TaxTMI 
TaxTMI 
2015 (7) TMI 913
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....ific grievance of the appellants, we deem pertinent to take note, a brief background of the case. 3. In October, 2005, Securities and Exchange Board of India (SEBI for short) noticed large scale off market transactions of shares of Yes Bank Ltd. On detailed examination of data collected from the depositories and Registrar to the Issue, SEBI found that many demat accounts in fictitious/benami names were opened by certain persons, and these persons had cornered the shares of certain Initial Public Offers (IPOs) by making applications in fictitious/benami names with each of the applications being of small value so as to make it eligible for allotment under retail category. It was also observed that subsequent to the allotment of IPO shares, this fictitious/benami allottees had transferred the said shares to their principals (key operators/master account holders) who in turn transferred the shares to the persons (the financiers) who made available fund for making subscription to the respective IPOs., through off-market transactions prior to the date of listing on the stock exchange. The financiers have also sold the said shares immediately on the date of listing and made huge profit. ....
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.... SEBI, therefore, no income resulted to the assessee, which can be assessed in the hands of the assessee either under the head "capital gains" or under the head "business income". 9. In the appeal of the Revenue for the Asstt.Year 2006-07, in the case of Reetaben R. Thakkar, solitary issue is that the ld.CIT(A) has erred in accepting a sum of Rs. 5,48,385/- out of the total alleged capital gain of Rs. 36,16,736/- as assessable under the head "capital gains". 10. With the assistance of learned representative, we have gone through the record carefully. Before we embark upon an inquiry, as to assessability of Rs. 36,16,736/- and Rs. 30,78,423/- in the hands of Smt. Reetaben R. Thakkar and Shri Monal Y. Thakkar, in the Asstt.Year 2006- 07 respectively, it is pertinent to bear in mind certain basic features emerge out from the proceedings of the SEBI. As stated earlier, the assessees have financed certain benami/fictitious applicants to apply for allotment of shares in initial public offer, which is against section 12A of Securities and Exchange Board of India Act, 1992. The SEBI has initiated inquiry and ultimately issue was settled. The SEBI has passed order in the case of Smt. Reet....
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.... by the applicant and after considering the period of prohibition on buying, selling or dealing in securities undergone by the applicant since April 27, 2006, recommended the case for settlement. As per the terms of settlement, the applicant shall disgorge Rs. 30,98,785 (Rupees thirty lakh ninety eight thousand seven hundred and eighty five only) being the unlawful gain made by her in the alleged irregularity and Rs. 6,20,215 (Rupees six lakh twenty thousand two hundred and fifteen only) as the settlement charges. 4. For the sole purpose of settling the matter on hand and without admission or denial of guilt on the part of applicant to the findings of fact or conclusion of law, the applicant has remitted a total sum of Rs. 37,19,000 (Rupees thirty seven lakh nineteen thousand only) comprising of Rs. 30,98,785 (Rupees thirty lakh ninety eight thousand seven hundred and eighty five only) towards disgorgement and Rs. 6,20,215 (Rupees six lakh twenty thousand two hundred and fifteen only) towards settlement charges vide demand drafts No. 982666 (Rs. 8,00,000), 982668 (Rs. 8,00,000), 982669 (Rs. 8,00,000), 982670 (Rs. 5,19,000), dated October 27, 2008, drawn on State Bank of Patiala, ....
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..... I have considered the submission of the appellant and I have also perused the copy of the order passed by the SEBI on 05.11.2008. In the SEBI order, supra, it has been clearly - mentioned that the appellant, vide letter dated 12.07.2007, proposed settlement of the pending proceedings. Thereafter, SEBI constituted one high power advisory committee, which considered the consent terms proposed by the appellant and recommended the case for settlement. As per the terms of settlement, the appellant shall disgorge Rs. 30,98,785/-, being the unlawful gain made by the appellant and Rs. 6,20,215/-as the settlement charges. In consideration to this order, the appellant has remitted total sum of Rs. 37,19,000/- vide demand draft, drawn on State Bank of Patiala payable at Mumbai. 15. The appellant's contention that income earned out of the share transactions to the extent of Rs. 30,68,351/- should be directed to be reduced from the income assessed by the Assessing Officer, is not accepted for the following reasons :- (a) The SEBI's order has been passed on 05.11.2008, whereas the previous year in the impugned assessment orders ended on 31.03.2006. Therefore, the SEBI's order h....
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.... orders of the CIT(A) contended that the activity of the assessee in the purchase and sale of shares is of investment in the shares, and it cannot be assessed under the head "business income". Alternatively, on the strength of SEBI order, he contended that no income ultimately resulted to both the assessee, therefore, the amount of Rs. Rs. 30,98,785/- and Rs. 29,17,331/- is to be excluded from the assessments of both these assessees, respectively in the Asstt.Year 2006-07. He further contended that capital gain is assessed under the head "business income" by the ld.CIT(A). Consequently, loss on account of repayment of this income to the SEBI is to be allowed to the assessees. The payment has been made in the Asstt.Year 2009-10, therefore, this amount is to be allowed to the assessees in the Asstt.Year 2009-10. 14. As far as the settlement charges are concerned, he contended that payment was not made for violation of any law. It was paid for settlement of dispute with the SEBI and it is compensatory in nature. It does not come within the ambit of Explanation-1 appended to section 37 of the Income Tax Act. Therefore, the settlement charges paid by these assessees deserve to be allow....
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....xpenditure. The income, which we have already excluded, therefore, the assessees cannot claim the expenditure, because, the expenditure has to be incurred for earning some income. Once the income is not form part of the total income, then against that activity, how the assessee can claim that expenditure ? Apart from the above, we find that the order of the ITAT in the case of Kaira Can Company Ltd. (supra) is altogether on different footings, rather, it is against the assessees. The Tribunal has considered the expression of "offence" and made the following discussion: "20. The word 'offence' has not been defined in the Act. As per Websters Encylopedic Abridged Dictionary, it means violation or breach of law or rule; a transgression of the criminal law, especially one which is not felony; a cause of transgression. As per Blacks Law Dictionary, it means,-a violation of the law; a crime, often a minor one. As per Illustrated Oxford Dictionary, it means-illegal act or a transgression. A perusal of the above definitions clearly shows that if there is a breach or violation of law or rule then it is to be treated as offence. 21. In the present case, admittedly, the assessee is gov....