The Revenue Department has initiated a probe against several individuals and entities in connection with long-term capital gains tax evasion by indulging in a reversal of options trade on the Bombay Stock Exchange (BSE) in illiquid options.
The probable tax evasion scam is to the tune of Rs 8,200 crore, a report published by a business and trading news website suggests.
The Income Tax (I-T) department is busy in unearthing more details of the scam, which is more than 10-years-old.
The news website claimed that it has reviewed the initial report submitted by the I-T Department to capital markets regulator Securities and Exchange Board of India (SEBI) last month for further investigations. The report further claims that the department has identified about 20,000 such beneficiaries.
Details of the scam unearthed after the investigation wing of the Income Tax Department launched ‘Operation Falcon’ in July 2019. It had searched 22 brokerage offices in various cities, including Mumbai, Kolkata, Kanpur Hyderabad and the Nation Capital Region (NCR).
The website claimed that it had tried to contact BSE with its queries. However, BSE response was: “The BSE is not privy to any such report or antecedents. In view of the same, BSE will not be able to comment on the same.”
Notably, brokers, in statements, have admitted to I-T officials about the tax evasion in the F&O segment, the report said, adding that they even admitted to charging 2-3 per cent commission in cash for executing such trades.
The department has found out that a certain syndicate of share brokers and entry operators, who record the profit/loss of various entities in lieu of unaccounted cash commission, are behind these dealings. Entry operators are those who provide invoices of profits and loss, by generating bills.
Quoting sources, the website claimed that initial investigations have found out that many taxpayers have evaded tax to the tune of Rs 1,200 crore by claiming long- term capital gains tax on investments in two penny stocks.
Reversal trade in illiquid stocks on the BSE for about Rs 3,500 crore, reversal trade in currency derivative options about for Rs 1,500 crore and evasion of about Rs 2,000 crore by reversal trade in currency options on the United Stock Exchange, now merged with the BSE, accounted for the rest of the Rs 8,200 crore.
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