Chhattisgarh Coal Levy Scam: Key Investigations and Systemic Reforms

Income Tax and ED Investigations into Chhattisgarh's Coal Levy Scam and Systemic Reforms

Since 2022, the Income Tax Department and Enforcement Directorate (ED) have conducted thorough investigations into a substantial coal levy scam in Chhattisgarh. This initiative has uncovered widespread corruption, illegal levies, and systemic issues in coal transportation, implicating numerous bureaucrats, politicians, and corporate executives. This report highlights the key findings from these investigations, recent developments, and the reforms initiated to address these challenges.

Key Findings from Income Tax Searches (June 2022)

Search Operations

On June 30, 2022, the Income Tax Department conducted searches at over 30 sites across Chhattisgarh, including significant cities focusing on a coal transportation group and senior government officials.

Unaccounted Wealth

• Evidence Collected: Investigators identified ₹200 crore in unaccounted income stemming from illegal levies on coal transportation.
• Seizures: Authorities confiscated ₹9.5 crore in cash, ₹4.5 crore in jewelry, and documents revealing the existence of benami properties spanning over 50 acres.

Modus Operandi

The investigation revealed a cartel imposing an illegal levy of ₹25 per tonne on coal transported within the state. Allegations indicated that these funds financed:

• Bribery
• Election expenses
• Acquisitions of benami properties

Preliminary Investigations

• Leads suggested that ₹45 crore was handed out in cash to secure coal washeries.
• Property agreements indicated undisclosed investments associated with government officials.

Systemic Reforms Post-Scam

Abolishment of Offline Permit System

In January 2024, the Chhattisgarh government revoked the offline permit system for coal transportation that was instituted in July 2020. The newly elected BJP-led government has reinstated an online permit system to improve transparency and reduce human intervention.

Real-Time Monitoring

To address tax evasion and underreporting, SEBI has mandated real-time GPS tracking for coal transportation conducted by listed companies.

Interagency Coordination

The Income Tax Department and ED are now exchanging real-time data via the National Faceless Assessment Centre (NaFAC), facilitating quicker investigations into benami properties and tax discrepancies.

Stricter Penalties for Corruption

Revisions to the PMLA (2023) have introduced harsher penalties for financial crimes involving public officials.

Finance Act, 2024: Block Assessment Reforms

• Consolidated Block Period: 6 years (in contrast to year-wise assessments).
• Tax Rate: 60% on undisclosed income, with an additional 50% penalty for non-disclosure.
• Digital Compliance: Mandatory e-filing of Form ITR-B for block assessments.

CBDT Notification No. 30/2025 (ITR-B Form)

• Applicability: Relevant for search cases initiated on/after September 1, 2024.

Features:

• Captures income, assets, and expenditures over the designated block period.
• Mandatory digital signatures for companies/political parties.

Penalty Structure:

• Previous penalties under Sections 234A/B/C have been replaced with a flat 50% penalty on undisclosed income.

2025 Finance Act Amendments:

• Expanded Section 132 Powers: Tax officers can access emails and social media accounts if there is suspicion of undisclosed income.
• Data Privacy Concerns: Current regulations lack safeguards against potential misuse of digital access.

Judicial Developments

Supreme Court Interim Bail (March 2025)

IAS officer Ranu Sahu, businessman Suryakant Tiwari, and Saumya Chaurasia received interim bail from the Supreme Court due to protracted investigations. Nonetheless, a special court in Raipur later remanded them back into custody, citing potential risks related to witness tampering.

Prosecution Complaints

The ED has filed three prosecution complaints against 26 individuals under the provisions of the PMLA.

Challenges Identified by Investigations

Corruption in Governance

The investigation revealed systemic corruption, with bureaucrats working in collusion with private entities to extort funds under the guise of mandatory permits.

Revenue Impact

The illegal levy disrupted coal transportation, resulting in significant revenue losses for the state government.

Political Fallout

Allegations of political vendetta have overshadowed efforts focused on enhancing accountability in governance within Chhattisgarh.

Key Takeaways

The Chhattisgarh coal levy scam underscores the urgent need for robust regulatory frameworks to deter systemic corruption. The introduction of online permits and real-time monitoring represents crucial steps towards improving transparency in coal transportation. The collaborative efforts of agencies like the ED and the Income Tax Department reflect India's strengthened commitment to combating financial crimes under the PMLA.

Conclusion

Investigations into the Chhattisgarh coal levy scam have exposed deep-seated corruption in state governance, catalyzing substantial systemic reforms. As legal proceedings continue against the principal accused, these developments highlight the essential need for transparency and accountability in public administration.