LINE OF INVESTIGATION

1. LINE OF INVESTIGATION • Identification & Establishing the scrip as Penny Stock • Purchase analysis of share by the assessee • Sale analysis of share by the assessee • Delayering the fund flow

2. Penny Stock Analysis • Pictorial Diagram • Trade Volume Analysis • Price Variation Analysis • Financial Analysis

3. Purchase Analysis of Shares • Queries to be raised before assessee

4. Purchase analysis of shares • Please specify the date of purchase along with quantity. • Please specify the mode of payments. • If the payment is made through banking channel, submit the corresponding bank statements reflecting the aforesaid transaction. • Please furnish the contract notes related to purchase, if applicable.

5. Purchase analysis of shares • Please furnish the documents related to allotment of shares, if applicable. • Please give complete detail (such as Name, PAN, Address, Contact No., etc.) of broker. • Whether the shares were purchased in physical form or dematerialized form? • When did you open the Demat account and what is the name and address of DP?

6. Purchase analysis of shares • Please furnish the DEMAT statement since its opening. • Please specify the date on which these shares were credited into your DEMAT A/c.

7. Sale Analysis of share • Please specify the Stock Exchange in which these shares were listed at the time of sale of these shares. • Please furnish complete detail of broker such as Name, PAN, Address, Contact No. etc. • Please furnish the contract notes regarding sale of shares.

8. Sale Analysis of share • Please furnish the corresponding Demat A/c statement clearly reflecting debit of such shares from the account. • Please furnish the ledger of the broker. • Please furnish corresponding bank statement reflecting the receipts from such sale consideration.

9. Sale Analysis of share • Please specify clearly the utilization of funds so received against sale of shares. Establish it through Fund Flow Statement.

10. Data to be received from BSE • Avoid truncated / filtered data from BSE • So, what query to be raised?

11. Data to be received from the BSE • You are requested to provide complete detail of share transactions made by the assessee [PAN] from 01.04.2011 to 31.03.2015. You are requested to provide complete detail of brokers as well as counter parties detail including their name, PAN, address, contact number, etc. available with you. • You are requested to provide such information in soft copy also.

12. Data Analysis • Vis-à-vis the assessee, only few CP and that too repetitive • Only few Counter party members and these are one who had major portion of the trade volume percentages • Also, most of the CP_members are found to be tainted or on whom action have been taken by Investigation wing

13. Data Analysis • Most of the CP are also merely accomodation entry providing concern • Analysis of CP

14. Analysis of CP • Establish the flaw and incoherence in the trading history of the CP • Non-filer • Very low R/I thereby raising doubt about its ‘çreditworthiness’ • Ask ITI/ issue commission to conduct spot verification of the address- high chances it to be either address incomplete or CP_clientnon-existent on the given address

15. Analysis of CP • Thereafter issue Summons u/s 131 for personal attendance– most of the letters will returnunserved and in some few cases it could be possible that reply will be received for seeking some more time but chances are that still no one will appear • And suppose even though he appears, record specific and analytical statement- with special emphasis on his share market knowledge, share trading history and high value credit and debit transactions in his bank account- would fail to record any satisfactory reply

16. Analysis of CP • Also take help from the KYC document of the CP_client filed by it before its member

17. KYC of CP • complete address of individual/ company, contact no., PAN • director’s detail (PAN, Identity card such Voter ID, etc), • Share holding pattern, • shareholders detail

18. KYC of CP • Name of the Authorized Signatory, • Net worth certification of the company from the authorised signatory • MoA • AoA

19. KYC of CP • Trading account detail which include (i) Bank account details and (ii) Depository account details • complete detail of introducer (in opening such trading account) such as name, address, PAN

20. KYC of CP • name of the employees of the CP_member who had done • Documents verified with originals • Client interviewed by • In-person verification by

21. KYC of CP • Declaration under the heading “ Information Provided by the client in relation to the Prevention of Money Laundering Act, 2002” • Here client need to also certify “ I/We intend to invest in the stock market with OWN FUNDS/ BORROWED FUNDS” • If borrowed funds then has to specify the sources of funds

22. Delayering of fund flow • Identify weak link, i.e. entry providing CP_client • Issue is to obtain the bank statement of the CP_client • Get it from the CP_member

23. Queries to be raised to CP_Member • Following details regarding the client to be asked from the Member:- • Plz furnish the KYC Documents • Plz furnish the Ledger of the client • Plz furnish the “SaudaDetail”of the client • Plz furnish the Demat Statement, if it is maintained with you • Plz furnish the complete information of Sub-broker