The mysterious disappearance of Café Coffee Day (CCD) founder VG Siddhartha and his reference to “harassment” by the income tax (I-T) department in a purported letter, may well trace back to two years ago when tax authorities stumbled upon undisclosed money worth hundreds of crores of rupees.
The I-T department has said that the “authenticity” of Siddhartha’s note is known and the “signature does not tally” with the signature as available in his annual reports, a statement by the Chief Commissioner of Income Tax, Karnataka, Goa and Bangalore, said.
Tax officials said that in September 2017 during a series of search and post-search investigations at various premises, Siddhartha had “admitted” to having undisclosed income of Rs 346.46 crore and Rs 118.02 crore that he and Coffee Day Enterprises, one of the many companies company that he founded, had hidden away from reporting to authorities.
Curiously though, while Siddhartha, often referred to as India’s Coffee King, acknowledged these earnings in a verbal hearing before the tax authorities, he continued to hide the income in responses to formal I-T department notices.
These hidden incomes were spread over a six-year period during 2012-13 to 2017-18, sources said. Coffee Day Global, another company that he founded, was also facing a dispute over a self-assessment tax of Rs 14.5 crore last year, and I-T officials were scrutinising evidence where this company was a serial tax dodger.
Siddhartha’s July 27 letter to the board also alludes to a January 2019 incident when the I-T department had attached the shares that he and Coffee Day Enterprises owned in information technology major Mindtree Ltd.
This came amid reports when L&T Infotech was moving in to buy out Mindtree, and the attachment of Siddhartha’s shares triggered worries about throwing a spanner in this acquisition.
In its regulatory filing, Mindtree said that the attachment was for a “tax demand” that was likely to be raised on Coffee Day and Siddhartha.
Mindtree, in its filing, had also said that the attachment “prohibited for transfer or charge” of 22.2 lakh equity shares of Coffee Day Enterprises Ltd., and 52.7 lakh shares held by Siddhartha.
At the time, Coffee Day Enterprises insisted that there was no tax liability on the part of Siddhartha as the company and its promoters had “filed the revised returns” – a claim that the CCD founder makes in his alleged letter to the board as well.
The tax department said that Siddhartha flouted rules by seeking to sell off shares in a company without seeking permission from tax authorities, as required in cases where proceedings were pending.
In February 2019, the I-T department, in an apparent easing, revoked the attachment order, only on the condition that Siddhartha will use the sale proceeds only for repayment of loans availed against Mindtree Ltd shares.
The Mindtree Ltd-L&T deal had fetched Siddhartha and his company Coffee Day Enterprises around Rs 3200 crore. Out of this, he repaid a loan of around Rs 3,000 crore and paid expenses related to Rs 154 crore and the balance Rs 46 crore was paid towards the first instalment of advance tax of estimated minimum alternate tax liability of around Rs 300 crore in case of shares of Coffee Day Enterprises.
“As against the balance MAT liability of Rs 250 crore and tax liability arising based on search findings to the tune of approximately Rs 400 crore, the provisional attachment made by I-T department is less than 40 percent of the likely tax liability,” the I-T department statement said.
“The provisional attachment was made to protect the interests of the revenue out of the income admitted by the assessee based on credible evidence gathered in the search action. The I-T department has acted as per provisions of the I-T Act,” the statement said.
Siddhartha’s purported letter alleged harassment by the previous DG, Income Tax. “There was a lot of harassment from the previous DG income tax attaching our shares on two separate occasions to block our Mindtree deal and then taking a position of our Cafe Coffee Day shares, although the revised returns have been filed by us. This is very unfair and has led to serious liquidity crunch,” the letter read.
The Café Coffee Day owner found himself in trouble in 2017 when the Income Tax Department first raided his premises and found Rs 650 crore concealed income from the documents seized while concluding the search and seize operations.
Siddhartha went missing on Monday evening when he got off from his car near a bridge across the Nethravathi River near Mangalore, about 375 km from Bengaluru, but did not return even after an hour.
A panicked driver went down looking for him, but could not find him anywhere. He then alerted the family members who in turn informed the police.
The police have launched a massive search for him. According to his driver, Siddhartha was talking to someone on his mobile phone when he got off from the car near Kotekar.
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