IT dept finds unaccounted sales of Rs 1,000 Cr during raids against Polycab

The Income Tax department has detected "unaccounted cash sales" of about Rs 1,000 crore after it recently raided the Polycab group, a prominent wires, cables and electrical items manufacturer, the CBDT and official sources said on Wednesday.

Unaccounted cash of more than Rs 4 crore was seized and more than 25 bank lockers were put on restraint after the searches were launched against the group on December 22 last year, the Central Board of Direct Taxes (CBDT) said in a statement.

It said a total of 50 premises in Mumbai, Pune, Aurangabad, and Nashik in Maharashtra, Daman, Halol in Gujarat, and Delhi were covered.

Some of the authorised distributors of the group were also covered in the searches, the CBDT, which is the administrative body for the Income Tax department, said.

The CBDT statement did not name the group but official sources confirmed it to be Polycab India Limited.

Polycab India issued a clarification to stock exchanges earlier Wednesday terming reports of "tax evasion by the company circulating in media" as "rumours"

"The company asserts its commitment to compliance and transparency, having fully cooperated with the Income Tax department officials during the search proceedings in Dec '23. The company has not received any communication from the Income Tax department regarding the outcome of the search," the company told the bourses in a statement.

The CBDT said a large number of "incriminating" evidence in the form of documents and digital data were seized during the raids. These reveal the "modus operandi of tax evasion" adopted by the group in connivance with some of authorised distributors, it said.

"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," it alleged.

"Credible evidence recovered during the search has established that the flagship company has made unaccounted cash sales of around Rs 1,000 crore which are not recorded in the books of accounts," the CBDT claimed.

Unaccounted cash payments of more than Rs 400 crore made by a distributor, on behalf of the company, towards purchases of raw materials, have also been found, the statement said.

It alleged that "non-genuine" expenses in the nature of sub-contracting expenses, purchases and transport expenses, etc., aggregating to about Rs 100 crore, have also been identified in the seized evidence from the premises of the company.

The search action also resulted in the determination of "unexplained" transactions undertaken by the distributor for issuing bills without the genuine supply of goods, whereas such goods have been sold in the open market in cash, it said.

Thus, the CBDT said, the authorised distributor facilitated certain parties to "inflate" their purchase accounts, which aggregate to about Rs 500 crore. This distributor exclusively sells products of the flagship company, it said.