Shell companies instituted for unlawful purposes under tax scanner

The Central Board of Direct Taxes (CBDT) has requested the Ministry of Corporate Affairs (MoA) to give them a list of all the Shell Companies that they have identified to shut down or have already been done so. The purpose involves revival of such shell companies for securing the tax amount lost in de-registering these Shell Companies. The Tax Department has requested the details of the tax liabilities of such shell companies by May 31, 2018. Shell Companies are not illegal per se, however the Registrar of Companies has the power to de-register any Company if it fails to conduct any economic activity for a period of one year. Shell Companies are instituted for the sole purpose of re-directing funds and money laundering. They do not indulge in any manufacturing or providing any services themselves and are used for making financial transactions. On September 14^th 2017 the Ministry of Corporate Affairs (MoA) and the CBDT entered into a Memorandum of Understanding (MoU) to share information about shell companies and curb their mal-practices. In pursuance of the same, the CBDT has instructed the Income Tax Department to form a Special Team and file petitions before the National Company Law Tribunal. The reason behind this drive is the crores of tax payer's money that is stuck in these de-registered Shell Companies. In 2017 the CBDT had formulated an SOP or a Standard Operating Procedure for the Income Tax Department for instituting any prosecution or appeals against Shell Companies. The MoA has also been requested to extend their cooperation to the proceedings before the NCLT.