I-T department launches investigation against 90 companies for money laundering
The tax department has launched an investigation against 90 companies for possible evasion, money laundering and for converting black money into “white” through a series of transactions in little-known shares, commonly called penny stocks.
Sources said this is a massive scam which the department is probing and is the latest element of the government’s drive against black money.
Over the past few months, market regulator Sebi passed orders related to around 10 companies, resulting into suspension of 36 companies that were involved in irregular trades and banning of 900 en tities. Sources said the money involved in the 36 companies could add up to close to Rs 20,000 crore. In his orders, Sebi member Rajiv Agarwal had said that the cases should be investigated by the tax department, the enforcement directorate as well as the Financial Intelligence Unit. On December 22 last year, TOI had reported that Sebi was investigating around 50 companies.
Sources said the transactions were all done by “entry operators”, who would collect cash from “investors” and buy shares of unknown companies, which largely existed on paper. In most cases, preferential allotment of shares was done at a premium. Then a group of traders would trade among themselves to ramp up the share price.
After raising the price significantly , they would issue bonus shares to the investors or go for a stock split. And, despite all this, the share price would rise further. Typically , the “investors” would exit after 14-15 months or two years to avoid paying capital gains tax on the transactions. In the final settlement, the person who had routed cash through the operators would be paid in cheque, helping convert his black money into legitimate funds on payment of 8-10 per cent commission. Source in the I-T department and Sebi said the crackdown by the tax authorities and regulators has resulted in this kind of business coming to a near halt over the past few months.
