IT Raids: Attack on press or a case of money laundering?

At about 9:30 am yesterday, Delhi journalist WhatsApp groups started buzzing with the news of Income Tax raids being carried out at media entrepreneur Raghav Bahl’s house in Noida.

In the next one hour, it emerged that ‘surveys’ under Section 133A of the I-T Act were also being carried out at Bahl’s media outlets like at The Quint’s office in Noida, the Quintype office in Bengaluru and also The NewsMinute, in which Bahl has invested. Bahl and his wife Ritu Kapur founded Quintillion Media after their exit from News 18 in 2014.

About 12 IT officials carried out day-long searches at the Quint’s account office in Noida. Another team of 10 officials were at his Sector 40 house in Noida, seizing his computer and other data gadgets. The search was on till late at night. An employee in one of the companies told Newslaundry on condition of anonymity that IT official also went through mobile devices and computers of individual employees and ran a search with keywords like “black money, Raghav” and so on.

Bahl’s digital platform Quint had of late published stories — text and videos — critical of government policies. Bahl’s videos on the website, too, took on the Narendra Modi government on the PM’s recent Russia visit, fuel prices and so on. So, it was natural for some to link Quint’s journalism to the raids.

But if income tax officials are to be believed then this is not simply a case of a political witch-hunt. Newslaundry spoke to officials on condition of anonymity and were told that they had duly served a notice to Bahl for tax evasion.

IT officials told Newslaundry that they also sought an explanation into his huge earnings overnight on a paltry investment.

The curious case of Fincorp

The case the official is speaking about pertains to Bahl allegedly trading at a very low price and making 100 times more money by investing in a Uttar Pradesh-based penny stock company in less than three years. IT officials we spoke to also allege that he indulged in money laundering and evaded long-term capital gain tax in the process.

The allegations point to Bahl indulging in trading with a ‘briefcase’ company, which is essentially a company that only exists on paper and in some cases can be a front for money laundering. The Securities and Exchange Board of India had suspended the registration of 300 such dubious companies in 2016.

IT officials discovered more such companies in 2017 and Bahl and his wife Ritu Kapur were found to be investors among others in these companies, an IT official said.

IT documents accessed by Newslaundry disclose that Bahl invested Rs 3.03 crore in a penny stock company PMC Fincorp Ltd promoted by one Raj Kumar Modi in 2011. In the next three years, he and his wife offloaded the majority of their shares. The total sum value of their shares was over Rs 118 crore at the time of sale. At its peak, when Bahl was selling shares, the price of a single share was at Rs 109. And once Bahl offloaded most of his shares, the price of a single Fincorp share crashed down to Rs 0.47. This trend of a sudden crash, the IT officials alleged, hints at possibilities of money laundering.

In this story of allegedly making Rs 114 crore out of an investment of Rs 3 crore also lies the matter of tax evasion in the name of long-term capital gains, the IT officials alleged.

According to IT documents, purchase value of stocks owned by Bahl in Fincorp Ltd was Rs 3.03 lakh in 2011-2012. And in 2014, sum of sale value was Rs 114.11 crore. So, essentially a lot of money was made with a seemingly paltry investment.

IT details Newslaundry accessed clearly state Pan numbers of Bahl and Kapur and their investment and value of shares. (Kapur sum of sale value of stocks was Rs 4.38 crore but it is not clear if there were any investments in her name in Fincorp.)

In 2012-13, Bahl offloaded shares worth Rs 11 crore. In the next financial year, he sold off shares for Rs 8.60 crore. In 2014-15, Bahl offloaded shares worth Rs 93.77 crore. And by 2016, he sold stocks worth Rs 89 lakh. As of today, the sale cost of a share is Rs 0.47.

“Searches were made to find sources of their investment in Fincorp Ltd and a reconstruction of trading that turned Rs 3 crore worth stock into Rs 118 crore,” a senior IT official requesting anonymity said.

Sources also disclosed that Bahl’s company The Quint has collaborated with Bloomberg to open a business TV channel and has applied for a licence with Information and Broadcasting Ministry. I&B is understood to have stalled his application due to the IT case.

We have sent a questionnaire to Bahl. The story will be updated as and when we get his reply. In a press statement, Bahl said: “We are a fully tax compliant entity, and will provide all access to all appropriate financial documents.” Meanwhile, Bahl has tweeted out a statement rubbishing the raids.