Income Tax Scam: HC upholds 90 Assessment Orders related to penny Stock worth more than 38000 Cr

High Court on 14th June 2022 upheld 90 Assessment Orders related to bogus Long Term Capital Gain (LTCG) accommodation entries earned by inventing in penny stock wherein more than 64,811 beneficiaries were identified to be involved in the bogus claims of LTCG which was estimated above Rs. 38,000 crores.

The illegal business of bogus LTCG involves three different individuals, the promoter of “penny stocks” companies also known as syndicate member, the share brokers and the entries operators who purchase the shares through paper companies by taking cash and many at times the three categories of individuals perform overlapping roles and at times, a single individual may perform all the three functions.

A large number of NRIs and well-known FIIs are buying and selling these penny stocks and this appears to be a case where the black money stashed a broad is coming back to India (purchase) or money being sent out of the country (sale).

The High Court Bench of T.S. Sivagnanam and Hiranmay Bhattacharyya said that the tribunal committed a serious error in setting aside the orders of the CIT(A) who had affirmed the orders of the Assessing Officer and equally the Tribunal committed a serious error both on law and fact in interfering with the assumption of jurisdiction by the Commissioner under Section 263 of the Income Tax Act.

As a result, the appeals were allowed and the substantial questions of law framed/suggested are answered in favour of the revenue and against the assessee restoring the orders passed by the respective Assessing Orders as affirmed by the CIT(A) as well as the orders passed by the CIT under Section 263 of the Act.