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The religious group Cosmic Truth Society hid ¥1.4 billion in taxable income by disguising revenues from its love hotels in five prefectures as offerings, sources alleged Tuesday.

The Kantoshinetsu Regional Taxation Bureau imposed a ¥300 million penalty and added taxes on the group known in Japanese as Uchu Shinri Gakkai, the sources said.

The group, based in Tadotsu, Kagawa Prefecture, has objected to the decision, which covers income made over a seven-year period through February 2008, they said.

Tax authorities believe the association abused preferential tax treatment for public-interest corporations, including religious entities, to dodge corporate taxes, according to the sources. Offerings to such organizations are nontaxable.

The association, which is believed to be effectively run by a man who lives in Chikuma, Nagano Prefecture, runs 23 love hotels in Nagano, Gunma, Niigata, Gifu and Shizuoka prefectures. The religious entity was founded in 1983 but remained dormant until 1994.

The sources said the association reported to the tax authorities about 60 percent of its revenues from hotel fees but failed to declare the remaining 40 percent, as it claimed they were offerings.

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