250 penny stocks under I-T scanner

Close on the heels of market regulator Securities and Exchange Board of India (Sebi) cracking the whip on 331 suspected shell companies, the Income Tax Department is preparing another list of penny stocks that could be barred from being traded on bourses.

The new list could have as many as 250 names and would be shared with Sebi for further action.

The move is in line with the government's crackdown on black money which has been intensified post-demonetisation. The government suspects black money hoarders are using listed companies to facilitate money laundering and tax evasion.

The investigators have recently discovered hundreds of penny stocks — believed to be shell companies quoting very low price on the share market. Trading in these companies are done to help the wealthy people to evade tax. During black money amnesty scheme last year, share traders are learnt to have disclosed over Rs 5,000 crore that was earned through the trading of penny stocks.

Earlier this year, the tax authorities had prepared a list of over 80 penny stocks and shared it with the Sebi.

The regulator has been tough in its action against those manipulating the market. It has already launched an enquiry into several cases where it suspects share prices were manipulated.
It has set a target of clearing all penny stocks-related cases by September this year. The regulator has set a deadline of September for clearing all the penny stocks-related cases.

Market sources said that in case Sebi fails to prove market manipulation by companies it may be very difficult for the tax authorities to act. The two agencies have been working closely and identified hundreds of suspected penny stocks. They estimate a tax evasion of about Rs 30,000 crore through the trading of shares in shell companies.

Earlier this month, Sebi had shocked investors with its order to suspend trading in 331 suspected shell companies. The regulator put them on a strict watch under its graded surveillance measure (GSM) framework.
It has set a target of clearing all penny stocks-related cases by September this year. The regulator has set a deadline of September for clearing all the penny stocks-related cases.

Market sources said that in case Sebi fails to prove market manipulation by companies it may be very difficult for the tax authorities to act. The two agencies have been working closely and identified hundreds of suspected penny stocks. They estimate a tax evasion of about Rs 30,000 crore through the trading of shares in shell companies.

Earlier this month, Sebi had shocked investors with its order to suspend trading in 331 suspected shell companies. The regulator put them on a strict watch under its graded surveillance measure (GSM) framework.