A restaurant owner who ripped off the tax system to the tune of $833,000 has been jailed and his "naive" wife sentenced to home detention.

The Inland Revenue Department began looking into the activities of Rakesh and Nalini Kumar when it noticed large cash sums going into their accounts while their businesses claimed to be losing money.

The department calculated that Rakesh Kumar had evaded $833,294.99 in payments between 2009 and 2016.

JOHN COWPLAND Nalini Kumar appearing in Hastings District Court for sentencing on Wednesday.

Nalini Kumar knowingly signed false tax, GST and PAYE returns with the intention of evading assessment and payment of tax totalling $127,029.60.

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In July Rakesh pleaded guilty to three representative charges of evading assessment and payment of tax. His wife pleaded guilty to one similar charge.

MARTY SHARPE Indian Palace restaurant, on Carlyle St, Napier, where Nalini Kumar claimed to have employed just one staff member on $947 a month.

They were sentenced by Judge Max Courtney in Hastings District Court on Wednesday.

IRD's lawyer Amanda Bryant told Judge Courtney that Nalini Kumar had paid the full amount she owed on Tuesday. Rakesh Kumar had paid off $349,948, leaving $483,346.08 outstanding, for which IRD was seeking reparation.

Bryant said knowingly filing false tax returns was "an integral part of their business plan", and was inspired "by greed more than need".

MAARTEN HOLL IRD found large cash sums going into Rakesh Kumar's accounts at the same time he was claiming his businesses were making losses.

She described it as "inherently premeditated" offending and they mst be held to account in order to denounce similar offending.﻿

They could have repaid the debt by now and the payments would not have been made had they not be prosecuted, Bryant said.

Lawyer for the Kumars, Rachel Scott, said the case was unusual in that some reparation had been paid and considerable effort went into making the payments.

She said Nalini Kumar had been naive in her dealings with tax, and she had never "come up with some grand scheme to deceive the commissioner".

Judge Max Courtney said a pre-sentence report noted Rakesh Kumar blamed others for his offending and recommended a jail sentence.

The offences "go to the heart of the income tax regime", which relied on taxpayers honesty, Judge Courtney said.

JOHN COWPLAND/STUFF The Kumars were sentenced at Hastings District Court on Wednesday .

He noted references for good character and the early guilty pleas.

He sentenced Rakesh Kumar to two and a half years in prison, but did not make a reparation order against him.

Judge Courtney said Nalini had received just $120 a week in wages while employed in the companies, and she was in a "vastly different situation" to her husband.

She appeared genuinely remorseful and did not know about her husband business dealings, he said.

He sentenced her to five months home detention and 100 hours community work.

IRD became interested in Rakesh Kumar, in 2014. Kumar is the director and shareholder of several companies including restaurants, dairies, rental properties and horticultural operations and investigators noticed his companies had returned large losses for income tax and GST purposes and he was also reporting low cash earnings compared to similar operations.

Despite this, Kumar, 56, was able to buy new businesses over the years he was reporting losses.

His bank records revealed that he was receiving substantial amounts of cash deposits over the same time. Some of his family members were also receiving large cash deposits into their accounts from sources that have not been explained.

He used proceeds from undeclared cash sales to expand his business empire and regularly took cash from the businesses for himself or instructed his employees to deposit it in bank accounts under his control. He also paid employees in cash and didn't list them in employer schedules provided to the Commissioner for Inland Revenue.

Nalini, 55 is the director and shareholder of Prabhu Kripa Ltd, which runs the Indian Palace restaurant on Carlyle Street, Napier. Her husband is the only other shareholder.

Between 2009 and 2017 the company returned an abnormally low percentage of cash sales, leading it to being investigated by IRD. In one year the company's tax returns stated that less than one per cent of its sales were cash - the industry average was 30 per cent.

One PAYE return by the company falsely stated that between December 2010 and February 2011, the busiest part of the year, the company had employed just one staff member and was paying just $947 a month in wages.

Inland Revenue can look to recover the money through civil proceedings. A spokesperson said it was an option being considered.