Tax authorities raid CBM drilling contractor Mitchell

Vol 12, PW 16 (15 Jan 09) People & Policy

Not often do you get to hear about the office of an established and reputed overseas drilling contractor in India raided over charges of tax evasion.

But in this case it probably wasn’t surprising, given that the firm in question, Mitchell Drilling of Australia, was audited by the Indian arm of PricewaterhouseCoopers (PWC), whose spectacular failure to spot a Rs7000cr ($1.7bn) fraud at disgraced Indian IT firm Satyam last week dealt a near fatal blow to its reputation. On December 16, the International Taxation unit of India’s federal Income Tax Department raided the Gurgaon office of Mitchell, looking for incriminating documents.

“The department sent many notices to Mitchell,â€‌ reports an industry source. “Neither Mitchell or PWC bothered to reply.

â€‌ During the raid, tax authorities, we hear, sealed Mitchell’s offices. Mitchell, it seems, immediately pleaded to be able to gather items from the office, crucial to ongoing projects and was allowed to re-enter earlier this month.

“Mitchell is being investigated for tax evasion to the tune of around $500,000,â€‌ adds another source. Contacted by this report, an unofficial Mitchell spokesman downplayed the incident, saying the raid was nothing more than a routine â€کsearch and survey’ by tax authorities.

Exact details are unclear but Mitchell’s accountants are allegedly accused of manipulating financial entries and evading excise duty and tax payable on the company’s revenue. Last year Mitchell signed two firm CBM drilling contracts with exploration companies operating in India.

One was with Brisbane-based Arrow Energy and the second is with BP. “Arrow’s contract was called off because of violence when they went to drillâ€‌ at RM-CBM-2005/III, or the Raj Mahal block, in Jharkand.

But BP’s contract for drilling services at the BB-CBM-2005/III CBM block at Birbhum in West Bengal is still in place and BP confirms Mitchell is set to drill its first core hole on the block in March.