Rs 800 crore bogus expense, Rs 60 crore cash deal in real estate detected in tax raid on Hero MotoCorp

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The Income Tax Department has found that two-wheeler auto giant Hero MotoCorp has shown more than Rs 800 crore as business expenditure in its books which has not been supported by evidence and therefore appears to be a case of tax evasion. </p>
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“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 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 Income Tax Department said in a press statement issued on Thursday. </p>
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“In the search, it was also found that 10 acres of farm land at Delhi was purchased through a  few paper companies. In such transactions, an unaccounted cash component of over 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 further explained.</p>
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The statement, however, did not mention the name of Hero MotoCorp or its chairman Pawan Munjal who were covered in the tax raid.</p>
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The I-T Dept. said it conducted a search and seizure operation 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 across Delhi-NCR, on March 23.</p>
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During the course of the search operation, various incriminating documents and digital evidence have been found and seized indicating that the expenses ostensibly shown to have been claimed towards business purposes are not fully supported by evidence, the statement explained.</p>
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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.</p>
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In the case of the company operating chartered flights, evidence related to 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, etc. have also been unearthed.</p>
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Undisclosed cash exceeding Rs. 1.35 crore has been seized and jewellery over Rs. 3 crore has been kept provisionally under restraint, the statement said.</p>
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Further investigations are in progress, it added.</p>
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Hero MotoCorp The company in a statement issued at the time of the raid said, "Officials from the Income Tax Department visited two of our offices in Delhi and Gurugram and the residence of our Chairman & CEO Dr. Pawan Munjal on Wednesday. We have been informed that this is a routine inquiry, which is not uncommon before the end of the financial year."</p>
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"We reassure all our stakeholders that it continues to be business as usual," it added. "We at are an ethical and law-abiding corporate, and maintain the highest standards of impeccable corporate governance. In keeping with this philosophy, we are extending our full cooperation to the authorities," the statement added.</p>