The search was carried out on 34 premises, which included 12 residential and seven office premises in Mumbai alone. The department covered 15 official premises of the company located in various parts of the country, including Vapi, Silvassa, Ahmednagar, Baroda and Delhi.

According to sources, the department had acted upon information that certain allowances claimed by the company were not in accordance with law. The department has alleged some manipulation in claiming deductions under Section 80HHC, allowing 100 per cent tax incentives for exports, and 80IA, pertaining to deductions in respect of industrial undertakings set up on or after April 1, 1991.

Sources said that the company had also tried to adjust profits by claiming false depreciation and entering into some questionable lease-back transactions through stateelectricity boards.

Interrogation of some top company officials is also said to be on, even while three executives are out of the country. However, Sun Pharma officials were not available for comments.

Confirming the raids, director general of investigation NP Sahani said that 40 lockers have been sealed by the department while few bank accounts have been put under prohibitory orders. The search also involved a Bombay Stock Exchange broker, Anuj Sheth and a clearing house agent. The department did not rule out the possibility of price rigging by the broker.

"We cannot rule out direct role of the broker in jacking up the scrip of Sun Pharma," sources in the revenue department said. Repeated attempts to contact Sheth proved futile. Sources said that I-T officials searched the back-office data of the brokerage, but did not seize any files or documents.

Although the search was conducted during market hours, the stock failed to react negatively. The scrip, which was being quoted between Rs 305 and Rs 320,closed at Rs 315.75, registering a gain of 4.8 per cent.