Shares of Hero MotoCorp Ltd. tumbled after the Income Tax Department said that its raids on the premises of India's largest two-wheeler maker revealed multiple irregularities.
The IT raids, which were launched on March 23, revealed alleged illegal business expenses of over Rs 800 crore, Rs 60 crore "unaccounted" cash used to purchase land in Delhi and role of some shell companies. The Splendor maker had at the time said it was extending full cooperation to the tax authorities, who visited its offices in Delhi and Gurugram apart from the residence of Chairman and CEO Pawan Munjal.
The Central Board of Direct Taxes issued a statement saying the operation was carried out on a leading automobile manufacturer group, along with a company operating chartered flights and a real estate group of Delhi NCR, covering more than 35 premises.
"Incriminating documents and digital evidence have been found and seized indicating that expenses ostensibly shown to have been claimed towards business purposes are not fully supported by evidences," the CBDT said in the statement. "Expenditure aggregating to more than Rs 800 crore has been booked in the guise of purchase of services from a specific event management entity."
This entity, it said, has siphoned off the money by way of layering.
Such claims towards non-business purposes are inadmissible expenditure under the provisions of the Income tax Act, the CBDT said.
It was also found that 10 acres of farm land in Delhi was purchased via a few paper companies, it said. In such transactions, "unaccounted" cash component of more than Rs 60 crore was purportedly involved. "The ultimate/real beneficiary of the land deal is a prominent person of the automobile manufacturer group. The intermediary who facilitated the said deal has admitted in his statement that major part of the sale consideration was paid in cash," the statement read.
Officials said this action was carried out against Hero MotoCorp and Pawan Munjal.
While a response from the company on the CBDT statement is awaited, it had in a regulatory filing on Tuesday said it was a "law-abiding corporate, with robust internal financial controls" and its "financial statements are duly audited".
On Friday, shares of Hero MotoCorp fell 2.39% to Rs 2,241.80 apiece on the BSE while the benchmark Sensex closed 1.21% higher at 59,276.69 points.
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