Background
Polycab India Ltd, a prominent wires, cables and electrical items manufacturer, faced a massive raid by the income tax department on January 10, 2024. The raid covered 50 premises of the company in Mumbai, Pune, Aurangabad and Nashik in Maharashtra, Daman, Halol in Gujarat and Delhi . The raid was a follow-up of the searches conducted on December 22, 2023, when the department had received some incriminating information about the company’s tax evasion.
Findings
The income tax department said it detected “unaccounted cash sales” of about Rs 1,000 crore during the raid. The department said it found credible evidence that the company had made cash sales that were not recorded in the books of accounts . The department also seized more than Rs 4 crore in cash and put more than 25 bank lockers on restraint . The department also found that the company had colluded with its authorized distributors to evade taxes through unrecorded cash sales. The department said that the company had inflated its purchase accounts through authorized distributors by Rs 500 crore and claimed non-genuine expenses of Rs 100 crore for suppressing its taxable income.
Implications
The raid had a severe impact on the company’s share price, which plunged 20 percent on January 11, hitting the lower circuit limit . The company’s market capitalization dropped from Rs 81,109.44 crore on January 5 to Rs 73,083 crore on January 11 . The company issued a clarification to the stock exchanges, terming the reports of tax evasion as “rumours” and stating that it was cooperating with the authorities . However, the investors seemed to be unconvinced by the company’s statement and continued to sell the stock.
Company Response
Polycab India Ltd denied any allegations of tax evasion and said that it had not received any communication from the income tax department regarding the outcome of the search operations. The company said that it was fully compliant with all applicable laws and regulations and maintained high standards of corporate governance and transparency . The company also said that it was confident of its business prospects and growth potential and would continue to focus on delivering value to its stakeholders.
Conclusion
The income tax raid on Polycab India Ltd has exposed a large-scale tax evasion by the company through unaccounted cash sales. The raid has also eroded the company’s market value and reputation. The income tax department is likely to take further action against the company and its officials for violating the tax laws. The company has denied any wrongdoing and claimed to be cooperating with the authorities.