OAG asks for Nu 244 mn in restitution from 5 fronting cases

The Office of the Attorney General (OAG) filed five cases yesterday against five business entities that were found to be running fronting businesses after an Anti Corruption Commission investigation.

The OAG charge sheet based on the ACC investigation has asked for a total of Nu 244.697 mn in restitution in the form of tax avoidance amounts and fines, illegal rupee remittance interests and smaller amounts for fronting licenses fees.

JPLP

Of all the companies the biggest fines has been imposed on Jatan Prasad Lalchand Prasad (JPLP) for tax avoidance coming to a total amount of Nu 184.903 mn for a period from 2011 to 2014. The business house had avoided the taxes by maintaining two sets of accounts which were retrieved by the ACC.

JPLP basically overstated its purchases and under-reported its sales. The actual Business Income Tax avoided by JPLP is around Nu 54 mn but the rest are penalty for concealment and late interest.

The charge against the owner Lalchand Prasad by the OAG is that since the amount of tax evaded exceeds daily national minimum wage of 30 years, that is, Nu. 1.350 mn as prescribed under section 18(a) of Penal Code, the four counts of tax evasion are all graded as felony of the third degree which basically means imprisonment.

In a felony of the third degree the minimum imprisonment is for five years and the maximum is less than nine years and there is no provision to pay thrimthue.

Mr. Rajeshwar Choudhury, the data entry operator for the wholesale department of JPLP has also been charged with a felony of the third degree in helping conceal the taxes by issuing false financial statements.

JPLP and Dorji Wangmo Tshongkhang

Another case involving JPLP is fronting by using the license of a Dorji Wangmo to conduct business through the Dorji Wangmo Tshongkhang.

The OAG charge sheet has asked for a restitution of Nu 150,000 paid to Dorji Wangmo from 2007 to 2015 as hiring charges for the license and also commission for large INR transactions from her account. She has also been fined Nu 10,000 separately.

The OAG charge sheet based on the ACC reports says that the country faced a sever rupee shortage starting from 2011 and in 2012 the government had to borrow around INR 15 bn at high interest rates from Indian banks but fronting agencies like Dorji Wangmo Tshongkhang was used by JPLP to suddenly increase his imports from 2012 onwards and drain out rupee.

The charge sheet says Dorji Wangmo opened a Current Deposit (CD) account number with the Druk Punjab National Bank, Phuntsholing. The CD account was opened in order to facilitate trade giving the business operator easy access to rupees to make payments for imports.

However, decisions on transactions through this bank account solely rested with Jai Prakash. Dorji Wangmo simply signed the blank cheques but she did not know from where the goods were purchased and how the payments were made. This has severely affected in draining out the INR reserves when the Royal government was facing acute Rupee shortage. The charge sheet says that since the business was carried illegally, the amount maintained in CD account also needs confiscation since it’s a proceed of crime.

The charge sheet asks for restitution of Nu 1.239 mn from JPLP as 9.75 percent interest for rupee imports from 2012-2015. The Bhutan government paid the same interest rate to the Indian government for borrowing Indian rupees.

Both of the above have been charged with several counts of deceptive practices and the OAG has asked the court to cancel the license, seize the auction money of the stock and seize the money in the accounts.

Rigsom Enterprise

In a similar case to the above Sonam Choden got a retail trade license for Rigsom Enterprise in 2010 and another wholesale license in 2012.

In a case of fronting the business in reality was run by a Naresh Bansal who is an Indian national.

Ms. Sonam Choden opened Current Deposit (CD) accounts in Bank of Bhutan Limited, Bhutan National Bank, Druk Punjab National Bank and T-Bank to facilitate trade and payment through these accounts.

Sonam Choden also admitted that the money transacting through the accounts belonged to Mr. Naresh Bansal and she has no idea from where the goods were purchased and how the payments were made.

Again coinciding with the rupee shortage Bansal made use of the CD accounts to import goods worth Nu. 403 .755 mn between 2011 and 2015. The highest hikes were in the rupee crunch years of 2012 and 2013.

The total amount of interest Naresh Bansal is liable to pay to the Royal Government of Bhutan amounts to Nu. 39.366 mn.

Sonam Choden has to restitute Nu 411,000 as hiring charges and commissions give to her as well as fine of Nu 20,000.

Both of the above have been charged with several counts of deceptive practices and the OAG has asked the court to cancel the license, allow the seizure of the auction money of the stock and seize the money in the accounts.

Norzang Trading

Ugyen Tshering obtained a license for Norzang Trading and then lent it out to a Raj Kumar Aggarwal for fronting.

In again a similar situation to the above case Raj Kumar Aggarwal used the CD accounts of Norzang Trading to suddenly make huge rupee transactions during the peak of the rupee shortage.

Since Aggarwal made illegal rupee imports worth Nu 105.420 mn from 2011 to 2015 the OAG has asked for a restitution of Nu 10.288 mn as interest for the rupee loans taken by the government.

Ugyen Tshering has been asked to pay Nu 470,000 he received as hiring charges and commission from Aggarwal in addition to a Nu 10,000 fine.

Both have been charged with several counts of deceptive practices and the OAG has asked the court to cancel the license, allow the seizure of the auction money of the stock and seize the money in the accounts.

Rabten Pharmaceutical & Medical Supplies

Again in another similar case a Yangki Tshering gave out her wholesale license for Rabten Pharmaceutical & Medical Supplies to an Indian businessman by the name of Bal Krishna who actually ran the business.

The ACC has asked for restitution of Nu 905,000 in commissions received from 2004 to 2015 and another Nu 10,000 fine from Yangki Tshering.

Between 2011 and 2015 Krishna made INR transactions worth Rs 78.53 8 mn in import remittances especially during the rupee shortage years. The OAG charge sheet asks Krishna to restitute Nu 6.972 mn as interest to the government.

Analyzing the import values year 2012 has the highest imports of Nu. 29.8 million, followed by year 2013 with Nu.22.6 million. Such unprecedented hike in imports achieved by Bal Krishna Pandey coincides with INR shortage that the Bhutan confronted.

Both of the above have been charged with several counts of deceptive practices and the OAG has asked the court to cancel the license, allow the seizure of the auction money of the stock and seize the money in the accounts.

More cases coming up

The cases are part of ACC’s investigation in Phuentsholing into fronting, tax avoidance and illegal rupee transactions. So far Indian and Bhutanese business people along with revenue and customs officials have been implicated. More cases are expected to be charged through the OAG in the near future.

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