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CBDT Directs Reopening Assessments To Tax Bogus Capital Gains/ Loss In Penny Stocks Scam By Taxpayers

The CBDT has issued a letter dated 16.03.2016 in which it has noted that an investigation has been conducted by Kolkata Investigation Directorate in respect of large number of penny stock companies, whose share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries. It is stated that extensive investigation, including search and seizure/survey action on entry providers, riggers, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate has now uploaded details of such information in respect of individual assessees who have made transactions in such penny stocks. The CBDT has directed that the information relating to the “Penny Stock” should be considered by AO’s for making assessments u/s 143(3) and reopening assessments u/s 148 of the Act.


REF : EFS Instruction No.53 of Directorate of Systems dated 08.03.2016

Kind attention is invited to the above referred EFS Instruction issued by the System Directorate regarding handling cases of Penny Stocks (suspect Long Term Capital Gains/Short Term Capital Loss etc).

2. It is informed that the said instruction is in the context of investigation conducted by Kolkata Investigation Directorate in respect of large number of penny stock companies, whose share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries. Extensive investigation, including search and seizure/survey action on entry providers, riggers, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate has now uploaded details of such information in respect of individual assessees who have made transactions in such penny stocks.

3. Vide EFS Instruction under reference a new button ‘Penny Stock’ has been added on Individual Transaction Screen (ITS) to display information related to penny stock, now enabled on the screen of the Assessing Officers (AOs). Available information regarding the manipulative transactions has been captured in the functionality, including the investigation report of the Kolkaia Investigation Directorate. The functionality also contains a guidance note for the Assessing Officers. Such details are visible to the AOs of those assessees whose particulars have emanated out of the investigation report of Kolkata Investigation Directorate and whose cases have been considered actionable, at this stage. The details are also visible to supervisory officers of such AOs.

4. In case of any difficulty in viewing the information on ITS, Shri Vipul Agarwal, JDIT (Sys) 2(1) could be contacted on 0120-2770052 or email at vipul.agarwal@nic.in

5. The undersigned is directed to request that necessary directions may kindly be issued to the officers working under your jurisdiction to access this functionality and ensure that information available in the ‘Penny Stock’ functionality which may be useful for the purpose of cases presently under scrutiny, is examined and considered while finalizing assessments and considering reopening of cases under section 148 of the IT Act, 1961.

6. This issues with the approval of Member (Inv), CBDT.


6 comments on “CBDT Directs Reopening Assessments To Tax Bogus Capital Gains/ Loss In Penny Stocks Scam By Taxpayers
  1. N.devanathan Devanathan says:

    dear sir,

    the department is digging its own grave. It is settled law that the assessing officer alone can reopen the assessment and it cannot be reopened at the behest of superior authority. In the light of the above circular even genuine cases also would be affected The recent decision of the Bombay High court that assessment cannot be reopened as a remedial measure also stands in the way of reopening

    with regards
    N. devanathan

  2. Jwala Singh says:

    Dear Sir

    Make some suggestion at the grass root level, this will only increase the importance of accountancy, else bhagwan mallik hai,

    J

    With Regards

    Jwala Singh

  3. B.S.Waghela says:

    I wish a List of Bogus Companies and their beneficiaries should have been published to all the Assessing Officers. Such Bogus transactions are going on for decades and the Ld.(I mean CORRUPT) CIT(Appeals) / ITATs have deleted the additions on one or the other pretext. In Income Tax Act a Section should inserted that such Lists prepared by the Investigation Wing of the Department shall be treated as conclusive/final and binding on all the Appellate Authorities including the ITAT. Such Lists should be made part of a SCHEDULE to the IT Act updated periodically by way of Notification.
    It is welcome step that the DG(Inv) Calcutta has prepared such list. Now all the Investigation Wings through out India should undertake such exercise and the Board should publish a Consolidated List periodically.

    • Rajesh bhardwaj says:

      Sir, your anxiety to nail the tax evaders is understandable. However, we cannot tar all CIT(A) / ITAT as corrupt. There may be few rotten fish and they should be brought to book. As regards lists prepared by inv wing, they are good starting points for investigation by AO but making them final word in assessment would make the ADIT/AO above the Hon. HC/SC. Suspicion howsoever strong cannot take the place of proof. AOs will have to put in hard work and nail the tax evader in assessment proceedings instead of just relying on inv wing list to make the addition as many are doing at present. Due process of law has to be followed. Even Kasab got a trial though he was caught on cctv camera. Inv wing can also think of sting operations or phone tapping to nail tax evaders. Best of luck.

      • B.S.Waghela says:

        I do not mean all the CIT(Appeals)/ ITAT members are corrupt; but majority is. This is my Personal experience and I have appeared before dozens of CIT(As). Practitioners generally do not appears before upright CIT(As) and ITAT Bench. They wait for favourable persons; there is Bench hunting. I have made suggestion to place such Lists in the Schedule to the IT Act, so that old HC/SC decisions may not come in the way. At least such lists may be binding on the CIT(A)/ITAT.

        • NARENDRA SEKSARIA says:

          NO ADDITION WILL BE SUSTAINED AT CIT/ITAT PL GOOGLEAND READ LATEST ITAT MUM2016 OF Farrah Marker-ETC

          EVEN ADMITTED BLATANT TAX AVOIDANCE CASE-
          THIS METHOD KNOWN TO DEPT-NEW ENTRANTS OF 6YRSWILL SUFFER-OTHERS SHOULD ALSO BE SUBJECT TO SURVEY/SEARCH ETC

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