INR 800-Cr ‘CSR Racket’ Across 6 States Uncovered

Rs 800-crore Corporate Social Responsibility funds misuse racket uncovered by Tax Dept

Section 135 of the Companies Act, 2013 mandates certain companies to spend at least 2% of their average net profits on CSR activities. Many companies allegedly used fake trusts to show compliance while routing money back.

Scale of Fraud: Over ₹800 crore CSR funds siphoned off through bogus trusts and shell companies. CSR funds siphoned off Operation spanned six states, with searches at 30+ locations. Key Trusts Involved: Three trusts identified at the centre — in Mathura (UP), Bhilwara (Rajasthan), and Ahmedabad (Gujarat).

1. Jan Jagriti Sevarth Sansthan (Mathura, UP)
2. Brajmohan Sapoot Kala Sanskriti Sewa Sansthan (Bhilwara, Rajasthan)
3. Raginiben Bipinchandra Sevakarya Trust (Ahmedabad, Gujarat)

Modus Operandi: Involved bogus trusts and shell companies.CSR funds shown as spent on education, health, and welfare.CSR donations (mandated under Section 135 of the Companies Act) were siphoned off. In reality, no social work carried out. Funds were diverted abroad through fraudulent remittances of over ₹100 crores to places like Singapore, Malaysia, Hong Kong, and UAE. Money diverted via complex networks of fake entities and fraudulent foreign remittances (~₹100 crore).Following are the Investigation Status mentioned here under :

Searches conducted at 30+ locations since August 19 by the I-T Investigation Unit in Agra. Directed by the Principal Director of Income Tax (Investigation), Kanpur. Still ongoing, with more recoveries expected. Still ongoing; more recoveries and revelations expected. During the Investigation Following are Findings are come out like These organisations claimed to work in education, health, employment, and social welfare, but no actual work was done. Chartered accountants and controllers managed a network of bogus entities to launder CSR money. Money was siphoned off and diverted abroad.

Broader Concerns: India has 3+ million NGOs/NPOs, many receiving CSR and govt funds. Highlights growing risk of misuse of CSR obligations under Section 135, Companies Act, 2013.

Wider Concern & Implications on NGOs/NPOs

• India has over 3 million NGOs/NPOs, many receiving large sums through CSR mandates and government funding. This case shows growing misuse risks in the non-profit sector.
• Stronger scrutiny of NGOs/NPOs is expected. Corporates may face increased compliance checks on CSR spending. Could lead to policy reforms on monitoring CSR activities and trust registrations.
• Implication for Companies: Heightened compliance checks likely. Corporates may face stricter monitoring of CSR partners and fund utilisation.

CSR funds must keep safeguard against misuse and regulatory risks :

This case underscores the urgent need for companies to strengthen CSR governance frameworks. Corporates must treat CSR obligations not merely as a compliance requirement, but as a responsibility requiring rigorous monitoring, transparency, and accountability. To safeguard against misuse and regulatory risks, companies should:

• Conduct Due Diligence: Verify the credentials, financials, and past track record of CSR partner organisations. Check NGO/NPO registration under MCA, Income Tax Act (12A/80G), and FCRA (if applicable).
• Board-Level Oversight: Ensure the CSR Committee actively reviews CSR proposals and implementation. Document decision-making and monitoring mechanisms in Board minutes.
• Third-Party Audits: Engage independent auditors to review CSR fund utilisation. Obtain utilisation certificates and impact assessment reports.
• Direct Implementation Preference: Where feasible, implement CSR projects directly or through well-established, reputed organisations.
• Reporting & Transparency: Ensure accurate CSR disclosures in the Board Report and on the company website. Monitor compliance with MCA’s CSR-2 filing requirements.
• Continuous Monitoring: Track CSR fund flows periodically. Insist on quarterly progress and fund utilisation reports from partner NGOs/NPOs.

We recommend an immediate review of ongoing CSR partnerships and fund utilisation to ensure full compliance and mitigate risks. We can provide the further assistance, our team can help with CSR policy framework reviews, Due diligence of implementing agencies, Independent CSR audits and impact assessments & Advisory on CSR reporting and compliance with MCA filings

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