On one hand, YS Jagan Mohan Reddy is facing CBI investigation into the investments made in his companies, while on the other, now Enforcement Directorate is also gearing up to quiz him over the quid pro quo issue. As per the sources, the income tax authorities are believed to have informed the CBI sleuths that as per their own investigation, a quid pro quo arrangement existed by which several firms pumped money into the companies floated by Jagan in return for land allotments that he could manage because his father was the chief minister at that time.

This information was passed on to them when the CBI authorities visited Aayakar Bhavan, the I-T headquarters, in Hyderabad on Thursday, as top sources told. Quoting from a report, the I-T authorities told the CBI that "it can be construed that the investors who have paid a huge premium amount (in the companies floated by Jagan) did so due to some form of benefit derived or a hope for benefit to be derived in future by association with the key management personnel who was son of the late chief minister of Andhra Pradesh." After concluding this, the I-T department served notices on some of the investor companies like Matrix, Aurobindo Pharma, Hetero Group, Ramky and Pennar group of companies and collected their version on the investments.

The statements recorded by the I-T wing from Matrix disclosed that "two of Matrix group companies were awarded Voderevu and Nizampatnam port and industrial corridor (Vanpic) project by government of AP." Similarly, Aurobindo Pharma director K Prasada Reddy disclosed that "I have not received any government projects but our family related group concern Aurobindo Pharma was allotted SEZ land in Mahbubnagar." With regard to Hetero Drugs Limited, its director G Srinivasa Reddy confessed to I-T department that "we have applied and been allotted 75 acres of land on a lease basis for a period of 33 years by APIIC at Polepally village, Mahbubnagar district, in Special Economic Zone developed by APIIC for establishment of formulation units."

The investigation carried out on Jagathi Publications, the publishers of Sakshi newspaper, by I-T department with the help of Kolkata, Mumbai, Chennai, Bangalore and New Delhi offices has given rise to doubts over the genuineness of the investments. Accordingly the I-T department slapped a notice on Jagati Publications to pay Rs 122.78 crore. According to the I-T report, "The very fact that Jagati Publications is suffering huge losses (cumulative loss as on 31/03/2010 was put at Rs 31.84 crore) and consequently the share capital has been substantially eroded, clearly indicate that the valuation reports were unrealistic, over optimistic and not based on real appreciation of the facts."

The report also pointed that "It is very important to note that all the fixed properties including land and buildings of Jagati are owned by other associate concern i.e. Janani Infrastructure Pvt.Limited (JIPL) and not the assessee company, Jagati Publications Pvt Ltd. Jagati only owns plant and machinery, which has also undergone substantial depreciation as on date, eroding wealth of the investors." The detailed investigation done by income tax officials in several states has now come as a major source of information to the CBI. "The I-T report also cross checked all the details about investor companies and found that several are bogus. This will be crucial information for us," said sources in the CBI.