Penny stock scam: Income Tax department carries out 200 surveys in Mumbai

After conducting 200 surveys post-IDS, the Income Tax Department here has served notices in most of the cases and will complete the process soon.

It comes in the wake of the department unearthing Rs 8,000 crore worth of tax evasion by investors in penny stocks in Mumbai alone. Nation-wide, around 1,000 penny stock investors/entities evaded tax to the tune of Rs 38,000 crore.

"We have carried out around 200 surveys on tax evaders who dodged their capital gains tax after having made huge profits from investing in penny stocks. While we have already served notices on majority of them, we are in the process of doing so on the rest as well," a senior I-T official told PTI here.

Penny stocks are common shares of small publicly traded companies that trade at low prices and hence are highly speculative in nature. Capital gains tax is applicable on under-one year investments is equities.

On the tax evasion in Mumbai, the official said, "In Mumbai alone, we have unearthed tax evasions by penny stock investors worth Rs 8,000 crore. Across the country this is a massive evasion running to Rs 38,000 crore involving nearly 1,000 entities."

However, Principal Chief Commissioner of Income Tax, Mumbai, Suman Kumar Anand told PTI that majority of the cases could not be new as most of them must have availed of the Income Disclosure Scheme (IDS) that was in effect from June 1 to September 30 this year.

"In a majority of cases, people must have availed of the IDS which was in force until September 30," he said, but refused to share the particulars.

When contacted, a Sebi official said that during its investigation if it finds likely violation of some law, then the case would be referred to the agency concerned.

So far, Income Tax Department here has conducted around 200 surveys and notices have been served in 80% of such cases, another official said.

While there is a provision of reopening the cases under Section 147 of the Income Tax Act, the cases can be reopened under another section 148 as well, he added.

Prosecution against these entities, who face penalty ranging between 100-300% of the concealed income, will start shortly, the official added.