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Black money: Govt to pull up Sebi over laxity on shell companies

business Updated: Sep 06, 2016 17:14 IST
Timsy Jaipuria
black money

Once the compliance window closes, anyone found having undeclared overseas wealth would be required to pay 30% tax, 90% penalty and face criminal prosecution. (File Photo)(HT Archive)

More than six months after sending a list of shell companies to Sebi, the income-tax department has decided to approach the special investigation team on black money to register its disappointment with the market regulator’s lax stance on the matter, sources told HT.

In February, revenue secretary Hasmukh Adhia shared a list of companies being used for blackmoney or hawala transactions with the Securities and Exchange Board of India (Sebi) with a request to ban them. But till now Sebi has not taken any action.

These “shell” or “jamakharchi” (deposit and withdrawal) companies were alleged to have traded shares and evaded long-term capital gains claiming “bogus transactions.” Such companies are used to channel illicit money earned from purchase of land and jewellery among others.

According to tax authority’s directorate of investigation, a chunk of operators work from Ahmedabad, Mumbai, Hyderabad, Delhi and Bengaluru. “These details were also sent to Sebi,” sources said.

However, Sebi has been clamping down on such companies on a whole. In March, the regulator debarred over 1,000 entities from the capital markets after they were found to be misusing stock exchange platforms for tax evasion to the tune of more than ₹15,000 crore.

In its probe into various such cases, Sebi found huge share price rally in shares of the companies that existed only on paper.

Meanwhile, citing gaps in the “regulatory framework”, the Supreme Court constituted SIT asked the central bank to establish an institutional mechanism to track and curb illicit financial flows and share data with other enforcement agencies such as enforcement directorate, directorate of revenue intelligence and CBDT.

In a letter to RBI governor on August 11, SIT head Justice M B Shah (retd) underlined the need for creating a data warehouse from where various agencies can gather relevant information for taking early appropriate action.

SIT said the data provided “clearly showed that there are gaps in monitoring trade flows which are used by unscrupulous elements to take out precious capital outside the country, this damaging the fabric of Indian economy”.