Penny stocks linked tax evasion: Tax dept may take you to tribunal and court for bogus transactions
Central Board of Direct Taxes (CBDT) has decided to increase the scope of theIncome Tax Department in filing of appeal cases in tribunals and courts. It has been directed by CBDT via a circular dated March 15, 2024, that the tax department can now file appeals with income tax tribunals and courts without considering the tax effect amount for certain specified cases based on the merit of the case. Among the specified cases, one is about penny stocks which falls under the category of cases involving organised tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries.
«Monetary limits given with regard to filing appeal/SLP shall be applicable to all cases including those relating to TDS/TCS under the Act with the following exceptions where the decision to appeal/file SLP shall be taken on merits, without regard to the tax effect and the monetary limits,» said CBDT in its circular dated March 15, 2024.
What does this mean for taxpayers?
According to tax experts, the intention behind this circular by CBDT is to catch those taxpayers who are using penny stocks and accommodation entries for tax evasion purposes. The tax department will not catch all individuals investing in penny stocks who have followed all tax law(s) and rules, but only those who have done so purposefully for tax evasion.
«Merely investing in penny stocks through accounted money is no violation of any income tax law and rule. However, declaring huge profits or huge losses, several times of
