Hyderabad, The Income Tax Department's searches at properties owned by Andhra Pradesh MP Alla Ayodhya Ramireddy's family-owned Ramky Group in Hyderabad three days ago have revealed a Rs 1,200 crore artificial loss.

The raids conducted on July 6 also led to detection of unaccounted income of Rs 300 crore, the Income Tax Department said on Friday.

Ayodhya Ramireddy is a member of the Rajya Sabha from Andhra Pradesh's ruling YSR Congress Party (YSRCP) and considered close to Chief Minister Y.S. Jagan Mohan Reddy.

The income tax sleuths had conducted searches at various properties owned by the MP and his family-owned Ramky Group after they had shown huge losses.

The searches revealed that they had incorrectly claimed bad debts to the tune of Rs 288 crore on account of related party transactions, which was set off against the profits earned.

The department said the entities and their associates have admitted to having an unaccounted income of Rs 300 crore and have also agreed to pay the tax on it.

The search operation led to detection of artificial loss of approximately Rs 1,200 crore, which is said to be taxed in the hands of the respective assesses, the department said.

"Further, during the course of the search, it was found that the assessees had incorrectly claimed bad debts to the tune of Rs 288 crore on account of related party transactions, which was set off against the aforementioned profits earned. During search proceedings, incriminating documents relating this artificial/incorrect claim were found. Unaccounted cash transactions with the associated of the group have also been detected during the search and the quantum and modus of the same is under examination," it said.

"As a result of the search & seizure operation, and on the basis of various incriminating documents found, the entities and associated have admitted to having unaccounted income of Rs 300 crore and have also agreed to pay due taxes," it added.

The officials seized many incriminating documents, including several loose sheets indicating involvement of the group in unaccounted transactions.

It was also found that the group had sold its majority stake to a non-resident entity based in Singapore during 2018-19 and had earned huge capital gains.

The group subsequently devised various schemes by entering into a series of share purchase, sale, non-arm's length valued subscription and subsequent bonus issuance etc with related parties, creating a loss which was set off against the capital gains earned. Incriminating evidence/documents have been recovered, which indicate that the loss was artificially created to set off the respective capital gains.

The department said further investigations were under progress.

Ramky Group is engaged in real estate, construction, waste management, and infrastructure. The activities of waste management are spread across India while real estate activities are mainly concentrated in Hyderabad.

The group had earlier figured in the investigations by the Central Bureau of Investigation (CBI) into disproportionate assets case against Jagan Mohan Reddy.

The Enforcement Directorate had, in 2013, seized its assets based on the charge sheet filed by the CBI. The Ramky Group was accused of investing in Jagan Mohan Reddy-owned Jagati Publications in the form of buying shares at 35 times premium on alleged quid-pro-quo basis.

According to charge sheet, Jagan Mohan Reddy had prevailed upon his father and then undivided Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy to reduce the green belt area of Ramky Pharmacity at Parwada in Visakhapatnam in violation of layout norms.