Thane-based Infra.Market has told CNBC-TV18 that it will continue to work with the Income Tax Department to address all queries after the enforcement agency's 'search and seizure operation' detected an undisclosed income of Rs 224 crore.

In a statement on Sunday, the Central Board of Direct Taxes (CBDT) said it found and seized a large number of incriminating evidences in the form of hard copy documents and digital data during search operations, which began on March 9 and covered 23 premises of the startup across Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh.

While the I-T department refused to reveal the name of the company, the reference to "Thane-based unicorn start-up group, primarily engaged in the business of wholesale and retail of construction material with an annual turnover exceeding Rs 6,000 crore" indicated that it was investigating Infra.Market.

The Case Of Bogus Entries

The CBDT said evidences revealed that the group has booked bogus purchases, made huge unaccounted cash expenditures, and obtained accommodation entries, aggregating to the tune of over Rs 400 crore.

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"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," it said.

As per reports, the enforcement agency also searched the residences of founders — Souvik Sengupta and Aaditya Sharda. "So far, unaccounted cash of Rs 1 crore and jewellery of the value of Rs. 22 lakh have been seized," the CBDT said.

During the search operation, the department claims to have unearthed a complex hawala network of some Mumbai and Thane-based shell companies, which exist on paper, created only for the purpose of providing accommodation entries.

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"Preliminary analysis has revealed that the total quantum of accommodation entries provided by these shell entities exceeds Rs 1,500 crore" the CBDT said, adding that further investigations are under progress.

In response to the I-T department's statement, Infra.Market's spokesperson told CNBC-TV18, "As per our company policy, we ensure adherence to the applicable tax laws, at all times. We continue to work with the department to solve all their queries related to any transaction. Since the investigation is still ongoing we will wait for the final report to comment further."

The Unicorn Status & The Questions Thereafter

Founded by Souvik Sengupta and Aaditya Sharda in 2016, Infra.Market remained bootstrapped for three years before Accel offered seed funding in mid-2019. The startup allows customers to place orders for sand, cement, and other construction material — online.

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In 2020, the pandemic turned the world upside down and snapped the conveyor belt of the supply chain. A terrible time, but it provided the booster shot, with supply-chain managers compelled to take the online route for procurement of industrial and construction products.

In an earlier interview, Sengupta told CNBC-TV18, "Lots of brands, who wanted to deliver their construction material to retailers or B2B companies, started depending more and more on us, as their traditional distributors had to back out during the pandemic."

Last February, Tiger Global led the $100 million Series C funding round with other existing investors — Foundamental, Nexus Venture Partners, Accel, Sistema, and Evolvence — who valued Infra.Market at $1 billion, turning it into a unicorn startup.

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Five months later, Tiger Global invested another $125 million in a single-investor round, awarding a valuation of $2.5 billion. This rapid rise in Infra.Market's funding and valuation has also come under the CBDT's scanner.

"The search action also revealed that the group had obtained huge foreign funding via the Mauritius route, by issuing shares at an exorbitantly high premium," it said.

The investigation could put a spanner in the wheels for Infra.Market as it was reportedly looking to raise funds at a valuation of $4.5 billion. Besides Infra.Market, another B2B unicorn startup — Zetwerk — is also reported to have faced an I-T raid on suspicion of tax evasion.

(Edited by : Jomy Jos Pullokaran)

First Published:Mar 21, 2022 4:06 PM IST