The action also resulted into identification of the wrongful long-term capital gains taken in at least three penny stocks listed on the BSE (Photo: Bloomberg)
The action also resulted into identification of the wrongful long-term capital gains taken in at least three penny stocks listed on the BSE (Photo: Bloomberg)

I-T Dept searches 39 locations to check tax evasion by BSE brokers, traders

  • The unscrupulous entities have secured desired profits/losses, which is estimated to be more than 3,500 crore
  • The action was taken against those who were involved in facilitating 'accommodation of profits/losses' through reversal trades in illiquid stock options

New Delhi: The Income Tax department has unearthed a series of bogus transactions entered into by a few stock brokers aimed at tax evasion, in a search and survey operation held on Tuesday.

An official statement from the department said on Saturday that searches and surveys were conducted on 39 locations including Mumbai, Kolkata, Kanpur, Delhi, NOIDA, Gurugram, Hyderabad and Ghaziabad, which helped in detecting these transactions.

The stock brokers were involved in facilitating “accommodation of profits/loss" through reversal trades in illiquid stock options in equity derivative segment and in currency derivative segment on the Bombay Stock Exchange (BSE), the statement said. Accommodation entries are bogus transactions used to manipulate financial statements by booking profits or losses artificially.

The tax department’s statement said that the share brokers and traders involved in these transactions generated artificial losses or profit by executing certain trades in a very short span of time. Officials detected such transactions worth more than 3,500 crore.

“The search/survey action has also resulted into identification of the wrongful long-term capital gains taken in at least three penny stocks listed on the BSE, where the manipulated profits utilized by the beneficiaries aggregate to around 2,000 crore," said the statement. A few thousand people have benefited from these bogus transactions. The department is now in the process of identifying these people to assess the quantum of taxes evaded.

The tax department’s searches come at a time a deep economic downturn is putting stress on the government’s revenue receipts.

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