A crucial Income Tax investigation report that was not shared with any other agency, bogus purchases, huge over-valuation of stocks, suspicious payments to relatives, dubious loans, and more were red-flagged over eight months before the Nirav Modi-PNB scam came to light. The Income Tax probe report on fugitive diamond jewellers Nirav Modi and Mehul Choksi, running into approximately 10,000 pages, was finalised by the agency on June 8, 2017. The report was apparently not shared with other agencies like the Serious Fraud Investigation Office (SFIO), Central Bureau of Investigation (CBI), Enforcement Directorate (ED), and the Directorate of Revenue Intelligence (DRI) until February 2018, when the Punjab National Bank (PNB) scam came out.
Sources also said the tax department also did not share its findings through the Regional Economic Intelligence Council (REIC), a mechanism for sharing of information between various law enforcement agencies. On January 14, 2017, the Income Tax Department searched Modi's firms and surveyed companies owned by his maternal uncle Choksi. The search and survey covered at least 45 residential and commercial premises across the country. A senior tax official said the tax investigation appraisal report on Modi and Choksi was not shared with other agencies because there was “no protocol” for sharing such reports with other agencies at that time.
“After the Nirav Modi and Mehul Choksi scam, since July-August 2018, the tax department has been asked to share all investigation appraisal reports with the Financial Intelligence Unit (FIU), which in turn shares these with other agencies for investigation and appropriate action,” the tax official said. He added “Since July-August, we are sharing information and investigation reports on real time basis.” The findings have now been mentioned by the CBI and ED in their chargesheets filed against Modi and Choksi between May and July 2018.
Key findings of the June 2017 report include:
- Modi's Firestar International Pvt Ltd received Rs 284.14 Crore from Cyprus-based Jade Bridge Holdings Pvt Ltd and Mauritius firm Forcom Worldwide Investment Ltd in financial year 2013-14. The IT report said that the documents claimed to be submitted by Jade Bridge and Forcom were prepared at Nirav Modi’s office in India.
- Physical stock lying at Modi’s firms in the Special Economic Zone (SEZ) in Surat were hugely over-valued.
- Modi’s firms gave “huge amount of interest free loans and advances to group firms” when the concerns giving loans and advances had themselves taken “huge bank loans”.
- The top two creditors of Choksi-owned Gitanjali Group; Iris Mercantile and Premier Intertrade, were a part of Gitanjali Group till financial year 2014-15. Subsequently, the partnership composition of these firms changed and new partners were brought on board. The IT found that the firms did not exist at their registered address.
- The Nirav Modi Group and Gitanjali Group made “bogus purchases” of Rs 344.4 crore and Rs 2021 crore respectively from three accommodation entry firms in Mumbai.
- The group did not report international transactions of Rs 515.87 Crore entered with its associates.
