12,000 people in Telangana and AP are under tax scanner

Hyderabad: As many as 12,000 people in TS and AP have come under the scanner of the income-tax department for using the stock market to legalise their stash.

The 12,000, businessmen, merchants and realtors among them, were identified in coordination with the Securities and Exchange Board of India and Central investigation agencies like the Directorate of Revenue Intelligence.

An official from the I-T department said these people approached stock brokers to convert their black money into white. “Penny stock companies in Mumbai and Kolkata have low share values and their price zooms suddenly, sometimes by as much as 2,000 times after one year,” he said. Going only by this count, a Rs 100 of stash turns into Rs 20,000 of legal money.

12,000 persons identified by I-T officials in Telangana state and Andhra Pradesh whose investment in stock markets returned 1,000-time profits in the last one year.

“We have identified thousands of entities but we are concentrating on those who have dealings of Rs 1 crore and above. We will focus on the others in phases,” the official said.

The official said profits from shares with long term capital gain of more than one year do not come under the I-T net.

“These 12,000 attempted false claims under the LTCG. As per the IT Act and Rules, withdrawal of investments is considered as white money,” he said.

The issue came to light when penny stock companies were monitored by various agencies.

“Kolkata topped with about 36,000 respondents followed by the Telugu states. About Rs 15,000 crore of black money was converted into white, the share of the Telugu states is about Rs 500 crore,” another officer said.

I-T officials will serve notices on these 12,000, seeking applications under the income declaration scheme by September 30. Once the deadline ends, the investigative wings would organise raids and register cases against them. The cases would be referred to Sebi for action.

The B&W tax games

I-T officials have identified a few B&W Games

Invoicing: Company ‘X’ supplies '10 lakh goods to Company ‘Y’. It presents a bill of Rs 6 lakh including taxes; the other Rs 4 lakh is in cash, and turns into stash.

Borrowing: Company ‘X’ lends '1crore in cash to Company ‘Y’ through a convertible debenture. ‘Y’ uses the cash to pay vendors, but accepts payments only by che-que. It repays ‘X’ in cheques for equity.

Charity: Form a charitable trust with dummy executive body. Donates black money as charity and the trust converts it.

Cash income: Cash paid for tuitions, professional fees or commissions can convert black into white.

Real estate: People fake a deal, cash changes hands and then the deal is cancelled citing ‘non-payment.’