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An Income Tax demanded on late Harshad Mehta and his Family had been eliminated after 27 years which was accused in 1992 and changed the whole game of Dalal Street (BSE).
Alleged Harshad Mehta a stockbroker was engaged in manipulation of stocks which was financed by worthless Bank Receipt. Mehta was convicted to Bombay High Court as well as Supreme Court for the onus of Rs 4999crore which took place in Bombay Stock Exchange ( BSE).
This Scandal unveiled unprecedented loopholes of banking system, Bombay Stock Exchange (BSE) transactional system, Security and Exchange Board of India (SEBI).
The Scrapping of the Income Tax by Income Tax Appellate Tribunal ( ITAT'S ) was based on transactions related to trade money and the Stock market for the same period. As a matter of fact, they also scrutinized the untaxed income worth Rs 2,014 crore.
The Tribunal has done a commendable job of analyzing each transaction and commuting taxable income.
What is the Harshad Mehta scam?
Harshad Mehta, a registered broker, and his partners were accused of manipulating the Bombay Stock Exchange in 1992 by taking advantage of loopholes in the banking system. Mehta used the ready forward (RF) deal to insert money into the market. RF deals were short-term loans from one bank to another. The deals were generally made with the help of brokers, who were paid commissions.
Mehta allegedly colluded with bank employees to get fake bank receipts (BRS) issued. He used these BRS to get other banks to lend him money under the false impression that they were lending against government securities (G-Secs). This amount was then put into the stock market to enhance share prices up to a staggering 4400 per cent. Harshad Mehta then sold these shares at a significant profit and the principal amount was then returned to the banks.
In this manner, Mehta defrauded banks of nearly Rs 4,000 crore. Once his mode of operation in the stock market was discovered and exposed, banks realised that they were in possession of fake BRS holding no value.