Polycab India said that the Income Tax Department searched its premises last month. However, the electric goods company refuted reports of tax evasion.
The company has issued the clarification as the tax authorities issued a statement saying it initiated search and seizure operations in the case of a group which is engaged in the manufacturing of wires and cables and other electrical items on December 22.
Some of the authorised distributors of the group were also covered in the search. The search action was conducted at more than 50 premises located in Mumbai, Pune, Aurangabad, Nasik, Daman, Halol and Delhi, the statement said. However, the statement did not mention name of the company.
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According to the statement, during the course of the search operation, a large number of incriminating evidences in the form of documents and digital data have been found and seized. These evidences reveal modus-operandi of tax evasion adopted by the group in connivance with some of the authorised distributors. Preliminary analysis suggests that the flagship company indulged in unaccounted cash sales, cash payments for unaccounted purchases, non-genuine transport and sub-contracting expenses, etc. for suppression of its taxable income.
Further, credible evidences recovered during the search have established that the flagship company has made unaccounted cash sales of around ₹1,000 crore which are not recorded in the books of accounts. Evidences of unaccounted cash payments of more than ₹400 crore made by a distributor, on behalf of the flagship company towards purchases of raw materials, have also been seized. Further, non-genuine expenses in the nature of sub-contracting expenses, purchases and transport expenses, etc. aggregating to about ₹100 crore have also been identified in the seized evidences from the premises of the flagship company.
The search action also resulted in determination of unexplained transactions undertaken by the distributor for issuing bills without genuine supply of goods whereas such goods have been sold in open market in cash. Thus, the authorised distributor facilitated certain parties to inflate their purchase accounts, which aggregate to about ₹500 crore. This distributor exclusively sells products of the flagship company, the statement added.
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During the course of search operation, unaccounted cash exceeding ₹4 crore, has been seized and more than 25 bank lockers have been put on restraint. “Further investigations are in progress,” the department said.
Meanwhile, in a filing to the stock exchanges, the company stated its commitment to compliance and transparency, having fully cooperated with the Income Tax Department officials during the search proceedings in December 23.
“The company has not received any communication from the Income-Tax department regarding the outcome of the search. Polycab India remains focused on its mission to provide quality products and services to its customers while upholding the principles of corporate governance and ethical business practices,” it said.
The Polycab India share declined ₹979.90 or 19.95 per cent to ₹3,931.95 at 12.20 pm on BSE.