NEW DELHI: The income tax (IT) department recently summoned Jet Airways founder Naresh Goyal for questioning in an alleged tax evasion case, said people with knowledge of the matter. This marks the first time an enforcement agency has summoned Goyal in connection with alleged irregularities in the grounded carrier. The investigation wing of the department had seized documents during searches at the airline’s Mumbai offices in September last year. The probe was completed in February and the report has been forwarded to the assessment wing.
The investigation wing discovered alleged irregularities in transactions between Jet Airways and its Dubai-based group firms, and believes these may have been aimed at evading taxes to the tune of Rs 650 crore, said the people. The airline was found to be paying commissions every year to its general sales agent in Dubai, which was also part of a group unit, they said.
These payments were allegedly in excess of permissible business transactions under the Income Tax Act and could not be viewed as allowable expenses that fell outside the ambit of taxation. “The survey was conducted at the time when Jet Airways was delaying the announcement of its June quarter result,” said an income tax official. “These are excessive payments made with the intent to divert funds abroad, so as to evade taxes.” Goyal was summoned to explain these transactions. “The assessment wing is now carrying out the inquiry, and based on the findings, had summoned Goyal to explain the case,” said another person. Jet Airways declined to comment.
The carrier had previously told ET that it was in compliance with the law. This was in response to a February 26 report by ET that said income tax authorities had discovered irregularities in the airline’s transactions with Dubai-based group companies and that the authorities might ask Jet Airways to explain these related-party transactions.
“Jet Airways reiterates that it has always complied with all regulatory and corporate governance requirements, as required by law, with respect to the transactions entered into with related parties,” it had said at the time. “Such disclosures have been made by the company in its duly audited and published financials as part of ‘relatedparty transactions’.”
It was cooperating with the authorities, including the Registrar of Companies, through the course of a tax survey conducted last year, the carrier had said.
Income tax is not the only department investigating Jet Airways and its erstwhile board. The Ministry of Corporate Affairs (MCA), western region, concluded that several transactions were of a “suspicious nature”, according to a report prepared in May, said a person with knowledge of the development. It recommended a detailed investigation into Jet Airways after an inspection of its account books.
The government is likely to hand over the probe to the Serious Fraud Investigation Office (SFIO), the inquiry arm of the MCA. A lookout circular had been issued against Naresh Goyal and his wife Anita to ensure the couple doesn’t leave the country, pending investigations, based on an MCA request. The couple were taken off a flight to Dubai at Mumbai airport on May 25 for this reason. “The report was put before the oversight committee, which is of the view that since the report points to numerous irregularities, the probe should be handed over to the SFIO,” said an official aware of the development. “The final decision is likely to be taken within a fortnight.” Last month, the Enforcement Directorate (ED) had questioned senior executives of Jet Airways in connection with overseas investments in the airline’s loyalty programme while investigating an alleged violation of the Foreign Exchange Management Act.
Jet Airways incorporated Jet Privilege Pvt Ltd as a wholly owned unit in 2012. It was hived off as an independent entity in 2014 after partner Etihad bought a 50.1% stake in the unit. Jet Airways holds the remaining 49.9%. The ED is trying to ascertain whether Etihad received the necessary approvals from the now-defunct Foreign Investment Promotion Board for making the investment. Etihad has a 24% stake in Jet Airways. Plans to revive Jet Airways have us far not met with success.