Rs 3,400-crore tax evasion’: I-T probing over 21,000 entities
The probe follows an investigation by the Securities and Exchange Board of India (Sebi) on 14,720 entities in a case related to alleged trading irregularities in that segment.
THE INCOME-TAX (I-T) Department is probing at least 21,900 entities that have traded through 193 brokers and allegedly evaded taxes of about Rs 3,400 crore through “non-genuine trades” in the illiquid stock option segment of the Bombay Stock Exchange (BSE) Ltd between 2014 and 2016, sources told The Indian Express.
The probe follows an investigation by the Securities and Exchange Board of India (Sebi) on 14,720 entities in a case related to alleged trading irregularities in that segment.
According to sources, while one set of these entities “repeatedly incurred significant losses” by executing reversal trades, another set “made significant profits” by becoming their counter parties in alleged orchestrated trades with a common objective to execute non-genuine trades. Most of the reversal of trades allegedly happened with the same counter party either on the same day or the next day, said sources.
The average daily turnover in BSE’s stock options segment was about Rs 720 crore in FY15 and Rs 300 crore in FY16.
The tax agency has found that of the 21,900 entities under scanner, at least 11,000 are based in Kolkata. The department is now in the process of drafting a Standard Operating Procedure (SOP) for its assessing officers to deal with each of these cases and assess tax liabilities. “There is a need for similarity of approach in taking action against these entities so we need an SOP,” said a tax official.
The Sebi probe found that 14,720 entities were allegedly involved in executing non-genuine trades in BSE’s stock options segment between April 2014 and September 2015, and violated the provisions of Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. Subsequently, the IT department identified another 6,000 entities that allegedly executed similar trades in violation of Sebi norms.
According to Sebi, an analysis of the trading activity of these entities found that the “scheme, plan, device and artifice employed in executing reversal trades in illiquid stock option contracts at irrational, unrealistic and unreasonable prices, was prima-facie a fraud on the securities market in as much as it involved non-genuine/ manipulative transactions in securities and misuse of the securities market”.
The markets regulator has already initiated action against these entities in a phased manner. Sebi has begun adjudication proceedings against 567 entities involved in such trades in the first phase.
