Brokers, who had been crying from the rooftops about the Rs 5,700-crore (Rs 57 billion) ‘scam’ at National Spot Exchange Ltd, are now facing some uncomfortable queries from the income-tax department.
The I-T department, which has been roped in to investigate the case, feels many of the people named as investors exist only on papers.
A senior I-T official said the department had asked stock brokers to provide data on NSEL investors to check whether the know-your-customer norms had been adhered to.
According to him, the department believes the actual number of investors involved in the scam is much less than the 13,000 mentioned by NSEL.
The I-T department’s suspicions arose from the claims made by the NSEL management that many brokers had invested from their proprietary books.
This implies brokers were actually investing their own money in these trades.
The department wants to know if the proprietary money was invested through benami or even dummy investors to earn high rates of return, of 14-16 per cent.
“Some brokers may have picked up cash from the market and invested in these trades through dummy accounts.
“We need to know whether the investors paid tax on the invested money or were trying to indulge in money laundering through this channel,” said the I-T officer.
Priti Gupta, executive director (commodities & currency), Anand Rathi Commodities, confirmed the I-T department had been following this line of investigation: “We have given details of all our NSEL investors to I-T
“We have also told them the KYC norms have been adhered to and the money has been invested through proper bank accounts.”
Another leading broker with huge exposure to NSEL also said it had submitted PAN details of its investors to the department.
The I-T department has also written to all the investors to find out if they exist and if they have paid tax on the money invested in NSEL.
This move could prove to be a double whammy for those who have not paid tax on the amount invested, as they will have to cough up extra money to pay tax with interest and, may be, penalty.
Since August, the I-T department has been raiding various parties involved in the NSEL scam. In the first round of raids, 24 borrowers were raided.
After that, for the past two weeks, the department has been raiding and going through the books of the stock brokers.
On October 1, the Economic Offences Wing raided the office and residence of NSEL Vice-Chairman Jignesh Shah.
Besides, the premises of some of the other top executives, including MCX-SX CEO & MD Joseph Massey and former NSEL MD Anjani Sinha were also raided.
Peons, guards were directors at defaulting companies
At least two of the 27 firms that defaulted in making payments to NSEL were found to have appointed peons and security guards as “dummy” directors, said an official involved in the probe into the fraud at the beleaguered exchange.
This was revealed when the directors of defaulting firms began turning up at the Economic Offences Wing of the Mumbai Police for questioning in the scam.