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2020 (2) TMI 1088
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....ame should have been charged at the normal rates. 2. In the facts of the present case, an adjournment application was moved on behalf of the ld. AR. However, considering the material available on record and noting the objections of the Proxy Counsel Mr. Tej Mohan Singh, it was deemed appropriate for the reasons set out hereinafter to proceed with the present appeal ex parte qua the assessee appellant on merits after hearing the ld. CIT-DR. 3. A perusal of the record shows that in the present appeal filed on 11.10.2018 by the assessee virtually on all occasions three in total adjournments were sought by the assessee. For the completeness of record the Revenue had also as per record sought an adjournment once. In the circumstances, considering the fact that more than sufficient indulgence had already been shown to the assessee in terms of grant of time and even otherwise, considering the record, it was deemed appropriate to proceed with the present appeal ex parte qua the assessee appellant on merits after hearing the ld. CIT-DR. 4. The ld. CIT-DR relied upon the consistent orders of the AO and the CIT(A). He was specifically required to make his submissions on the fact whet....
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....assessee has laundered its unaccounted money through the above concern and when the assessee came to know about the search operation carried out by the investigation wing then the assessee declared its income under the head income from other sources. As discussed in detail in above paragraph it is beyond doubt that the assessee has taken accommodation entry to launder its unaccounted money through M/s. UNNO Industries Ltd. therefore the addition under section 68 by the Assessing Officer has rightly been made. Accordingly this disallowance is sustained. 5.14 Secondly the assessee has challenged the application of special rate under section 115BBE on the amount of Rs. 2,56,367/- assessed under section 68. The appellant has vehemently contended that, since she has declared income from sale of shares as "Income from other sources" rather then claiming an exemption u/s. 10(38), therefore this income should not be treated as income from other sources. As discussed in detail in above paragraph it is undoubted that the assessee has brought its unaccounted money through the accommodation entry taken from M/s. UNNO Industries Ltd. In my considered view the Assessing Officer has rightly ch....
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.... 19.08.2016. Since the assessee voluntary surrender the same at the time of survey on 17.09.2015, the same amount of Rs. 2,56,367/- now added to the total income of the assessee during the year under consideration. Since, a thorough investigation in the matters has been conducted by the Department and it is clear that well planned transactions have been undertaken in order to laundering of money without paying taxes, the assessee has no option but to surrender the amount of bogus long term capital, claimed as exempt income in the return of income. The assessee is well aware of the facts that the transactions of share have been manipulated for bogus LTCG. The assessee wants to invest the undisclosed money in sort of loan/securities etc. For such investments, it requires the legitimate money. Therefore, it has undertaken all the transactions for laundering the money through sale/purchase of shares, which are manipulated for bogus long term capital gain. 5.2 The surrender, it is seen was not accepted by the Assessing Officer in view of the fact that Shri Anil Khemka in his statement recorded u/s. 133A by the Investigation Wing in reply to question No. 18 specifically accepted that ....
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....y SEBI in the case of M/s. UNNO Industries Ltd. It is necessary to see whether trading etc. activities have been suspended and whether any penalties etc., have been visited upon the said company. The statement of an unscrupulous Director who may in attempt to save his skin for his shortcomings in his business practices by itself can not be sufficient to conclusively hang the albatross around the neck of an innocent investor. Whether the said company has been held to be a sham company or not it is the order of the Regulatory Authority which needs to be referred to. It needs to be appreciated that different Statutory Authorities constituted under the specific Acts entrusted with specific roles, functions and powers to achieve the aims and objects exist in their domain areas. Their powers cannot be willy-nilly permitted to be usurped by other Statutory Authorities constituted and entrusted with their own roles, functions and powers. The powers cannot be usurped or encroached upon. No doubt the orders of the Authorities and their impact on the Co-ordinating Authorities has to be respected, the fact remains that the specific powers cannot be usurped. It is well understood that SEBI as a....
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....e depositories, [participants,] custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf;] (c) registering and regulating the working of [venture capital funds and collective investment schemes], including mutual funds; (d) promoting and regulating self-regulatory organisations; (e) prohibiting fraudulent and unfair trade practices relating to securities markets; (f) promoting investors' education and training of intermediaries of securities markets; (g) prohibiting insider trading in securities; (h) regulating substantial acquisition of shares and takeover of companies; (i) calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds, other persons associated with the securities market intermediaries and self-regulatory organizations in the securities market; (ia) calling for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial....
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.... writing, in the interests of investors or securities market, take any of the following measures, either pending investigation or inquiry or on completion of such investigation or inquiry, namely:- (a) suspend the trading of any security in a recognized stock exchange; (b) restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities; (c) suspend any office-bearer of any stock exchange or self-regulatory organization from holding such position; (d) impound and retain the proceeds or securities in respect of any transaction which is under investigation; (e) attach, after passing of an order on an application made for approval by the Judicial Magistrate of the first class having jurisdiction, for a period not exceeding one month, one or more bank account or accounts of any intermediary or any person associated with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder: Provided that only the bank account or accounts or any transaction entered therein, s....
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....tive investment scheme. (2) Any scheme or arrangement made or offered by any company under which,- (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day to day control over the management and operation of the scheme or arrangement. (3) Notwithstanding anything contained in sub-section (2), any scheme or arrangement- (i) made or offered by a co-operative society registered under the co-operative societies Act, 1912 (2 of 1912) or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any state; (ii) under which deposits are ....
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....he Investigating Authority) specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to the Board. (2) Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956 (1 of 1956), it shall be the duty of every manager, managing director, officer and other employee of the company and every intermediary referred to in section 12 or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power. (3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before it or any person authorized by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or register....
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.... during which the failure or refusal continues. (7) Notes of any examination under sub-section (5) shall be taken down in writing and shall be read over to, or by, and signed by, the person examined, and may thereafter be used in evidence against him. (8) Where in the course of investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Judicial Magistrate of the first class having jurisdiction for an order for the seizure of such books, registers, other documents and record. (9) After considering the application and hearing the Investigating Authority, if necessary, the Magistrate may, by order, authorise the Investigating Authority - (a) to enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept; (b) to search that place or those places in the manner specified in the order; ....
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....djudicated on the issues as set out in Chapter VI A of SEBI Act there can be no doubt whatsoever that a Regulatory Body is in existence. For the sake of completeness, Chapter VI A which provides teeth to the Regulatory Body is extracted hereunder: [35] [CHAPTER VIA PENALTIES AND ADJUDICATION 15A. Penalty for failure to furnish information, return, etc.- If any person, who is required under this Act or any rules or regulations made thereunder, - (a) to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less]; (b) to file any return or furnish any information, books or other documents within the time specified therefor in the regulations, fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less; (c) to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty of one la....
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....] (d) registered as a collective investment scheme including mutual funds fails to despatch unit certificates of any scheme in the manner provided in the regulation governing such despatch, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.] (e) registered as a collective investment scheme, including mutual funds, fails to refund the application monies paid by the investors within the period specified in the regulations, he shall be liable to pay a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.] (f) registered as a collective investment scheme, including mutual funds, fails to invest money collected by such collective investment schemes in the manner or within the period specified in the regulations, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.] I5E. Penalty for failure to observe rules and regulations by an asset management company,- Where any asset management company of a mutual fund reg....
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....t body corporate; or (ii) make a public announcement to acquire shares at a minimum price; (iii) make a public offer by sending letter of offer to the shareholders of the concerned company; or (iv) make payment of consideration to the shareholders who sold their shares pursuant to letter of offer. he shall be liable to a penalty twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher. [15HA. Penalty for fraudulent and unfair trade practices.- If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher. 15HB. PenaIty for contravention where no separate penalty has been provided.- Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.] 15I. Power to adjudicate.- (1) For the purpose of adjudging under....
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....t important entities of the financial market viz namely (i) Issuers of securities (ii) Investors; and (iii) Financial intermediaries. 5.7.1 Its functions may be divided as Developmental Functions, where SEBI is tasked to bring fresh initiatives and innovations to the Indian Financial Market; amongst its Protective functions, it is to address and stop the collusive, fraudulent and manipulated fluctuation in the market, prohibit insider trading issue guidelines from time to time to stop unfair practices used by Corporates to manipulate security markets. Apart from that, SEBI also has Regulatory functions with which we are concerned in the present proceedings. 5.7.2 In the discharge of its Objectives, SEBI has been armed with powers to enforce the implementation of the bye-laws and guidelines on the financial intermediaries and corporates in order to ensure that the stock market runs smoothly with transparency. For enforcing its orders, it has:- (i) Quasi-Judicial: SEBI in order ensure fairness, transparency, and accountability in the securities market has the authority to deliver judgments related to fraud and other unethical practices in terms of the securities market....
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....ed only once a month with "surveillance deposit" of three times the trade value. 5.9 Reference may also be made to the following web-site of business standard available in the public domain (https://www.business-standard.com/article/markets/158-mn-penalty-on-nse-is-harsh-but-it-won-t-have-cash-flow-implications-119050200689l.html ) where noticing instances of collusion of sorts a disgorgement order against the National Stock Exchange of India Ltd. was passed considering the algorithmic trading patterns of parties which demonstrated that the exchange had failed to provide equal access to all trading members. The NSE's systems were found to be at fault and provide a preferential access to select broker when they assessed its high speed algorithmic trading platform. The fact that no case of intentional running a rigged high frequency case was made out and on the penalty etc. imposed the quantification issue etc. was disputed does not detract from the point being made i.e. SEBI is active, alert and fully functional. Reference may also be made to co-location orders against certain NSE Members who have been barred from accessing the capital market for a specific period and refund ....
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....nce has been made to any order of SEBI or any other Regulatory Authority either delisting or threatening delisting/warning etc. issued in the name of M/s. UNNO Industries Ltd. To my understanding, this power vested in the Regulatory Authority cannot be usurped by any other Authority. The power to hold, penalize and act against a company in the event the company is a sham company floated against the laws of the land vests with the Ministry of Corporate Affairs, SEBI and SFIO who can recommend the removal of its name from the Registrar of Companies. For want of any relevant discussion thereon, the order at best proceeds only on presumptions and suspicions. 5.11 It is seen that this aspect has not been considered in the case of Shri Abhimanyu Soin (supra) relied upon by Id. CIT-DR. Accordingly, adjournment application of the Id. AR was rejected and it was deemed appropriate to restore the file back to the CIT(A) with the direction to bring out necessary facts as to whether the specific company in the specific period has been held to be a bogus/sham company by the appropriate Regulatory Authority or not. I am of the view that the facts, evidences and deficiencies noticed are suffici....
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....cussed in detail in above paragraph it is beyond doubt that the assessee has taken accommodation entry to launder its unaccounted money through M/s. Golden Legend Finance and Leasing Ltd. therefore the addition under section 68 by the Assessing Officer has rightly been made. Accordingly, this disallowance is sustained. 5.12 Secondly the assessee has challenged the application of special rate under section 115BBE on the amount of Rs. 28,98,987/- assessed under section 68. The appellant has vehemently contended that since she has declared income from sale of shares as "Income from other sources" rather then claiming an exemption u/s. 10(38), therefore this income should not be treated as income from their sources. As discussed in detail in above paragraph it is undoubted that the assessee has brought its unaccounted money through the accommodation entry taken from M/s. Golden Legend Finance and leasing Ltd. In my considered view the Assessing Officer has rightly charged under section 115BBE, on the amount of Rs. 28,98,987/-assessed under section 68. When we refer to an entry of loan transaction as 'fake loan' received from a 'paper company', it invar....