Infra.Market, one of India's fastest growing unicorns, said it is cooperating with the authorities and is providing all necessary information, after the Income Tax Department said the startup has undisclosed income of Rs 224 crore.
Its findings came after searches were carried out on March 9 at 23 premises in Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh and Madhya Pradesh. While it did not name the company and only referred to it as a 'unicorn startup group based in Pune and Thane', the details point to business-to-business e-commerce marketplace Infra.Market, which is backed by the likes of Tiger Global, Accel, Nexus and is valued at $2.5 billion. It also searched the residences of its founders Souvik Sengupta and Aaditya Sharda.
The CBDT said unaccounted cash worth Rs 1 crore and jewellery worth Rs 22 lakh have been seized till now. It also said the group has booked bogus purchases, made huge unaccounted cash expenditures, and obtained accommodation entries, aggregating to the tune of over Rs 400 crore.
"These evidences were confronted to the directors of the group, who admitted under oath this modus operandi, disclosed additional income of more than Rs 224 crore in various assessment years, and consequently offered to pay their due tax liability," the CBDT claimed.
It further said the group obtained huge foreign funding via the Mauritius route, by issuing shares at an "exorbitantly" high premium. A "complex" hawala network of some Mumbai and Thane-based shell companies, was also unearthed, the CBDT said.
"These shell companies exist on paper and were created only for the purpose of providing accommodation (bogus) entries. Preliminary analysis has revealed that the total quantum of accommodation entries provided by these shell entities exceeds Rs 1,500 crore," it said.
Reacting to CBDT's statement, Sengupta told Moneycontrol via email, "We continue to cooperate with the authorities and provide all necessary information to the department to solve all queries they have in relation to their search. We continue to work with the department to solve all their queries related to the company. We will wait for the final investigation report is out to comment further. Since the matter is subjudice we would not like to comment further."
Moneycontrol reported earlier, based on search-related documents, that Rs 2,000 in cash and jewellery worth Rs 1.2 lakh at the residence of Sengupta and cash and jewellery worth Rs 20 lakh each at Sharda's residence. While it seized Rs 19 lakh in cash from the latter, Sharda plans to file an appeal to claim this, as the money belonged to his kin.
Founded by Souvik Sengupta and Aaditya Sharda in 2016, Infra.Market is a business-to-business (B2B) e-commerce firm, running a brand of construction material, concrete and chemicals used in infrastructure projects. It ties up with contract manufacturers, gets them to utilize idle capacity, and manufactures products under its own brand, which it then sells to large infrastructure companies and retail outlets. It has an annualized revenue run rate of a billion dollars is one of the few profitable Indian unicorns- firms valued at over a billion dollars. Its investors include Tiger Global, Accel, and Nexus Venture Partners.
It was also reportedly in talks to raise funds at a valuation of $4.5 billion, its third funding round within a year, at a valuation jump of more than 400 percent within a single year. This too seems to have become a bone of contention, with CBDT now questioning its share premium.
Sources familiar with the development said the search was related to unpaid taxes and GST by some suppliers who worked with the startup and that the company has co-operated and provided complete information to officials.
Sengupta told Moneycontrol last week that neither did it make fictitious purchases, nor does it have any financial liability. "We saw a 5X growth year on year and grew to a business of Rs 7,000 crore in 24 months. Of this, GST wasn't paid on Rs 70 crore, which amounts to 1 percent of purchases by 30-40 vendors. But the fact that GST wasn't paid does not imply that these purchases were fictitious or did not happen."
On whether the firm should have had stronger internal controls and processes, he said, "The business hasn't been growing at a slow and steady pace but at a scorching rate in the last couple of years, which also coincided with Covid. Many of the small vendors shut down during this period."(With agency inputs)