Income Tax conducts raids, searched medical equipment firms say they are clean

Sleuths unearth fraud in manufacture of devices; seize evidence relating to faulty valuation of shares of one company

Published: 10th November 2019 05:31 AM  |   Last Updated: 10th November 2019 07:14 PM   |  A+A-

Raids

For representational purposes

By Express News Service

BENGALURU: The Directorate General of Income Tax (Investigation), Karnataka and Goa conducted search operations of three firms in medical and dental equipment manufacturing sector on November 6. "One of the group entities in this sector is in the field of infrastructure development such as building flyovers, bridges and railway infrastructure. The operation was conducted at the residential premises of the promotors and several offices located in Bengaluru and Mysuru. The search was carried out based on specific information regarding faulty evaluation of the fair market value of shares in order to raise capital, undisclosed foreign assets and inflation of expense," said an official source. 

The Income Tax officials claim that during the course of search operation “specific evidences related to the improper valuation of shares of the company for the purpose of raising capital were seized.

Evidence relating to the transfer of equity shares of foreign/domestic companies held by the investment companies of the promotors of the group were seized.” He added that, “Further investigations revealed that the group entities were claiming expenses relating to capital assets as revenue expenses. The entities in the dental equipment manufacturing group was found to have inflated expenses under the head conveyance, sales promotion and commission expenses. The infrastructure development company covered in the operation was found to be involved in inflation of expenses through cash vouchers under the head labour and wages. The cash expenses were
incurred for expenses that could not qualify as genuine business expenses."

The Income Tax sources claimed that the search operation allegedly resulted in “admission of unaccounted income through inflation of expenses to the extent of Rs 33.48 crore by the dental equipment manufacturing group and infrastructure development company. Further investment entities of the promotors of the medical equipment manufacturing group admitted income of Rs 71.39 crore consequent to transfer of shares held in foreign and domestic companies. 

Further examination of books of related entities also revealed that there were discrepancies to the tune of Rs180 crore relating to valuation of shares at a premium, wrong claim of expenses under revenue expenses which were actually utilized for acquiring capital assets etc. 

The operation also resulted in alleged cash seizure of Rs 1.77crore (being undisclosed income) from the residence of one of the employees of the infrastructure development Company and jewellery worth Rs 70 lakh from various promotors of a company.” 

He added that the information related to undisclosed foreign accounts, shares of promotors of one of the investment companies related to the group is being investigated.

One of the searched firms has, however, denied the income tax officials charges of tax violations. The firm spokesperson said their firm was “hundred per cent tax compliant and there was not a single fault in their books."

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