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Hero MotoCorp lands in fresh I-T storm

Apart from the auto manufacturer, the IT department conducted searches on a company operating chartered flights and real estate groups. More than 35 premises across Delhi-NCR were searched on March 23.

The Income Tax department said on Thursday searches on the premises of an automobile manufacturer in the Delhi–NCR region had unearthed incriminating documents that showed expenditure of more than Rs 800 crore had been booked in the guise of purchases of services from a specific management entity.

While the company was not named in the release, sources in the department said the observations related to the Munjal family-led Hero MotoCorp group. “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 department noted.

Apart from the auto manufacturer, the IT department conducted searches on a company operating chartered flights and real estate groups. More than 35 premises across Delhi-NCR were searched on March 23.

The release said the documents and digital information recovered indicated the expenses shown to have been claimed for the purpose of business were not supported by evidence. 

They also revealed that 10 acres of farm land in Delhi had been purchased through a few paper companies and that the transactions purportedly involved an unaccounted cash component of over Rs 60 crore. “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 release said.

In the case of the company operating chartered flights, evidence related to the booking of bogus expenses and non-recognition of income totalling to over Rs 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,have also been unearthed. The department said undisclosed cash exceeding Rs 1.35 crore has been seized and jewellery worth over Rs 3 crore has been kept provisionally under restraint.

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While there have been media reports on the searches by taxmen, Hero Motocorp had said in notification to the BSE “the allegations made in the press report are not borne out of any document that have been served on us or our internal documents. Therefore, we categorically deny the speculative press reports.”

Earlier this week, tax officials had told FE the proceedings pertain to the company’s financial transactions for multiple years and are based on documents/electronic devices seized during the search operations. “The company had booked bogus purchases and had unaccounted cash expenditures, the official had added. A tax demand  on unaccounted financial transactions would be issued to the company after the assessment proceedings were completed, another official said.

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