The Serious Fraud Investigation Office (SFIO) arrested the mastermind, named Dortse (board member of Jillian India Ltd) who incorporated multiple shell companies linked to China and provided dummy directors on their boards to run the fraudulent businesses.
Pursuing this serious financial crime, Ministry of Corporate Affairs (MCA) conducted simultaneous search-and-seizure operations at Bangalore and Hyderabad offices.
What are shell companies?
A shell company is a corporation without active business operations or actual assets. They exist only on paper and has no office and no employees, but may have a bank account or passive investments, etc.
They can be used for legitimate reasons such as for obtaining different forms of financing, conducting a hostile takeover or issuing Initial Public Offerings.
These types of corporations are not all necessarily illegal, but they are sometimes used illegitimately such as for tax evasion, tax avoidance, money laundering or anonymity.
Tax avoidance is a legal strategy to minimize the amount of incometax owed by an individual or a business by taking advantage of the loop holes and ambiguities in the legal provisions.
Tax evasion is a serious financial crime that uses illegal methods to evade tax liability. It may result in hefty fines and penalties.
Examples of tax avoidance like claiming deductions under chapter VIA of the Income Tax Act 1961 such as donations under section 80G
Examples of tax evasion are underreporting income, window dressing of accounts,falsifying deductions, hiding money, etc.
Serious Fraud Investigation Office (SFIO)
As per the Companies Act 2013, SFIO is a multi-disciplinary organization under the Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, banking, law, information technology, taxation, etc. for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds.
The SFIO conducts investigations on receipt of a report of the Registrar or on intimation of a special resolution passed by a company, request from any department of the Central Government or a State Government or in the public interest.
SFIO is headed by a Director as Head of Department in the rank of Joint Secretary to the Government of India.
The Headquarter of SFIO is in New Delhi, with five Regional Offices in Mumbai, New Delhi, Chennai, Hyderabad & Kolkata.
