Polycab Raided: Income Tax Department Unearths Rs 1,000 Crore Unaccounted Cash

The Income Tax department in India has uncovered substantial unaccounted cash sales amounting to approximately Rs 1,000 crore during recent raids conducted on the prominent wires, cables, and electrical items manufacturer, Polycab group. The Central Board of Direct Taxes (CBDT) and official sources revealed this information on Wednesday, highlighting the significant findings of the investigation.

Unaccounted Cash and Bank Lockers

During the searches initiated on December 22, 2022, the Income Tax department seized unaccounted cash exceeding Rs 4 crore and imposed restrictions on more than 25 bank lockers associated with the Polycab group. The raids spanned across 50 premises in various cities, including Mumbai, Pune, Aurangabad, Nashik in Maharashtra, Daman, Halol in Gujarat, and Delhi. Authorized distributors of the group were also included in the comprehensive search operation.

Polycab India's Response

In response to media reports circulating about tax evasion allegations, Polycab India Limited issued a clarification to stock exchanges, dismissing such claims as mere rumors. The company emphasized its commitment to compliance and transparency, asserting that it fully cooperated with the Income Tax department officials during the search proceedings conducted on December 23, 2022. Polycab India further stated that it has not received any official communication from the Income Tax department regarding the outcome of the search.

Modus Operandi of Tax Evasion

The CBDT revealed that a substantial amount of incriminating evidence, including documents and digital data, was seized during the raids. These findings shed light on the modus operandi employed by the Polycab group in collaboration with certain authorized distributors to evade taxes. Preliminary analysis suggests that the flagship company engaged in unaccounted cash sales, cash payments for undisclosed purchases, non-genuine transportation expenses, and subcontracting expenses to suppress its taxable income.

Unaccounted Cash Sales and Payments

Credible evidence gathered during the search established that the flagship company had made unaccounted cash sales of approximately Rs 1,000 crore, which were not recorded in the official books of accounts. Additionally, unaccounted cash payments exceeding Rs 400 crore were identified, made by a distributor on behalf of the company for raw material purchases.

Non-Genuine Expenses

The investigation also uncovered non-genuine expenses totaling around Rs 100 crore, including subcontracting expenses, purchases, and transportation expenses. These irregularities were discovered through the examination of seized evidence from the company's premises.

Facilitating Purchase Account Inflation

The search operation further revealed that an authorized distributor was involved in issuing bills without genuine supply of goods. Instead, these goods were sold in the open market for cash. This practice enabled certain parties to inflate their purchase accounts, amounting to approximately Rs 500 crore. Notably, this distributor exclusively dealt in products from the flagship company.

The Income Tax department's raids on the Polycab group have brought to light significant instances of tax evasion, involving unaccounted cash sales, undisclosed payments, and non-genuine expenses. The investigation highlights the importance of maintaining transparency and compliance in business operations to ensure fair taxation practices and contribute to the nation's economic well-being.