A day after the Supreme Court issued a show cause notice to the Commission for Investigation of Abuse of Authority (CIAA) in relation to the arrest of Chudamani Sharma, the anti-graft body on Thursday decided to file a Rs 10.96-billion corruption case at the Special Court against the suspended director general of the Inland Revenue Department, Tax Settlement Commission Chairman LD Mahat and TSC member Umesh Dhakal. 

Sharma, also the member of secretary of the TSC, Mahat and Dhakal stand accused of embezzling Rs 10.96 billion.

Officials said the anti-graft body will file a chargesheet against the trio on Friday.

Sharma was arrested on June 2. He is in CIAA custody since. Mahat and Dhakal are at large, and the CIAA has issued an arrest warrant against them.

The embezzled amount was calculated after the CIAA studied 46 files related to tax exemption, according to a CIAA source, who said as many as 1,063 files are under investigation. 

“The embezzled amount could be higher and it will be added in the charge-sheet once all the files related to tax exemption are investigated,” the source added. 

The anti-graft body has been studying more than 1,000 files related to tax exemption.

Earlier on June 29, the CIAA had sought Rs 3.02 billion bail from Sharma, as its calculation of embezzled amount by Sharma, Mahat and Dhakal at that time stood at a little over Rs 9 billion.

But instead of posting the bail, Sharma’s family had moved the court seeking his release. Responding to a writ of habeas corpus filed by Sharma’s wife Kalpana Upreti, the apex court on Wednesday issued a show cause notice to the CIAA and ordered it to present the accused before the court on Friday. 

“The Special Court has asked the CIAA to file the case on Friday at 10am. After that, Sharma will be taken to the Supreme Court,” said the CIAA official. 

 The TSC, formed in February 2015, had run into controversy after a report of the Office of the Auditor General (OAG) in April called into question the Rs 21 billion tax exemption granted to various enterprises.

The CIAA investigation shows the TSC had given tax waiver even to the enterprises that were seeking to pay tax dues. Even those who had missed registering applications within the set deadline for settlement of due taxes were also given tax waiver by keeping prior date of deadline for application, according to CIAA officials.

The OAG report has also questioned the intent of the TSC after it gave tax exemption of over 99 percent to many private firms.  

The report also said that most of the enterprises were granted tax exemption not because disputes had reached the court but because they were not willing to abide by the instructions of the tax authorities.

The TSC had received 1,726 applications seeking settlement of due tax amount worth Rs 40.8 billion. “It had reviewed 1,069 applications from which due tax amount of Rs 30.5 billion should have been recovered. But during the course of negotiations, the TSC exempted tax worth Rs 21 billion and recovered only Rs 9.5 billion,” said the OAG report. 

As per Clause 7 of the Corruption Control Act 2002, if a government official is found guilty of corruption, s/he is liable to pay the embezzled amount as well as the double of that in fine. This could mean the CIAA could seek around Rs 11 billion each from the trio in the chargesheet.

Timeline

• Feb ’15: Sushil Koirala-led govt forms Tax Settlement Commission (TSC)

• April 13, ’17: OAG report questions tax settlement by TSC

• June 2, ’17: CIAA arrests Chudamani Sharma; he stands suspended as the director general of Inalnd Revenue Department

• June 22, ’17: CIAA issues 

• public notice for the arrest of TSC Chairman LD Mahat and member Umesh Dhakal

• July 13, ’17: CIAA decides to file corruption case against Sharma, Mahat and Dhakal