Cbdt: Brokers Guilty Of Fudging Accounts

The Central Board of Direct Taxes has found prima facie evidence that some brokers have indulged in manipulation in accounts to create artificial losses and also diverted profits to loss making companies. This is the first clear indictment of brokers by an investigating agency.

In its submission to the joint parliamentary committee probing the stock scam, CBDT has said that the department has come across instances where some brokers were found to have entered into BOLT transactions which were not reported to the stock exchange.

CBDT had conducted search and seizure action under Section 132 of the Income Tax Act on March 23 at the business and residential premises of brokers Ketan Parikh, Nirmal Bang, Anand Rathi, Rakesh Jhunjhunwala, Shanker Sharma and those of the RS Damani group to detect and ascertain undisclosed income.

The department has also said that in one case, there were only paper transactions whereby the whole process of investment in units, distribution of dividend, reinvestment of dividend, repurchase of ex-dividend units had been undergone just to create short-term capital gains on paper whereby the same could be set off against real profits.

The investigations also revealed that in the case of sub-brokers, no sale or purchase confirmation notes were issued and in the case of clients, there was considerable delay in transfer of shares to the clients