Government's next target- shell companies, says will freeze accounts

12 Feb 2017 | Written by Vaneet Randhawa; Edited by Ramya Patelkhana

The government is determined to weed out shell companies to ensure black money doesn't find a conducive environment to flourish.

The government said it would freeze all the bank accounts used to launder money under the Benami Transactions (Prohibition) Amendment Act, 2016 as a punitive measure.

The move comes after highest officials in the PMO and other departments examined the working of shell companies.

In context: Demonetization: I-T investigations, rackets and shell companies

Shell CompaniesOver 200 shell companies detected by I-T dept

Post demonetization announcement, Income-tax department has detected over 200 shell companies in Delhi, Rajasthan, Karnataka, Gujarat, Maharashtra, Punjab, UP that were converting illegal money into legal.

Officers would examine these companies' revenue to understand the nexus between them and beneficiaries who used them to launder money.

Delhi-based lawyer Rohit Tandon floated his own shell company to convert part of his black money into white.

An I-T official's statement

"Investigations are underway and we will ensure that these cases are resolved at the earliest. We have come across a large number of shell companies that have been used to layer the transactions that are suspicious."
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I-T dept collecting names and details of newly-floated companies

Suspicious TransactionsI-T dept collecting names and details of newly-floated companies

The cash-flow of firms floated recently is being closely-monitored to ensure they aren't converting black money.

Out of 10.26-lakh companies with the Registrar of Companies, 133,256 were just "drop box" entities in Delhi and Kolkata.

The department sought details of suspicious transactions from both public and private banks and is looking into the accounts of defunct companies that suddenly reported increase in business deals.

12 Feb 2017Government's next target- shell companies, says will freeze accounts

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The government is planning to close 6-7 lakh shell companies, many of which had deposited large amounts in banks post demonetization.

The IT, RBI, IB and corporate affairs ministry, all involved in the exercise, examined such "dormant" companies that had managed to stay under the radar by not filing annual returns.

Shell companies don't have actual business; they are simply used to launder money.

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More than one third of the 11 lakh active Indian shell companies face de-registration prospects as they haven't filed their returns since the last 3 financial years.

Since last month, the I-T Department has been issuing notices to over 4 lakh companies for the same.

The companies have been given 30 days to file their returns, after which the government would de-register them.