Income Tax Department unearths Rs 400-crore medical seat-blocking scam in Karnataka

The Income Tax Department, which conducted search and seizure operations on nine educational institutions registered in Bengaluru and Mangaluru, said on Thursday that it has uncovered a major seat-blocking scam worth over Rs 400 crore where the transparent selection process for medical colleges was subverted.

The department found that trustees and key persons running the medical colleges worked in collusion with agents/brokers. Providing details of the malpractice, it said high ranking students in the National Eligibility cum Entrance Test (NEET) would take admission to MBBS through state counseling and block the seat without any intention of joining the colleges.

Once the counselling by the Karnataka Examinations Authority (KEA) is done, "in connivance with agents/middlemen/converters", the students withdraw from the admission process thereby making the seats available for the college management.

Essentially, the process converted the "regular" (merit) seats into "management seats" which the management filled up through "stray vacancies round" which is used to fill seats remaining vacant after the "mop-up round."

"The seats were filled by the college management by admitting less meritorious candidates (with low rank in NEET) after collecting huge sums as capitation fee/donations in cash, which are illegal under the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984. The capitation fee/donations are collected through a network of brokers/ agents employed by the key persons/trustees of these medical colleges," it said.

So far, the evidence indicates that Rs 402.78 crore has been accepted as illegal capitation fees and the same has not been disclosed to the Income Tax Department.

Incriminating evidence

It said that the management, faculty, staff, meritorious students and brokers worked in close nexus to manipulate the online admission process.

"There is evidence indicating that one of the medical colleges has some sort of 'package arrangement' for passing management quota students in written examination and viva voce for a fixed sum ranging from Rs 1 lakh to Rs 2 lakh," it said.

The release said that the sleuths have detected incriminating evidence, including notebooks, handwritten diaries and excel sheets containing details of the cash received from students/brokers for admission to MBBS, BDS and postgraduate seats for various years.

Evidence also showed that money has been diverted for non-charitable purposes, including investment made in immovable properties with huge cash components, violating provisions of the Income Tax Act. "One of the colleges has diversified into the business of timber/plywood industries where evidence regarding under-invoicing has also been found," the release said.

Searches have resulted in the seizure of cash amounting to Rs 15.09 crore, 81 kg gold jewellery valued at Rs 30 crore, 50-carat diamonds and 40 kg silver articles have been found from the residential premises of the trustees and are prima facie unexplained.

Evidence of undisclosed foreign assets of Rs. 2.39 crore in Ghana has also been found apart from that of huge investments in 35 luxury cars under benami names, the release said.

In 2019, the department had conducted similar raids to unearth a similar scam. In the aftermath, the committee set up by the state government to inquire into role of eight medical colleges and over 200 students.