The Enforcement Directorate (ED) on Monday conducted searches at nine premises in Uttar Pradesh and Haryana as part of a money-laundering investigation into an alleged bogus Input Tax Credit (ITC) network. The searches were carried out by the agency's Lucknow Zonal Office under the provisions of the Prevention of Money Laundering Act (PMLA), 2002, covering locations in Muzaffarnagar and Ghaziabad in Uttar Pradesh and Faridabad in Haryana. According to officials, the case involves an alleged fraudulent ITC scheme worth nearly ₹19.91 crore. 

What ED investigation found

The investigation stems from alleged fraudulent transactions involving an import-export company. According to the findings cited by the authorities, the entities involved allegedly generated and transferred bogus ITC using fabricated invoices and e-way bills without any actual movement of goods. The suspected network allegedly used multiple fictitious and non-existent entities to create the appearance of genuine commercial transactions. 

Officials said the alleged fraud involved the fraudulent availment of ₹9.63 crore in ITC, while another ₹10.28 crore was allegedly passed on through the network. The combined amount represents the alleged wrongful loss to government revenue under the transactions being investigated. The ED is treating the proceeds linked to the alleged activity as proceeds of crime under the PMLA. 

Money trail under scrutiny

Investigators are examining financial records, digital material and other documents recovered during the searches to establish the flow of funds and identify people or entities that may have benefited from the alleged transactions. The suspected modus operandi involved circular transactions and layering of funds through several entities, followed by withdrawals or transfers, according to officials. 

Bogus ITC cases generally involve invoices being issued or circulated without a corresponding supply of goods or services, allowing entities to claim or pass on tax credit that is not backed by genuine business activity. The ED has previously investigated similar networks involving fictitious entities created specifically for the generation and circulation of fraudulent ITC. 

Probe continues

The latest searches are part of the ED's investigation into the money-laundering aspects of the alleged tax fraud. The agency's broader enforcement activity under the PMLA includes cases involving fraudulent ITC utilisation and layering of funds through shell or non-existent entities. 

The investigation is continuing, and further action will depend on the evidence gathered during the searches and the subsequent tracing of the alleged money trail. At this stage, the allegations remain subject to investigation and any further proceedings that may follow under applicable law.