Raids on Temptation Foods offices for alleged tax evasion

Raids on Temptation Foods offices for alleged tax evasion

Mumbai: The investigation wing of the income-tax department (I-T) in Mumbai on 24 September searched the offices of Temptation Foods Ltd and the residence of its chairman and managing director Vinit Kumar for alleged tax evasion, a senior tax official told Mint on Tuesday.

Temptation Foods is a frozen-foods export firm listed on the Bombay Stock Exchange.

“The search was conducted last Thursday and we have detected undisclosed income of Rs50 crore," the I-T official said. “The investigation is not yet over and the department has found instances of fake purchases and sales in the books of account of the firm."

The department has also found evidences of siphoning off funds, he said.

A senior official at Temptation Foods, who asked not to be named, confirmed the development.

“There was a search conducted by the income-tax department and certain undisclosed income as arrived at by the investigation agency will be offered for taxation in the current year," he said.

There is no question of any bogus purchase and sales, he said, adding that all purchase and sales as per the book have been confirmed.

Temptation Foods’ shares rose 2.9% on the Bombay Stock Exchange on Tuesday to Rs42.60. The benchmark 30-tock Sensex rose 0.96% to close at 16,852.91 points.

The export firm has been on the radar of markets regulator Securities and Exchange Board of India, or Sebi, which has over the past few months charged it with a number of questionable financial and market activities.

In February, Sebi restrained Kumar from publishing or circulating false or misleading information about the company’s holding in rival Kohinoor Foods Ltd. The company had claimed a 13.69% stake when it actually had less than 3%. Earlier this month, Sebi cleared it of this charge.

In June, as part of its probe into one of the largest trading scams in the country, the regulator had barred 26 entities for illegally routing funds of alleged rogue trader Ketan Parekh into the stock market and rigging share prices of five companies, including Temptation Foods. Sebi barred these entities from trading due to their alleged involvement in circular and synchronized trades and creating bogus volumes and artificial price rises in the shares of the five companies over an almost two-year period starting early 2007.

The five stocks were Cals Refineries Ltd, Confidence Petroleum India Ltd, Bang Overseas Ltd, Shree Precoated Steels Ltd (now Ajmera Realty and Infra India Ltd) and Temptation Foods.

In 2003, the regulator had barred Parekh from trading in shares for 14 years because of his involvement in the stock market crash of 2001. Parekh had siphoned about Rs900 crore from Madhavpura Mercantile Cooperative Bank for trading in shares, and was unable to return the money, which led to the bank’s collapse. Sebi investigations suggested that despite the ban, Parekh was trading in stocks using front entities.

Temptation Foods was in mid-2007 reported to be close to acquiring the marine business of Hindustan Unilever Ltd but the consumer goods major rejected the deal in September that year.