Hero MotoCorp fell 3.39% to 2219.05 after the Income Tax department uncovered irregularities to the tune of Rs 800 crore after raids on the company.
The Income Tax Department 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 23 March 2022.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 evidences.
"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 Central Board of Direct Taxes (CBDT) stated on Thursday without naming the company.
In the search, it was also found that 10 acres of farm land at Delhi was purchased through few paper companies. In such transactions, 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.
Hero MotoCorp clarified to the stock exchanges on Tuesday, 29 March 2022, that officials from the Income Tax department visited its offices in the previous week. The company said it extended full cooperation to the authorities and will continue to do so if required.
"As and when the tax department concludes its findings and communicates to us, we will inform the exchanges suitably," it added.
Hero MotoCorp is the world's largest manufacturer of motorcycles and scooters. On a consolidated basis, its net profit declined 30.95% to Rs 703.74 crore on 18.46% fall in net sales to Rs 8,013.08 crore in Q3 FY22 over Q3 FY21.
Meanwhile, the company announced on 31 March 2022 that its promoter and promoter group bought 46,100 shares of the company. With the purchase of these shares, the promoter and promoter group shareholding in the company will increase from 34.75% to 34.78%.
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