Reddy case features in I-T Dept manual

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The Minister now features in a manual on tax evasion prepared by the Income Tax department.

Every year, the Income tax department publishes a compilation of the best orders and practices titled 'Let Us Share'. The latest volume of this book (Volume 3) features an assessment order from last year that details tax evasion by the Tourism Minister and his firm Obulapuram Mining Company(OMC).

The publication was envisaged with the idea of sharing how the income tax department functions with the general public. Penning the foreword, Durgesh Shankar, Member(Revenue), CBDT, writes: "The book contains an interesting collection of assessment orders showcasing the investigations made by the Assessing Officers with telling results and appellate orders containing persuasive and innovative interpretations of law".

The volume is released by the department in two versions: an internal version meant for circulation among tax officers, and a public version that omits the names of cases for protecting the identity. In the public version, Janardhan Reddy is named 'MNO', while OMC is named ‘XYZ’.

OMC tax evasion

The case relates to how OMC suppressed sales of nearly Rs 86 crore of iron ore by under-invoicing its exports. OMC entered into a MoU with a Singapore based firm GLA Trading International to sell iron ore ore at lower-than-market rate in 2007-08. For instance, ore was sold at prices of $76 and $98, when the market rate was between $144 and $165.

The case notes that Janardhana Reddy, who is a director of OMC, was also the director at GLA Trading during the months of December 2007 to March 2008. During investigations, it was found that GLA Trading had a capital of only one dollar -- essentially a front company.

The assessment officer held that the MoU was designed to "camouflage taxpayer's act of suppression of income". OMC has challenged the order before the appellate tribunal, and is currently awaiting a final decision.

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