The IT department has detected that the film-makers had allegedly entered into bogus transactions with the finance company to help it generate fake depreciation claims to the tune of several crore of rupees resulting in massive tax evasion, a senior official in the department said here.

Pursuant to the detection, search operations were carried out at all the establishments of VLS Finance and its subsidiary companies and firm proof regarding the evasion gathered. ``We have now issued a notice to the company to file returns on the amount detected by us. This will help us ascertain the source of income of this huge amount,'' the official added.

Actress-turned-film producer Kutty Padmini is reported to be among the filmproducers who were party to the paper transactions with VLS Finance. Incidentally, VLS holds the distinction of charging the highest premium in the history of Indian stock market.

The authorities have established that VLS Finance Limited and South Asia Enterprises Limited came out with public issue on the basis of representing themselves as companies with one of the highest earning per share and fastest growing NBFC companies even while they were registering huge losses and were not paying their income taxes. On the basis of accumulated loss, they were allegedly providing accommodation entries to many companies.

The official stated that a detailed report has already been prepared on VLS Finance. According to estimates, film-makers and the company have colluded to generate fake depreciation claims to the extent of Rs 100 crore.

The modus operandi was to organise `sale and lease back' deals for movies at highly inflated rates. Most of the movies involved had no commercial value and have not been exhibitedduring the lease period. Therefore, buying and leasing out exhibition rights was done with the sole purpose of raising fake depreciation claims, the official alleged.

The department has also conducted extensive investigations on unaccounted investment in property and assets by the directors of the company, providing accommodation entries to other companies so as to reduce their tax liability and artificially enhancing the price of the share of the company by use of unaccounted income, invested in a benami manner, in sale and purchase of their own shares.