The National Federation of Agricultural Cooperative Associations (Zenno) hid about 1.4 billion yen in taxable income over three years through March 1999, industry sources said Tuesday.
The association allegedly gave part of its income to its business partners by forging fictitious purchases, the sources said.
Payments for purchases can be deducted from income and are thus exempt from income tax payments.
The Tokyo Regional Taxation Bureau has told the association that the payments in question must be defined as social expenses and cannot be exempted, according to the sources.
The tax bureau has apparently collected some 100 million yen in tax and penalties from the association, as the entity underreported taxable income by about 2 billion yen, including accounting mistakes, they said.
A spokesman said the association had not intended to hide income but that it paid the penalty to follow the tax authorities' instructions.