The Centre has decided to create a database of shell companies and their directors as part of a crackdown on such firms mushrooming across the country. A task force chaired jointly by the Revenue Secretary and the Corporate Affairs Secretary has been mandated to coordinate action against these dubious companies, sources have said.
“Almost 8-9 lakh companies across the country registered with the Ministry of Corporate Affairs (MCA) have not been filing any annual returns with the MCA and they have become a threat and potential platform for money laundering. Hence, the task force has taken up the matter in right earnest,” Revenue Secretary Hasmukh Adhia said.
The MCA has sent notices to about 3 lakh unlisted companies, asking them to deregister themselves, Adhia said, adding that more notices will be issued to shell companies soon.
“Our strategy is not to let such companies operate that don’t file returns after registering (with the MCA),” Adhia said, adding that the government is trying to improve the quality of manpower and working to fill the existing vacancies in the ED, which is under the administrative control of the Ministry of Finance.
“In a major crackdown on domestic shell companies, the government in February had decided to take stringent action, including freezing the bank accounts of these companies. A task force in this regard was also set up with members from the regulatory ministries and the ED,” a senior government official said.
According to enforcement agencies, the names of dormant companies will be struck off and the property of such companies will be confiscated under the Benami Transactions (Prohibition) Amendment Act (BTPAA), 2016.
The BTPAA gives the government powers to confiscate benaami assets—those held in the name of another person or under a fictitious name to avoid taxation and conceal unaccounted-for wealth.
As per the records of the Income Tax Department, out of the 15 lakh companies registered in India, only 6 lakh file returns.
The Ministry of Finance is identifying shell companies on the basis of data such as nominal paid-up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income, high cash in hand, private companies as majority shareholders, low turnover and operating income, nominal expenses and minimum fixed assets.