I-T raids at Karnataka medical colleges unearth ‘cash for seat’ scam, Rs 402 cr found

The Income-Tax (I-T) department raids at several medical colleges across Karnataka Wednesday have found malpractices in admissions to MBBS, BDS, and PG courses. I-T sleuths also found over Rs 400 crore unaccounted cash in the name of capitation fee, officials said Thursday evening. Nine major trusts, registered in Bengaluru and Mangaluru, running educational institutes, including medical colleges, were raided.

Cash amounting to Rs. 15.09 crore, gold jewellery of 81 kg (valued at Rs. 30 crore), 50 carat diamonds and 40 kg of silver articles have been found from the residential premises of the trustees and are prime facie, unexplained. Evidence of undisclosed foreign assets of Rs 2.39 crore in Ghana has also been found apart from evidence of huge investments in 35 luxury cars in benami names.

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The residences of trustees of several medical colleges and hospitals in Bengaluru, Tumakuru, Davangere, and Mangaluru were also searched Wednesday.

“Searches were conducted at 56 different locations across Karnataka and Kerala… it was found that transparent selection process to Medical colleges through NEET has been subverted by trustees and key persons running these Medical Colleges in collusion with agents/brokers and some students who got high ranks in NEET Examination… thereby blocking seats in the medical stream in a medical college during the Karnataka Examinations Authority (KEA) counselling process, in connivance with agents, middlemen, converters (who provide service of converting the regular seats to management seats),” a statement by the Central Board of Direct Taxes (CBDT) said.

Such seats are made available to the college management for filling up through the “stray vacancies round” (seats remaining vacant or unfilled in a college after a mop-up round), the CBDT said. In this round, the statement added, the seats are filled by the college management by admitting less meritorious candidates (low rank in NEET) after collecting huge sums as capitation fee, donations in cash which are illegal under the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984.

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“The capitation fee/donations are collected through a network of brokers/agents employed by the key persons/trustees of these medical colleges,” the statement said. The CBDT said “the search operation resulted in detecting incriminating evidence regarding cash-for-seat malpractices for admission to MBBS, BDS and PG seats in the form of notebooks, handwritten diaries, excel sheets containing the details of cash received from students/brokers for admission in these colleges for various years”.

It added that there is evidence indicating that one of the medical colleges have some sort of ‘package arrangement’ for passing management quota students in written examination and viva voce for a fixed sum ranging from Rs 1 lakh to Rs 2 lakh.

“There is evidence which prima facie suggests that the cash money accepted by manipulating the online admission process in these colleges has been diverted for non-charitable purposes by the trustees, which is clearly in violation of Section 12AA of the Income Tax Act, 1961.

“Apart from this, evidence has been found regarding a large number of investments made in immovable properties with huge cash component attracting provisions of Section 69 (unexplained deposits) of the Income Tax Act, 1961,” the CBDT alleged.

It added that one of the colleges has diversified into the business of timber/plywood industries where evidence regarding under invoicing has also been found. “So far, the evidence gathered indicates that Rs. 402.78 crore has been accepted as illegal capitation fees by manipulating the online admission process and the same has not been disclosed to the Income Tax Department,” release added.