Promoters and investors of 84 companies were forced to declare illegal assets in the recently concluded Income Declaration scheme
Promoters of penny stock companies and investors who routinely traded in such stocks have declared around Rs 5,000 crore in the recently-concluded Income Declaration Scheme (IDS).
According to income-tax sources, the scheme has managed to bring out of closet promoters and traders of 84 companies, forcing them to declare their illegal assets. The coordination between the I-T department and the stock market regulator, Securities and Exchange Board of India (Sebi), has helped in the crackdown on punters trading in penny stocks effectively.
Most of the companies are from Kolkata, Mumbai and Gujarat. Most of them are inoperative shell companies and have been used for tax evasion in the form of long-term capital gain tax.
On October 13, DNA Money reported that a probe by the I-T department had revealed that several tax evaders were allegedly parking money in companies listed on stock exchanges in order to avoid paying tax and hiding alleged "black money". The department had collated information on the alleged dealings of individuals and companies through the securities transaction tax (STT) data submitted by the two stock exchanges -- NSE and BSE -- for 2013-14 and 2014-15, as per the documents available with DNA Money.
D S Saksena, former principal chief commissioner of income-tax, said, “We observed abnormal movement in some stocks that were usually not well-known. Then, we investigated these companies and came to know that some people were using these stocks for tax evasion in the form of long-term capital gain tax."
Sebi had also initiated the process to crack down on penny stocks. Over the last two years, the regulator found out the companies which used stocks for tax-evasion and expected worth of Rs 15,000 crore of tax evasion through penny stocks. Sebi also sent details of companies to the I-T department.
Sources said, “We received details from the Sebi. We even issued notices to the same set of companies on which the regulator had passed interim orders after investigations at the time of Income Declaration Scheme."
The I-T probe found that PAN cards of low-salaried people were used for facilitating tax evasion via trading in penny stocks. It was found that on their PAN cards, the traded value was more than a few crores of rupees.
“We found in our investigation that the company's promoters used PAN cards of their lower-salaried employees for making such fictitious trades. Stock exchanges and Sebi surveillance should alert investigators on such trades. We should increase coordination between Sebi, I-T and stock exchanges.”
Alok Churiwala, former vice chairman of BSE Broker Forum, said, “It is not just the responsibility of stock exchanges or Sebi alone. It is a collective failure."
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