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Govt plans Round II of stock scam probe

BS Bureaus

The government is contemplating a second round of investigation, which could lead to fresh income tax search operations associated with the stock scam.

Top government sources pointed out that in the second stage, foreign institutional investors, film personalities, entertainment and television software producing firms, music companies and companies whose shares have shown unusual movements in the stock market in the last few months will be scrutinised. The intelligence authorities are looking into the linkages between cash earned by the film industry and the underworld being diverted to the stock market through various routes.

In the first round of search and raid operation on key stock brokers on March 23, the income tax department has seized documents indicating undisclosed transactions by the six share brokers from Mumbai and their groups.

Chairman of the Central Board of Direct Taxes (CBDT) in an official release Monday confirmed that income tax searches had been made in the case of six share brokers of Bombay (Nirmal Bang, Radhakrishan S Damani, Ketan Parekh, Anand Rathi, Rakesh Jhunjhunwala, and Shankar Sharma of First Global) and their groups on March 23.

"Directorate of Investigation, Bombay has confirmed that there is a clear linkage of the material discovered with an attempt to avoid disclosing income," it said.

The report on the first round of raids is expected within a week based on which further search operations will be launched by the income tax department.

The release said the IT department was currently investigating the documents seized during the search operation to arrive at the exact quantum of undisclosed income. "In one case, it is of the order of Rs 150 million so far," said the release.

It further added that the lockers located in four of these cases had been kept under prohibitory order which will be opened in due course and inventorised to ascertain the disclosed/undisclosed income.

According to the release, the material discovered in the search operation included substantial quantity of gold and jewellery, share certificates running into several millions, as well as evidence of share transactions running into thousands of millions.

Evidence available also indicated in some cases, fictitious purchase and sale of shares, resulting in trading in of profits/losses. "In one case, it is of the order of Rs 70 million so far," said the release.

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