August 30th 2023.
The Income Tax Department has recently started an intensive investigation against entities based both domestically and overseas, as profits from short-selling shares of companies within the Adani Group have been linked to tax evasion. According to a senior IT official, this investigation is being conducted because of the arrangements made for real-time exchange of intelligence.
The Securities and Exchange Board of India (SEBI) has been tracking the activities of these entities, based on a report submitted by the Enforcement Directorate. It is believed that they may have obtained prior information about the controversial Hindenburg Research report, and subsequently gained significant profits through short-selling of the Adani Group stocks. The report had alleged "accounting fraud" and "stock manipulation" by the Adani Group, which had promptly denied the claims as "maliciously mischievous".
It is estimated that the Adani Group had suffered a loss of around $150 billion within days of the report's release, resulting in the cancellation of a ₹20,000 crore share sale in Adani Enterprises.
The ED investigation revealed that foreign portfolio investors and foreign institutional investors located in London, Ireland, France, Mauritius, Hong Kong, and the Cayman Islands were among the 'top short sellers'. Two Indian companies, one based in Delhi and the other in Mumbai, were also listed on the list of 'top short sellers'.
The IT Department's probe follows the ED's investigation, and the information shared with SEBI has raised suspicion that these entities may have been involved in tax evasion. The findings of the investigation will be revealed in due course, and it remains to be seen what action will be taken by the authorities.
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