The original “big bull” or as some articles stated “raging bull” of the Indian stock market from way back in the late 1980’s and early 90’s – Harshad Mehta, who also happens to have perpetrated the biggest stock market scam, which is pegged to be in the vicinity of 4,000 to 5,000 crores in the 90’s, is back in the news again, some 17 years after his death, at the age of just 47, during custody.
There is good news for the late Harshad Mehta and his family which includes his wife Jyoti and his brother Ashwin. After 27 years of an intense battle involving claims, couter-claims and cross appeals, an Income Tax demand on him and his family members, of little above ₹ 2,000 crores has finally been scrapped by the Income Tax Appellate Tribunal (ITAT), reviving memories of the 1992 securities scam that shook the country and changed the rules of the game on Dalal Street.
The ITAT while scrapping the additions made by the IT Department for the assessment year 1992-93, made an observation that every receipt of money cannot be termed as a taxable income by default, and it is the job of the department to compute the correct taxable income embedded in every transaction. The Tribunal reiterated that this cardinal principle of taxation must be followed notwithstanding the magnitude of the scam and in spite of probes and observations by Joint Parliamentary Committee, RBI, CBI and the seizure of volumes of documents by the IT Department.
The scam perpetrated by Harshad Metha involved colluding with bank employees to get fake bank receipts issued to him. He then used these fake bank receipts to make other banks lend him money against those receipts, and used the proceeds to invest in the stock market and artificially drive up the price of stocks. In one case he took the share price of ACC Cement up from ₹ 200 to ₹ 9000, which was an increase of 4400%.
However, the day he sold the shares to book profits, volumes were so large that the entire market crashed.