Dolo-650 makers under Health Ministry scanner after I-T Dept sniffs out 'unethical practices'

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Also, the Ethics Committee has asked to submit their report as soon as they can with the findings on how the nexus exploited the market and excessive sales.

Further, the government has issued show cause notices to medical practitioners and doctors who were covered under the income tax action for irregularities and unfair practices, sources said.

The CBDT said the department has seized "unaccounted" cash of Rs 1.20 crore and gold and diamond jewellery of Rs 1.40 crore. The CBDT is the administrative body for the I-T department.

The CBDT alleged that "freebies by Micro Labs included travel expenses, perquisites and gifts, etc. to doctors and medical professionals for promoting the group's products under the heads 'promotion and propaganda,' 'seminars and symposiums,' 'medical advisories' etc."

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"During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized. The initial gleaning of the evidence has revealed that the group has been debiting in its books of account unallowable expenses on account of the distribution of freebies to the medical professionals under the head 'sales and promotion'," the Income Tax Department said.

Dolo-650, an analgesic (pain killer) and antipyretic (fever-reducing ) oral tablet, was being extensively prescribed by doctors and medical shop owners for coronavirus patients to reduce pain and fever, common symptoms experienced by those infected.

The company website showcased a news article, published in February, that said: "The company has sold 350 crore tablets (of Dolo-650) since the COVID-19 outbreak in 2020, and earned revenues of Rs 400 crore in a year." The CMD of the company, Dilip Surana, was quoted in the story.

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Other irregularities

The CBDT also alleged certain other irregularities on part of the group that has a presence in more than 50 countries and manufactures pharma products and active pharmaceutical ingredients (API).

It alleged that the group was found to have claimed artificially-inflated deduction under special provisions in respect of certain incomes, by resorting to suppression of expenses and over-appropriation of revenue to the unit eligible for such deduction.

"Various other means of tax evasion, including inadequate allocation of research and development expenses to eligible units and inflated claim of weighted deduction under Section 35 (2AB), have also been detected," the CBDT said. The quantum of tax sought to be "evaded" through such means is estimated at over Rs 300 crore, the statement said.

It added that the department also found instances of "violation" of provisions of tax deduction at source (TDS) under Section 194C of the I-T Act in respect of transactions under contracts forged with the third-party bulk drug manufacturers.