Penny stock scam

Dr Sibichen K Mathew

Income Tax Authorities in India in 2006 under the leadership of the then Commissioner of Income Tax of Bangalore and the Additional Commissioner of Income Tax Dr Sibichen K Mathew IRS unearthed the 1.6 million dollar penny stock scam in Bangalore. The scam is the fallout of nationwide income tax raids on the premises of businessmen in April 2006, suspecting large scale money laundering and tax evasion through ramping up shares of small firms. Around 25 premises were raided in Mumbai and 10 in Bangalore. After the raids, the Additional Commissioner set up up a team and investigated this scam. They pursued the investigations and issued orders on December 31, 2008 that are said to have national ramifications. The team found that the traders had ramped up penny stocks to launder money an organised crime and a serious economic offence that has misused provisions of the Securities and Exchange Board of India and Registrar of Co-operatives. This route is chosen to use capital gains tax and legalise the unaccounted money. On April 28, the Central Board of Direct Taxes and the Ministry of Finance billed the case as the best investigation and assessment order of the year. The team picked up accounts of 30 Chikpet traders who were into penny stocks and found bogus claims through capital gains.
The finding has also debunked the claim that demat is sacrosanct though the depository participation did not have any role in the manipulation, the demat procedure was misused.
Sources : TimesOfIndia.com