PremiumSearches by income tax authorities across premises of Hero MotoCorp Ltd that continued for the third day on Friday were triggered by a mismatch between income declared with the tax department and information from other sources such as the GST Network (GSTN), said two people aware of the probe.
According to the people mentioned above, information shared by the Central Board of Indirect Taxes and Customs (CBIC) with the department “sometime back" led to the opening of a probe against the Pawan Munjal-led two-wheeler giant.
Officials aware of the development said the searches have not only continued for the third day, but its scope has now widened to cover multiple locations.
A government official, who spoke on condition of anonymity, said the department has “credible information" about alleged irregularities that warranted the search and that searches continued on Friday, but declined to confirm or deny if the action could be attributed to information from CBIC.
The I-T department and GSTN signed an agreement in 2019 to facilitate the exchange of data. This was aimed at allowing the I-T department to verify information filed by businesses in their income tax returns (ITRs) by comparing it to the annual GST returns.
The information exchange between the two authorities under the revenue department is intended at nabbing tax defaulters and evaders. GSTN has a centralized return filing system where businesses have to report their sales and input tax credit details.
“The mismatch came to light from the information shared by the CBIC sometime back. We have solid evidence to open the probe. There are multiple gaps and mismatches that were identified during the probe. We have credible information based on intelligence and that’s the reason we did not go for a survey, but a proper search and seizure operation," one of the people cited above said, requesting anonymity.
The person, however, declined to disclose details of the time and the year the case pertains to and the outcome of the search operation.
The tax department has covered more than 25 locations of Hero MotoCorp’s premises since Wednesday, including Delhi and Gurugram and the home of chairman and chief executive Pawan Munjal.
A second government official who also did not want to be named said the I-T department initiated the action based on “clear evidence" of alleged irregularities. The official declined to comment on the quantum of any irregularity or the financial years it may apply to, saying only that investigations are still on.
Queries emailed to the spokespersons of the finance ministry, Central Board of Direct Taxes (CBDT), and Central Board of Indirect Taxes and Customs (CBIC) on Thursday remained unanswered till the time of going to press.
A spokesperson for Hero MotoCorp did not respond to queries sent on Thursday and Friday on the continuing tax searches but referred Mint to the statement issued by the company on Wednesday.
“Officials from the income tax department visited two of our offices in Delhi and Gurugram and the residence of our chairman & CEO Dr. Pawan Munjal on Wednesday. We have been informed that this is a routine inquiry, which is not uncommon before the end of the financial year," Hero MotoCorp said in the statement on Wednesday.
“We reassure all our stakeholders that it continues to be business as usual. 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," the statement added.
The second official quoted above alleged that Hero MotoCorp was implying through the press statement that the search operation was carried out as part of a year-end collection drive.
“We have already exceeded the collection target for FY22 by ₹1.13 trillion. We don’t carry out these searches to meet our targets, but they are based on intelligence and very specific information and credible evidence of irregularities," said the official.
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