Hero Motocorp case: IT Deptt says automaker siphoned off ₹800 crore

The Income Tax Department said it has seized incriminating documents after it conducted a search operation on a leading automobile manufacturer, indicating that the expenses ostensibly shown to have been claimed towards business purposes are not fully supported by evidence.

The taxman said an expenditure of over ₹800 crore made by the auto company has been booked in the guise of purchase of services from a specific event management entity, which allegedly siphoned-off the money.

"This entity 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, 1961," the I-T Department said.

In the search, it was also found that 10 acres of farm land at Delhi was purchased through a few paper companies, the taxman alleged, adding that an unaccounted cash component of over ₹60 crore was purportedly involved in that transaction.

The real beneficiary of the land deal is a prominent person of the automobile manufacturer group, the Income Tax Department said without directly naming Hero Motocorp chairman Pawan Munjal.

The intermediary who facilitated the said deal has admitted in his statement that a major part of the sale consideration was paid in cash, it added.

Earlier this week, a news agency reported that the purchase was made by Munjal, where the price of the property was manipulated to evade taxes and black money was allegedly used to pay for it.

"Apart from this, several incriminating documents have been unearthed from the premises of persons involved in the real estate business. These contain records of on-money transactions where cash was being received in lieu of sale of units in their various real estate projects across Delhi," Surabhi Ahluwalia, commissioner of Income Tax (Media & Technical Policy) and official spokesperson of the Central Board of Direct Taxes (CBDT,) said in a press statement.

"In the case of the company operating chartered flights, evidence related to booking of bogus expenses and non-recognition of income totalling to over ₹50 crore, rotation of funds and suspicious loans through a dubious NBFC floated by a key person, layering and re-routing of funds through paper companies and claiming bogus interest expenses, etc. have also been unearthed," the release said. "Undisclosed cash exceeding ₹1.35 crore has been seized and jewellery over ₹3 crore has been kept provisionally under restraint."

The I-T Department had conducted a search and seizure operation at several locations related to Hero Motocorp last month.

Hero MotoCorp, however, has denied any wrongdoing in the matter, stating that it will inform the exchanges of the findings of the tax department when it receives them.

On Thursday, members of the promoter and promoter group of Hero MotoCorp bought 46,100 shares of the company. With the purchase of these shares, the promoter and promoter group shareholding in the firm will increase from 34.75% to 34.78%.