Two Twin Cities businessmen are facing dozens of charges of tax fraud while their restaurants in Minneapolis and Apple Valley have been charged with nearly 100 counts of failing to pay or collect sales tax.
The charges against Lakhvir Singh Padda, Medina, and Baljit Singh, Eagan, and their two Darbar India Grill restaurants, allege that over the course of several years Padda and Singh “knowingly underreported” sales tax collection reports, according to court documents filed by the Minnesota Department of Revenue (MNDOR) in Hennepin County Court.
The criminal complaints allege that the fraud occurred during several periods between July 2014 and July 2019.
The investigation, which began after a civil audit led to a criminal referral, found that Padda had altered computerized records of sales to help cover up the tax fraud.
At the Minneapolis restaurant, investigators found that thousands of sales transactions were deleted from the point-of-sale system and investigators noticed an unusually low percentage of cash sales in the system – an indication of an effort to reduce sales tax obligations, according to the complaints. The two restaurants allegedly evaded paying more than $280,000 in sales tax.
In addition to the “implausibly low ratio” of cash sales at the restaurants, investigators obtained bank records showing that the restaurant deposited more money than it reported as gross receipts on its monthly sales and use tax returns during most of the audited periods.
During the investigation, search warrants were executed at the homes of Padda and Singh along with both Darbar restaurant locations. Investigators seized handwritten notebooks from both residences containing monthly sales figures covering various periods. The figures indicated that both locations routinely underreported their sales to MNDOR on the corresponding monthly tax returns and that sales tax was accordingly underpaid, the complaint stated.
The complaint also noted that a prior audit of the Minneapolis restaurant by MNDOR for a period between 2010 and 2014 had found an under-reporting and underpayment of sales tax in the amount of $18,000.
Padda, 41, is facing 55 felony counts of aiding in the filing of false or fraudulent sales tax returns, and Singh, 36, is charged with 10 counts. The Minneapolis restaurant location is charged with 62 felony counts of failing to pay or collect sales tax, and the Apple Valley location is facing 31 counts.
Each tax-related felony charge carries a maximum penalty of five years in prison and/or a $10,000 fine.
The complaint stated that investigators requested a warrant for Padda’s arrest because he was deemed to be a flight risk due to his international connections and apparent large amounts of cash kept on hand.
Padda posted a non-cash bond following his initial court appearance and is scheduled to make his next appearance in Hennepin County Court on Aug. 18. Hearing information for Singh wasn’t immediately available.
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