IT Dept turns lens on investment, trading & delivery activities at NSEL

Probe comes in the wake of complaints about tax evasion

The veracity of trading and investment activity in the defunct NSEL commodities trading platform is being investigated by the Income Tax Department to find out whether there was any actual delivery of goods.

A senior IT official said the Director of Income Tax (Intelligence and Criminal Investigation)in the Department has formulated a Standard Operating Procedure (SOP) for investigating tax evasion of those entities, including investors and brokers on the exchange, who had payment obligations as well as those with outstanding receivables, the official said. After the trading platform was shut, the IT Department had received a number of petitions about tax evasion wherein allegations were made about suspicious sources of funds being used by investors.

The official said that under the SOP, the manner in which various entities have shown profit and losses in their tax returns on account of NSEL transactions, is being examined. The source of investments of the assessees and whether the profits arising out of such investments are reflected in the tax returns are also being looked into.

While verifying the source of investments of the entities, if any shell or bogus companies are used for routing the funds, is being investigated in great detail, the official said. The SOP has also asked the IT officials to check the provenance of the funds used by the entities if it is borrowed from NBFCs. Such banking companies should also be scrutinised further to check if they have declared such debts as bad debts in their books.

The official pointed that if the transactions by the entities on the exchanges are found to be fake, then the IT official can disallow setting off and carrying forward of losses.

The transactions carried out by the entities could also be cross-verified with NSEL for discrepancies. If a particular entity has invested funds belonging to another entity and that too in the name of fictitious account holders, then the IT Department could consider action under the Benami Transactions Act of 1988, the official added.