Shares of IIFL Finance Ltd. suffered a major drawdown on Thursday's trade, falling more than 15% after news of the Income Tax Department's order for a special tax audit. But this audit is merely a 'procedural' step rather than an allegation of wrongdoing, according to IIFL Group founder Nirmal Jain.
Speaking to NDTV Profit, Jain dismissed the notion that the special audit indicated any foul play. "I think this is completely false," he said, refuting reports that the audit was announced on account of potential tax evasion. “This audit actually by no means means tax evasion or any suspicion or anything of that sort," he added. \
Jain went on to explain that this audit is a natural extension of a search that was conducted by the department last February. “When the search happened... that happens with the suspicion of tax evasion, but that suspicion is not a conclusion,” he stated.
He noted that during the initial search, officials found no immediate cause for concern. “They find something immediately, then they make the firm declare, which did not happen in our case. So obviously, there was no evidence of tax evasion at that point in time”.
The IIFL Group founder added that the move is part of the department's internal checks and balances.
“The way the process works is that from the search department, the file goes to assessment,” Jain said. “Just for independence—to make sure that there's one body or one set of people who collect the data and documents, and the other set of people who process it”.
It must be noted that the management of IIFL Finance had already put out a clarification on the tax audit after market hours on Thursday. This, coupled with Nirmal Jain's clarification on NDTV Profit, has seen the stock zoom in trade, with shares of IIFL Finance currently trading with gains of more than 2.4%.
Jain remained firm that the company's records would withstand scrutiny. “We will be on record; you can check with tax experts who have a proper understanding of the Tax Act,” he concluded.
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