The Income Tax Department has initiated a probe into the alleged Andhra Pradesh liquor scam, following actions by the state police, the Enforcement Directorate (ED), and the Serious Fraud Investigation Office (SFIO). The department suspects that nearly Rs 2,000 crore in unaccounted cash was generated through the alleged fraud, with the overall scam value estimated at around Rs 3,500 crore.
Demand Notices and Statements
According to sources within the Income Tax wing, demand notices are set to be issued to the key accused, seeking tax on the unaccounted income. Statements of the accused are already being recorded as part of the proceedings.
Cash Generation Model Under Scrutiny
Investigators have documented a system that allegedly generated and routed unaccounted cash between October 2019 and March 2024. The total illegal gains are estimated at about Rs 3,500 crore, with monthly collections at the peak ranging between Rs 50 crore and Rs 60 crore. Witness accounts cited in the probe suggest kickbacks may have reached Rs 70-80 crore per month, linked to the sale of around 30 lakh liquor cases.
The primary source of cash generation was a per-case kickback mechanism, ranging between 15% and 20% of the base price. Rates varied across categories, from Rs 150 per case for low-cost brands to Rs 600 for high-end brands. Sources in the Income Tax wing said the probe has also flagged inflated procurement practices, where distilleries allegedly paid vendors three to five times the market price for raw materials such as bottles, caps, and extra neutral alcohol. The excess amounts were allegedly returned in cash.
Bogus Invoices and Similar-Sounding Brands
Investigators have further identified the use of bogus invoices by entities such as Adan Distilleries and Leela Distilleries for goods not supplied, with about Rs 76.92 crore suspected to have been diverted through such transactions. Another method under scrutiny is the approval of similar-sounding brands with higher base prices, which allegedly enabled suppliers to generate margins for kickbacks.
Cash Movement Network Mapped
The probe has also traced the logistics of cash collection and movement designed to avoid a digital trail. As per sources in the Income Tax wing, operatives used VPNs, international numbers, and encrypted applications such as Signal and WhatsApp to coordinate deliveries.
About the Author
U Sudhakar Reddy is the Editor (Investigation) at the Times of India, Hyderabad. He has reported extensively on government apathy, divisive politics, systemic gender discrimination, agrarian crisis, and the will to survive great odds. His investigation has uncovered scams such as the Panama Papers Scam, Telgi Stamp Paper Scam, and others.
