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

When Inland Revenue noticed large cash sums going into the accounts of a Hawke's Bay couple who claimed their businesses were losing money, they decided to take a closer look.

IRD became interested in Hastings man Rakesh Kumar, who is the director and shareholder of several companies including restaurants, dairies, rental properties and horticultural operations after noticing that between 2010 and 2016 his companies had returned large losses for income tax and GST purposes. 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.

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.

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.

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Kumar failed to provide adequate answers when questioned by IRD about the cash deposits and the source of funds to maintain his businesses.

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.

A former manager employed by Kumar at one his restaurants said he had received a cash "top-up" of $100 a week.

JOHN COWPLAND/STUFF The Kumars pleaded guilty of tax evasion at Hastings District Court on Tuesday

IRD said Kumar had maintained a practice of under-reporting cash sales from various businesses and paying employees under the table over a number of years for the purpose of evading assessment and payment of tax.

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

Kumar appeared in Hastings District Court on Tuesday and pleaded guilty to three charges of evading assessment and payment of tax.

His wife, Nalini Kumar, appeared immediately after him and pleaded guilty to one similar charge.

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.

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

The pair were granted bail and will appear for sentencing in October.

IRD is seeking reparation for the full amounts.