Income Tax Search conducted on Unicorn Startup

On 09.03.2022, the Income Tax Department conducted a Search and Seizure operation on a unicorn start-up group situated in Pune and Thane, primarily engaged in the wholesale and retail of building materials. The company operates across India and has an annual revenue of more than Rs.6,000 crore. The search effort covered 23 locations in Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh.

During the search operations, a substantial number of incriminating evidences in the form of hard copy papers and digital data were discovered and seized. These documents revealed that the group had made fictitious transactions, made large unexplained cash expenditures, and got lodging entries totaling over Rs.400 crore. These documents were shown to the group’s directors, who admitted under oath that this was their method of operation, that they had declared additional revenue totaling more than Rs.224 crore in various assessment years, and that they had promised to pay their due tax liability.

The examination also found that the company had secured significant foreign money through the Mauritius method, by issuing shares at an excessive price.

A complicated hawala network including certain Mumbai and Thane-based shell companies was also discovered during the search. These fictitious companies only exist on paper and were set up solely to provide accommodation entries. According to preliminary estimates, the total number of accommodation entries offered by these shell companies surpasses Rs.1,500 crore.

Unaccounted cash worth Rs.1 crore and jewellery worth Rs.22 lakh have been seized thus far.

Further investigations are being carried out.