Hero MotoCorp shares tank 7% after IT raid reveals Rs.1,000 crore bogus expenses
The Income Tax Department raids have revealed that Hero MotoCorp made more than Rs. 1000 crore bogus expenses and over Rs.100 crore cash transactions for a farmhouse in Chhattarpur, Delhi, as per sources. The search operations covered more than 40 premises spread over different locations in Delhi NCR.
Hero MotoCorp, one of the leading two-wheeler companies in India, has found itself entangled in bogus expenses which allows the company to claim them as a deduction, thereby reducing the income liable for tax. The Department has also found evidence of cash transactions of more than Rs.100 crore in the purchase of a farmhouse on the outskirts of Delhi.
As a reaction to the reports, the shares of automobile major Hero Motocorp slipped by over seven percent on March 29, as the market reacted adversely. The share price closed at Rs.2,210, recovering from the day’s low of Rs.2,154.
On March 23, the Income Tax Department carried out a search and seizure operation on Hero Motocorp and its chairman and managing director Pawan Munjal at multiple locations in Delhi NCR. The raid concluded on March 26.
As per sources, a large number of incriminating evidence in the form of hard copy documents and digital data have been seized during the search operations.
These evidences revealed that the group has booked bogus purchases, made huge unaccounted cash expenditures, and obtained accommodation entries, aggregating to the tune of more than Rs.1000 crore.
Munjal purchased a farmhouse in Chhattarpur where the market price of the farmhouse was manipulated to save tax and used black money to pay cash more than Rs.100 crore which is a violation of section 269 SS of the IT Act.
Last week raids were being conducted at the offices and residential premises of promoters of Hero MotoCorp. The search includes the residential and official premises of Pawan Munjal.
The company brushed aside the concerns in a statement, stating that this was a “routine check” and it is “business as usual”. While it’s not unheard of for the Income Tax department to conduct searches and raids towards the end of the financial year, the presence of incriminating evidence is a cause for concern.
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