VG Siddhartha death mystery: Everything you need to know about CCD owner VG Siddhartha

The IT department questioned the authenticity of Siddhartha’s letter and stated that it had acted as per the provisions of Income Tax Act.

Updated: Aug 1, 2019 11:05 IST
VG Siddhartha death mystery: All you need to know about CCD owner VG Siddhartha
VG Siddhartha death mystery: All you need to know about CCD owner VG Siddhartha

VG Siddhartha death news: The CCD owner VG Siddharth was confirmed dead on Wednesday after his body was fished out of the Nethravati River in Mangaluru. VG Siddharth's body was recovered by a group of local fishermen from the bank of Netravati River, some distance away from the spot where he was last seen on 29 July. The CCD founder had been reported missing since Monday evening. The Karnataka Government had initiated a large-scale search operation to locate him.

VG Siddhartha, owner of the famous coffee chain CCD was feared to have committed suicide by jumping into Netravati river, after a letter surfaced in which he had apologized to his CCD staff for failing them. Siddhartha cited immense financial pressure due to harassment from Income tax officials. VG Siddhartha was the son-in-law of former Karnataka CM and former External Affairs Minister SM Krishna.

VG Siddhartha Letter

VG Siddhartha, in a letter addressed to his staff before his death, said that he failed to create the right profitable business model despite my best efforts. Siddhartha said in the letter, “I would like to say I gave it my all. I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I gave up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend.”

Siddhartha also cited tremendous pressure from other lenders and harassment from the previous DG income tax in the form of attaching CCD shares on two separate occasions to block the Mindtree deal and then taking the position of Coffee Day shares, although the revised returns had been filed. Siddhartha said that this unfair move led to a serious liquidity crunch.

The CCD owner further took responsibility of every financial transaction. He said that is team, auditors and senior management were unaware of all his transactions. “The law should hold me and only me accountable, as I have withheld this information from everybody including my family,” he added.

The Karnataka Income Tax department on Tuesday rejected CCD owner VG Siddhartha’s allegations of harassment at the hands of tax officials and said the due process of law was followed in the probe against the missing businessman.

The IT department, in its press release, questioned the authenticity of Siddhartha’s letter and stated that it had acted as per the provisions of Income Tax Act. The Income Tax department claimed that VG Siddhartha’s signature on the note does not tally with VGS’s signature as available in his annual reports.

The press release revealed that the investigation in the VG Siddhartha case began with the search in the case of a prominent political leader of Karnataka. The IT department said that their case on Siddhartha is based on unearthing of credible evidence of financial transactions done by the CCD in a concealed manner.

IT department letter

1. A person holding Singapore citizenship was covered in the search action. He was found with unaccounted cash worth Rs.1.2 crores. He admitted that the cash belonged to V G Siddhartha. After considering the evidence gathered by the IT department, V G Siddhartha in a sworn statement admitted to unaccounted income worth Rs 362.11 Crores and Rs 118.02 crores, in his hands and Coffee Day Enterprises Ltd respectively.

2. CCD owner VG Siddhartha subsequently filed the Return of Income but did not offer the above undisclosed income as admitted in the sworn statement in both the cases except the sum of around Rs 35 Crores in his case.

3. Further, one of the group’s company, Coffee Day Global Ltd was found to have not paid the Self-Assessment Tax worth Rs 14.5 crores on the returned income. Coffee Day Enterprises Ltd did not offer the admitted income in its part.

4. In January 2019, it was reported that V G Siddhartha is planning to sell the equity shares of Mindtree Ltd held by him and his company immediately. VG Siddhartha, Coffee Day Enterprises Ltd and Coffee day trading Ltd together held nearly 21 percent of shareholding in Mindtree Ltd.

5. To protect the interests of revenue, the provisional attachment of 74,90,000 shares of Mindtree Limited owned by V G Siddhartha and Coffee Day Enterprises Ltd u/s 281B of the Income Tax Act was made (though they together held 2,29,31,518 shares). This action is a normal requirement to protect the interests of revenue.

6. Siddhartha filed a request to release Mindtree shares and in turn, offered other security of shares of Coffee Day Enterprises Ltd against the expected demand. This was accepted and the attachment of Mindtree shares was revoked on 13.02.2019 with a specific condition that the sale proceeds will be utilized only for repayment of loans availed against the Mindtree Ltd shares by opening escrow account and the remaining balance will be provided for attachment u/s 281B against the tax liability to arise. The alternate attachment of 46,01,869 unencumbered shares and 2,04,43,055 encumbered shares of M/s Coffee Day Enterprises Ltd u/s 281B was also made on 13.2.20 19 and 14.2.2019.

7. The assessees had transferred the Mindtree Ltd shares to L&T Infotech Ltd in April 2019 and received around Rs 3200 crores. Out of this consideration, the assessee had repaid the loan of around Rs 3000 crores and paid expenses related to transfer of 154 crores and the balance of Rs 46 crores was paid towards the first installment of Advance Tax of estimated MAT liability of around Rs 300 crores in the case of shares of Coffee Day Enterprises Ltd.

8. As against the balance MAT liability of Rs.250 crores and tax liability arising based on search findings to the tune of approx. 400 crores, the provisional attachment made by the department is less than 40 percent of the likely tax liability.

9. The provisional attachment was made to protect the interests of revenue out of the income admitted by assessee based on credible evidence gathered in the search action. The Income Tax department has acted as per the provisions of Income Tax Act.

VG Siddhartha Political Controversy

The official twitter handle of Karnataka Congress tweeted saying that the unfortunate case of VG Siddhartha was a result of harassment by IT officials and it indirectly raised a question on the ruling BJP government, saying that companies that had flourished under UPA have been shut down now with many people left jobless.

Siddaramaiah also tweeted saying that the death of V G Siddhartha is both disturbing and mysterious. The former Karnataka CM stated that the reasons and the invisible hands that led to his tragic death should unearthed through fair investigation.

Senior Congress leader Shashi Tharoor reacted to the unfortunate death of CCD owner VG Siddhartha by tweeting, "Ease of Doing Business is 'Ease of Ending Business' under BJP.

The Karnataka BJP retaliated to Congress claims by saying that investigation will reveal the facts behind this tragic incident.

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