The Income-Tax department on Saturday conducted searches at the offices of the Mumbai-based Motilal Oswal Securities and SSKI Securities, two major brokerages of the Bombay Stock Exchange.
The searches began on Saturday morning at several places, including their offices in South Mumbai, IT sources said.
"The searches are currently on and it is too early for any comment," an IT official said.
Motilal Oswal services more than 7,000 clients. Today, it has four Bombay Stock Exchange memberships and one National Stock Exchange membership. It is also on the board of BSE.
A Motilal Oswal employee confirmed that a search was on at the premises, "but it was not a raid."
The exact reason for the searches is not yet known. Sources in the income tax office, meanwhile, said that following the directives of the Securities and Exchange Board of India to probe illegal stock trading, some brokers had come under scrutiny.
The Directorate of Revenue Intelligence has been probing whether there was any tax evasion in illegal stock trading, or dabba trading, since the last few days. A joint team of the Securities and Exchange Board of India and National Stock Exchange is also investigating into dabba trades and is sharing information with the DRI.
The market estimate of Rs 6,000 crore (Rs 60 billion) of dabba trades per day is indicative of huge tax evasion.
Last fortnight, authorities raided the premises of a Kolkata broker to check if he was facilitating dabba trading.
The tax authorities, however, did not say if the present searches were a part of the crackdown on dabba trading.
Dabba trading -- the US equivalent of bucket shops -- is reported to be mushrooming in upcountry and select metros owing to lack of depth and volumes on exchanges following the bar on badla financing, the scrapping of stock lending and borrowing, the introduction of derivatives, and a ban on short-selling.
'Bucket shops' is a term that originated during the 1920s when some brokers set up buckets in which customers threw their orders.
The brokers quoted a price to the investors, but swindled them by waiting long enough to settle the trade when a price discrepancy made it profitable for the broking firm, and pocketed the difference.
The term dabba (which means a tin or an iron box) trade emerges from this.
Dabba trading trades happen outside the control of the official stock exchanges by setting up illegal stock exchange terminals.
