I-T department detects Rs 1K-cr 'bogus' expenses at Hero MotoCorp

The income tax (I-T) department is learnt to have found that two-wheeler maker Hero MotoCorp made over Rs 1,000 crore in ‘bogus’ expenses and an unexplained cash transaction of Rs 100 crore involving a property allegedly owned by a promoter of the company.

The findings are learnt to be part of the tax department’s initial probe into a possible tax evasion by the two-wheeler giant.

This came after it searched premises of the company and its chairman and CEO Pawan Munjal as well as other top executives of the firm. The search went on for three days between March 23 and March 26, covering at least 40 locations in Delhi, Gurugram and other parts of North India.

According to news agency ANI, the evidence collected revealed the two-wheeler manufacturer booked ‘bogus’ purchases, made huge unaccounted cash expenditures and obtained accommodation entries amounting to Rs 1,000 crore.

The report further added that the I-T department also found evidence of cash transactions of more than Rs 100 crore in the purchase of a farmhouse on the outskirts of Delhi.

Munjal purchased a farmhouse in Chhattarpur, where the market price was manipulated to save tax and used black money to pay Rs 100 crore in cash in violation of Section 269 SS of the IT Act, the report added.

The department had seized several crucial business and personal documents. The company’s ledger accounts, with transactions of the last five years, are also being scanned.

Besides, the officials had collected digital records and laptops as digital evidence from the premises.

The stock price of Hero Motocorp fell sharply following the reports. At 3:15 pm, the shares were trading at Rs 2,206 a piece on the BSE, which was 7.18 per cent lower compared to the previous day’s close. The stock eventually settled at Rs 2,208.35, down 7.08 per cent.

The company in a statement issued then said, “We reassure all our stakeholders that it continues to be business as usual.” It added, “We at Hero MotoCorp 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.”

Firm to up rates by Rs 2K

Two-wheeler market leader Hero MotoCorp on Tuesday said it will increase prices of its motorcycles and scooters by up to Rs 2,000 from April 5, to offset the rise in commodity prices. The exact quantum of the hike will be subject to specific models and the market.

“The price revision has been necessitated to partially offset the impact of increasing commodity prices,” it said in a statement. Hero is the first among two-wheeler firms to announce a price increase in the last two months. It may now prompt others to also do the same, said analysts.

“The current price hike will help them cover costs to some extent. They may still need to go for another round of price hike,” said an analyst at a brokerage, declining to be identified.

The move, he added, is unlikely to impact demand that has already touched rock bottom for most companies.

Even as persistent increase in commodity prices has continued to impact two-wheeler makers, they have been deferring an increase in the prices of their products, owing to poor demand. Shally Seth Mohile