The IPO allotment scam is now threatening to engulf an arm of the government — the income tax department . Financial sector regulators who have established a nexus between banks, brokers and depository participants in the large-scale manipulation of demat and savings bank accounts to corner a large chunk of the retail portion in IPOs are now set to probe the role of some income tax officers as well.

Investigations underway now point to the involvement of some income tax officers as well. A few officers have issued several PAN cards that were used with benami IPO applications in the Yes Bank offering. A probe is underway to ascertain whether bogus PAN numbers quoted, said official sources.
The tax department, for instance, recently found bogus or incorrect PAN numbers being quoted by individuals making high-value purchases. These purchases are being tracked through the annual information returns (AIR) filed by third parties. If the PAN numbers are fictitious, it would be difficult for tax authorities to track evaders.
Under the income tax law, it is illegal for an individual to hold more than one PAN card. Those subscribing to an IPO have to quote their PAN number in the application, if the value of the subscription is Rs 50,000 or more. The investigations could take a different turn if it is proven that bogus PAN cards were issued as there could be bigger players involved in the scam.
There have been cases where an individual has more than one PAN card. However, such instances have become rare after the IT department outsourced the job of issuing PAN cards to NSDL and UTIISL two years ago, said officials. The PAN number is allotted by the IT department.
Besides this, there are many cases where individuals use bogus or fictitious PAN numbers. In the Yes Bank allotment scam, brokers and market operators, with the help of the depository participant (Karvy Consultants), approached banks for opening multiple accounts in the names of purported applicants — in this case the group led by Roopalben Nareshbhai Panchal.
The banking regulator’s findings reveal that irregularities were perpetrated mainly by the Panchal group. Besides, BhOB, IOB and Vijaya Bank, two foreign banks and two private banks had violated the KYC and AML norms, facilitating easy flow of money to benami and non-existent groups of individuals.
One of the foreign banks allowed encashment of 120-1,150 cheques for the same amounts in a single day — breaching the ceiling of 10-15 cheques for withdrawals. Another foreign bank, is believed to have allowed the issue of 16,000 cheque leaves to Roopalben Nareshbhai Panchal’s current account at its Ahmedabad branch, within a few days of the account opening and despite non-authorisation by senior functionaries.
Another private bank allowed Bharat Overseas Bank to collect 25,094 refund orders, aggregating around Rs 75 crore, across the counter, on the basis of a letter written by the Worli branch manager, even though the beneficiaries of the cheque were not account holders of the collecting bank.
The probe has also shown the opening of multiple joint accounts in the same name at Vijaya Bank. However, no IPO funding was done by Vijaya Bank for the Yes Bank offering.
The banking regulator has come down heavily on Karvy Consultants for flouting Sebi’s norms for opening demat accounts. The advice of Karvy Securities to BhOB to credit a few brokers’ accounts only in respect of refund orders received by unsuccessful or partially-successful allottees instead of crediting savings accounts clearly establishes the nexus between banks, brokers and the Karvy Group, states the finding.

Do you guys think that with these kind of scam our economy can grow???

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