Here's how Amitabh Bachchan survived yet another Income Tax investigation

On December 22, 2009, the then finance minister Pranab Mukherjee received a letter from Bollywood actor Amitabh Bachchan. The letter was a follow up to a telephonic conversation on the preceding night between Bachchan and Mukherjee.

The letter, addressing the sitting Indian President Pranab Mukherjee as 'Pranab Da', reads as follows:

"The notice received by me from the Investigation Department of the Income Tax, Mumbai wherein a finger of suspicion has been raised at me is most unfortunate. I have continuously felt that frivolous media reportage has become a convenient instrument through which cases have been built against me by the Department. I plead my innocence in the case under reference and make a plea that I be spared from any further harassment."

The Income Tax department, despite having glaring evidence of tax evasion against Bachchan, put its investigations on the backburner.

Suspicious transactions and payments

dna will now reveal the entire Income Tax investigation of tax evasion, suspicious transactions, and payments to offshore tax havens allegedly made on behalf of Bachchan. The payments, totaling over six million GBP (Great British Pound), routed through Mauritius, were made for repaying a loan allegedly taken by Bachchan. The amount used for the purpose was not declared by Bachchan as his income and tax were not paid on it.

What's more intriguing is that the loan was allegedly repaid by the Sahara group, owned by Subrata Roy, as part of a deal struck with Bachchan. When Income Tax investigators detected the series of transactions, they launched a probe and questioned various people. In addition, the Enforcement Directorate (ED) was asked to probe foreign exchange violations. The Income Tax case was allowed to become dormant despite strong evidence of tax evasion while the ED's investigation never took off despite the Bombay High Court directing the agency to launch a probe.

Between 1993 and 1995, Bachchan took loans amounting to $5.65 million (nearly Rs 37.58 crore) from Indian businessman (now deceased) Chottubhai Keshavbhai Pithawalla who operated many businesses in Germany. The loans were purportedly taken for Bachchan's business ventures. The money was funnelled to Bachchan by Pithawalla through a company in Chanel Islands, an offshore tax haven. The loan was to be repaid by 1996.

These were tumultuous times for the Bollywood actor. His businesses were in the red and his flagship company Amitabh Bachchan Corporation Ltd (ABCL) was running in losses. In the year when Bachchan had to repay Pithawalla, the Miss World pageant organised by ABCL in Bangalore turned out to be a financial disaster. The pageant had Bachchan's now daughter-in-law Aishwarya Rai and Vijay Mallya, among others, as judges. 

Bachchan failed to repay Pithawalla in 1996 and subsequently a one-year extension was given. When the extension ended on March 31, 1997, the loan remained unpaid. On July 16, 1997, Bachchan issued a promissory note to Pithawalla's company Pattchom International Engineering AG for an amount of $6.33 million (nearly Rs 42.1 crore) with a monthly interest of 1.5% if the loan was not repaid by August 15, 1997. With Bachchan's business in free fall, the loan continued to remain unpaid. In 1999, Pithawalla asked his Germany-based lawyer to send a notice to Bachchan asking him to pay up $8.4 million. 

Case in the Bombay High Court against Pithawalla 

While probing the case and seeking depositions, Income Tax sleuths found that Bachchan had filed a case in the Bombay High Court against Pithawalla in 2000 demanding the return of his promissory note for cancellation. In response, Pithawalla filed two cases against Bachchan. The first one was filed in 2000 demanding $9 million from Bachchan. The second was a criminal case filed in 2002 charging him with forgery and cheating. Between the filing of a civil case in 2000 and the criminal case in 2002, an interesting sequence of dealings seems to have unfolded between Pithawalla and Bachchan. 

On July 11, 2001, Pithawalla met Bachchan at his Mumbai home. The meeting was held a few months after Bachchan had filed a case seeking return of his promissory note issued to Pithawalla's company Pattchom International Engineering. In addition to Bachchan and Pithawala, the meeting was also attended by Bachchan's brother Ajitabh Bachchan and a man named H Nageshwaran.

Very little is known about Nageshwaran's relationship with the Bachchans or Pithawala. dna dug up court records to find Nageshwaran's whereabouts. His address was traced to an apartment complex in Mumbai's Dadar (West) locality. However, his flat was sealed and a possession notice pasted outside his door. The guards of the society said that they hadn't seen him for the last eight years.

When contacted, Ajitabh Bachchan said he was recovering from a surgery and would not be in a position to comment any further.

Minutes of the July 11 meeting

dna has a copy of the minutes of the July 11 meeting between Pithawalla, the Bachchan brothers, and Nageshwaran. The minutes of the meeting were recorded by Pithawalla and were also filed before the metropolitan magistrate in Mumbai in a separate case. The document shows the deal worked out to settle Bachchan's loan. It was agreed that Ajitabh Bachchan would pay Pithawalla Rs 3 crore, which would be as a "loan at reasonable rates of interest". In addition, Amitabh would "organise an additional loan of Rs 10 crore through financial institution (sic) against collaterance (sic) of the property, Adarsh Chemicals & Fertilisers Ltd at Surat and Jhonson Electric Company at Baroda (sic) at reasonable rates of interest."

The document further reads, "On getting this loan of Rs 10 crore, CK Pithawalla will pay back Rs 3 crore with interest to Mr Amitabh Bachchan." A further reading of the document shows that this particular transaction was a starting point for Pithawalla to recover $9 million (nearly Rs 60 crore) from Bachchan.

The last page of the minutes of the meeting shows modalities of the deal worked out on July 11, 2001, at Bachchan's residence. Pithawalla and Bachchan seem to have agreed on a three-stage settlement process for repaying $9 million. Bachchan would be required to pay $3 million (nearly Rs 19.9 crore) by the end of July 2001. Another $3 million would be paid by March 31, 2003. The remaining amount, including the interest, would be paid by Bachchan at the end of March 2005.

Cheating and forgery case against Bachchan

What prompted Pithawalla to file a case of cheating and forgery against Bachchan on November 1, 2002 – more than a year after their meeting at the latter's residence – is unclear. Income Tax sleuths found that a few days after the criminal case was filed, Bachchan paid an amount of Rs 10 crore to Pithawalla as a "deposit". The payments of Rs 5 crore each were made on November 20 and 23, 2002.

The account statement of Pithawalla's company, Pattchom International Engineering AG at Barclays Bank in London (Account Number: 00773271) shows that it received almost six million GBP. On March 26, 2003, the London account of Pithawalla's company received 4.65 million GBP. A few days later, on April 10, 2003, it received an amount of 1.4 million GBP. At 2003 exchange rates, six million GBP equaled almost $9.6 million. This was exactly the amount which was demanded by Pithawalla from Bachchan and whose repayment modalities were discussed in the July 11, 2001 meeting between Pithwalla and Bachchan at the latter's residence.

Civil cases against Bachchan withdrawn

Interestingly, the civil cases against Bachchan were withdrawn by Pithawalla on April 3, 2003 – a week after the first payment of 4.65 million GBP was made. The criminal case against Bachchan was withdrawn by Pithawalla on April 19, 2003 – almost a week after the second payment of 1.4 million GBP was made. The Rs 10-crore "deposit" was given back by Pithawalla to Bachchan on April 17, 2003 – a week after the complete repayment of Bachchan's loan.

The sheer synchronicity of the events – from repayment of Pithawalla's loan and the subsequent withdrawal of cases against Bachchan – raised further suspicion among investigators.

While the bank account statement of Pithawalla's company in dna's possession shows that he received the amount, Bachchan has in the past denied ever repaying (and therefore taking) the loan to Pithawalla. Pithawalla told Income Tax sleuths that he had indeed loaned the money to Bachchan. Repeated emails and reminders sent to Bachchan to respond to questions pertaining to the transactions did not elicit a response at the time of going to press.

Who paid Bachchan's loan amount?

So if Bachchan did not pay back his loan taken from Pithawalla, then who did it for him?

The bank account statement of Pithawalla's company shows that the two payments totaling six million GBP were made by a company named PBL Mauritius Ltd. This offshore company incorporated in Mauritius is owned by Australian billionaire James Packer (son of deceased media mogul Kerry Packer). Packer's company had acquired a stake in an Indian company and was buying programming slots on Doordarshan in the early 2000s. ABCL was also engaged in the same business of acquiring slots on India's national broadcaster. A report in The Hindu newspaper dated September 9, 2000, shows Bachchan at a launch party hosted by Packer. Bachchan did not respond to questions on his business relationship with Packer.

While PBL Mauritius Ltd made the payment to Pithawalla's company, it was in turn paid by a Mumbai-based company named Lahari Productions Pvt Ltd. Lahari Productions was owned by a man named Shripal Morakhia.

Morakhia was an investment banker-turned-film director, best known for his debut movie 'Naina', featuring Urmila Matondkar. Income Tax sources revealed that Lahari Productions was in turn paid money by Subrata Roy-owned Sahara India Media Communications Ltd, later rechristened Sahara One Media & Entertainment Ltd.

Bachchan's past business relationship with Subrata Roy

Bachchan's past business relationship with Subrata Roy is well documented. A Rediff news report dated June 22, 1999, noted that Bachchan had shifted ABCL's office to Sahara India's office in Mumbai after a warrant was issued for the seizure of ABCL's properties for non-payment of dues. The report noted that in 1998, Bachchan and his wife Jaya Bachchan toured towns and villages across India promoting Sahara's non-banking finance schemes and even allowed their faces to be used on posters promoting these schemes. It is through these schemes that Sahara unlawfully mobilised over Rs 27,000 crore from small investors in towns and villages. It is the inability to refund Rs 24,000 crore to over three crore small investors, influenced by Bachchan's endorsement of Sahara's schemes, that has led to the incarceration of Sahara boss Subrata Roy.

Sahara's spokesperson denied ever repaying Bachchan's loan and insisted that "you should go and ask Mr Bachchan".

Sources in the Income Tax department revealed the entire chain of transactions and the route through which money eventually reached Pithawalla's bank account in London allegedly from the coffers of Sahara.

The 2004 annual report of Sahara One Media & Entertainment Ltd shows an Opening stock of "actor rights" valued at Rs 60 crore. The so called "actor rights" were acquired from Lahiri Productions.

But were the "actor rights" in question those of Amitabh Bachchan? Sahara's spokesperson denied that they had ever purchased Bachchan's rights from anyone in the past. When dna contacted Lahiri Productions owner Shripal Morakhia, he refused to answer saying, "I am bed ridden, will speak later". Bachchan did not respond to specific questions on the sale and purchase of his rights.

But Income Tax authorities were sure that the actor in question was none other than Amitabh Bachchan. This was revealed to them in an agreement dated June 28, 2000, between Lahiri Productions and Amitabh Bachchan for acquiring his rights. The balance sheets of Lahiri Productions showed that it was a loss making company with a turnover of just a few lakhs. It baffled investigators that a company with virtually no business was the owner of India's biggest celebrity – Amitabh Bachchan. Investigators then examined the bank accounts of Lahiri Productions.

The bank accounts of Lahari Productions showed that Rs 60 crore was paid in two installments by Sahara One Media & Entertainment Ltd. On March 24, 2003, an amount of Rs 46 crore was paid. On April 9, 2003, the remaining Rs 14 crore was transferred.

Role of PBL Mauritius Ltd

Sleuths revealed that when they examined the bank accounts of Lahiri Productions they found that it had transferred the money to PBL Mauritius Ltd immediately after receiving it from Sahara. From the first payment, Rs 36 crore (around 4.6 million GBP) was paid to PBL Mauritius, the remaining Rs 10 crore was transferred to ABCL. From the second payment, Rs 11.3 crore (around 1.4 million GBP) was transferred to PBL Mauritius. This was exactly the amount that Bachchan owed Pithawalla.

Sources revealed that PBL Mauritius Ltd was the actual owner of Lahiri Productions. Before being rechristened, Lahiri Productions was called HFCL – Nine Networks India Ltd – a company co-owned by James Packer and whose launch party Bachchan had attended in 2000.

The very next day, after receiving the money, PBL Mauritius transferred the amount to Pithawalla's company, Pattchom International Engineering AG's account. The Barclays Bank account statement of the company shows two entries in the name of PBL Mauritius – one for 4.6 million GBP on March 26, 2003 and the other for 1.4 million GBP on April 10, 2003.

An Income Tax official reveals, "Sahara used PBL Mauritius as a conduit to settle Mr Bachchan's loan with Pithawalla by masquerading the transaction as a purchase of the actor's rights from a dubious company. This was Mr Bachchan's income and he concealed it which he should not have done as a respected citizen. He evaded tax and that was illegal."

When Pithawalla deposed before the Income Tax department, he revealed that he had indeed received the amount from PBL Mauritius Ltd. He told investigators that he believed the payment was made for settling Bachchan's loan since his company had never done business with PBL Mauritius. Pithawalla also told investigators that Bachchan had told him to hand over the promissory note to a person who was introduced to him at the latter's residence once the loan was repaid. The person, introduced by Bachchan to Pithawalla, had met him in London to take back the promissory note after the first payment of 4.6 million GBP was made. However, Pithawalla refused to hand over the note till the remaining amount of 1.4 million GBP was paid. Pithawalla deposed before the Income Tax that after the second payment was made he instructed his lawyer to hand over Bachchan's promissory note to his representative.

dna mailed Amitabh specific questions twice in a span of two weeks. We also spoke to his secretary who promised to send a response. However, despite repeated reminders, there was no response. Bachchan's secretary, in fact, stopped taking our calls after promising to get us a response. The emails sent to Bachchan continued to remain unanswered at the time of going to press.