probe was on for long. It was now they had gathered enough evidence.