The Income Tax department (IT), raided premises in Mumbai and Delhi starting from July 5. During this, the department found numerous incriminating pieces of evidence which were in the form of physical documents as well as some digital records.
In the first week of July, the Income Tax department (IT) raided the group of suspects involved in stock price manipulation. This took place in Delhi NCR and Mumbai. A total of 27 groups were investigated, the majority of them being in the agro and textile industry. The department found pieces of evidence were physical records as well as digital data. Though no names are disclosed the suspects were caught with all due shreds of evidence. The Finance Ministry is still investigating to find more pieces of evidence.Â
During the IT department’s investigation, it was noted that the majority of the turnover by the listed companies under the main group was generated through circular trading. According to SEBI it is a fraud and unfair trade practice, the people involved could be punished with serious terms. Circular trading is the chain of similar transactions with similar values done at the same time in two or more companies’ records. It is a recurring cycle in which traders are involved and they encourage price manipulation through this practice. Among the groups caught, the promoter was involved in this practice with many other companies and also had a stock broker for his help. They have practised systematic manipulation, hampering the performance of certain stock groups in the market.Â
In the records, several transactions were spotted by the Finance Ministry which were made for unlawful purposes. The company’s books of accounts did have these transactions which were made to some stock brokers and were not officially maintained. The promoter and the stock broker have admitted these wrongdoings in the records. On further investigation, it was also found out the group was supported by a professional person who helped them with accommodation entries. He practices this, providing companies accommodation entries in exchange for cash.Â
There were many bogus purchases found in the book. One of which was; spending ₹100 crores on packing materials. These transactions had huge figures and were shown as purchases made. The unaccounted sale was found after investigation to be ₹150 crores. This could be tracked with their digital data. Apart from this, the company’s handwritten records were also found to be corroborated by statements of some of the counterparties/beneficiaries covered under the search action stated by the Finance Ministry.
Another group was found during the investigation which has practiced selling accommodation entries to the companies. The malpractices involved control and operations of LLPs, adjustments of purchase and sales in the diamond business, and issues regarding ownership of the business. The people caught have also made a statement of oath and admitted this. They have also provided unsecured loans and practice accommodation entries through and through. The company’s records for previous years were also found and investigated duly. Unaccounted cash of ₹1.4 crores was found during the investigations.Â
A preliminary analysis of a few years of such transactions shows that accommodation entries in the nature of bogus loans and expenses exceeding a few hundred crores have been provided through these entities.
The investigations are still being conducted, the IT department has spotted some more suspects and will be working on them. These fraudsters are still being questioned and there is a search for more pieces of evidence. The records show scams of hundreds of crores and some of them are still not traced. These false records and illegal operations are tracked by the ministry from time to time, the punishment for which can lead to getting barred or in some cases even imprisonment.Â
