MBBS seat blocking scam tuned to be worth Rs 100 crore: IT officials

Bengaluru: The Income Tax (IT) department raids on alleged forgery in the National Eligibility cum Entrance Test (NEET) exam and major MBBS seat blocking scam in Karnataka have revealed yet another hand. The department has now estimated size of the scam, which it termed as undisclosed income, at around Rs 100 crore.

"Evidence reveals undisclosed income of around Rs 100 crore, considering the cash donations received for 185 seats averaging Rs 50 lakh to Rs 65 lakh per seat," the press note jointly issued by the finance ministry and Central Board of Direct Taxes (CBDT) stated.

Medical Dialogues had recently reported that based on the tipoff that the MBBS seats were being sold at the rate of Rs 50-60 lakh for undeserving candidates whose ranks were below even 8 lakh, the IT department conducted raids at 2 medical colleges wherein the authorities have seized about Rs 5 crore cash so far. One other medical college was also raided by the officials suspecting connection with the scam.

The issue of seat blocking during medical counselling is an issue that crops up every year. Seat Blocking is an act by high ranking candidates first opting for a particular seat in a round and then not joining the same, making the seat available for the next round. It is alleged that many medical colleges collude with the high ranking candidates to indulge in seat blocking so that popular MBBS seats can be made available for lesser deserving candidates who are willing to pay exorbitant price.

The raids were in connection with a multi-crore tax evasion case linked to the NEET exams and being conducted against the former Karnataka ex-deputy chief minister G Parameshwara and former MP R L Jalappa's son J Rajendra.

Two medical colleges are affiliated to Sri Siddhartha Academy of Higher Education, where Parameshwara is the chancellor. The third institute is affiliated to Sri Devraj Urs Academy of Higher Education and Research, whose trust is headed by Jalappa.

Since the medical colleges were deemed varsities, they were required to fill their seats via merit on NEET and did not have any local reservations.

A senior I-T official, who has been monitoring these raids has informed that they have found 168 out of 300 MBBS seats allotted under management quota by the three private medical colleges (which are deemed universities), were blocked and later sold to the students, who secured low ranks. These seats were allegedly sold at a minimum price of Rs 50 lakh per seat while the actual fee for these seats is only about Rs 6 lakh.

The massive search had resulted in the seizure of Rs 8.82 crore worth assets and incriminating documents proving the alleged irregularities in medical admissions.

Read Also: MBBS Seat Blocking at Karnataka medical colleges: IT raids recover Rs 5 crore from top Politicians

Now, in a recent press release issued by the finance ministry and CBDT, the authorities stated that evidence also revealed undisclosed investments in real estate. "Overall, the total undisclosed income detected so far is around Rs 100 crore, considering the cash donations received for 185 seats, averaging Rs 50 lakh to Rs 65 lakh per seat, and total seizure of undisclosed assets of Rs 8.82 crore," said the note; reports TW.

"Certain students, whose names were used in conversion of seats, have made statements establishing the modus operandi. Agents have admitted to having aided in sale of seats, brokers have admitted to be witness and accomplice to diversion of such cash generated," the release stated.

The note speaks of seizing Rs 9 crore in cash. Interestingly, Rs 40 lakh in cash found during searches was from the offerings box of a temple of which Parameshwara is a trustee.

TOI adds that the IT sleuths have evidence that the accused had resorted to hawala transactions involving unaccounted cash. "A total of Rs 4.2 crore of unaccounted cash, including Rs 89 lakh from the house of the main trustee (Parameshwara), has so far been found," it claimed.

On the benami transactions, an IT officer informed TNIE, "Out of the Rs 8.82 crore cash that was seized during the raids, Rs 4.6 crore was recovered from the fixed deposits of eight employees of the Sri Siddhartha Education Trust. The employees have told the income tax officers that the money reportedly belonged to the trustees, who had diverted it to their accounts. The trustees have also opened benami bank accounts in the names of their employees to deposit some of the capitation fee received in cash. The interest from the benami fixed deposits is being used to service the loans taken by the trustees in their personal capacity. They have also used the cash, which was collected as donation for purchase of immovable assets such as hotels and property."

According to the IT officials, collection of capitation fee is itself a criminal activity under the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984 and noting the several gross violations the case is likely to be handed over to the CBI.

"The initial investigation by the Directorate of Income Tax (Investigation), Karnataka & Goa has unearthed gross violations under the provisions of the Income Tax Act, 1961 and the stringent Benami Transactions (Prohibition) Amendment Act of 2016," said an I-T officer. The department is likely to refer the case to the CBI to investigate charges of corruption against Parameshwara under the Prevention of Corruption Act, certain sources informed TNIE.

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