The income-tax department will issue notices to two dozen borrowers on the National Spot Exchange (NSEL) as their probe so far has revealed that most of the trades undertaken by them were not backed by underlying commodities.

"We will be summoning the borrowers shortly as an examination of their books and other records shows more than 90% of the transactions they entered into were not backed by commodities," a senior I-T official told ET after having examined the books of the two-dozen borrowers who cumulatively raised about Rs 5,500 crore against commodities lying ostensibly in NSEL-accredited warehouses in different parts of the country. The tax department's investigation revealed the warehouse receipts issued and kept with exchange were bogus — not backed by commodities.

The question that arose - and which will be dealt with by other agencies — was whether NSEL had put in a system of checks and balance and due diligence to check such fraudulent activities that could eventually harm genuine investors. Since it was obligatory on NSEL's part to safeguard the system, the question is whether NSEL itself has been errant by ignoring safety norms, the I-T official said.

"Other agencies will deal with this issue. Right now, the income-tax department is concerned about the money loaned to the borrowers. Our only concern is whether the money given to the borrowers by the investors was accounted for or not? Other issues are under the purview of different agencies." The tax department is seeking details of investors who traded with the borrowers from bro-genkers, which include the likes of Anand Rathi, IIFL and Motilal OswalBSE 0.63 %.

According to SK Saraf, convenor of the NSEL Investors Forum, tax sleuths are trying to ascertain how much money has been invested by brokers through their proprietary accounts and how much was investor money. NSEL suspended trading of one-day forward contracts with settlement cycle beyond the 11-day period for spot contracts on July 31.

Through these contracts, the 24 borrowers raised money from 13,000 investors against stocks supposedly lying in exchange accredited warehouses. However, in light of the successive failure of payouts to investors, and an audit by their party inspector and verifier SGS on the warehouses, it has emerged that stocks are not present in most locations.

Meanwhile, the two task forces under Arvind Mayaram, secretary, economic affairs, will submit their reports on violations committed by NSEL and the money trail on September 12, a delay of six days from the scheduled date of submission.