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TMI Blog2020 (2) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 whether any order of the appropriate Regulatory Authority i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 charged under section 115BBE, on the amount of Rs. 2,56,367/- assessed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in Scrip Code 519273 in the case of M/s. UNNO Industries Ltd. the transactions were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 an Authority has been constituted to address instances of price rigging, unofficial private placements, non-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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 Act in respect of any transaction in securities which is under investigation or inquiry by the Board; (j) performing such functions and exercising such powers under the provisions of [...] the Securities Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessing 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, so far as it relates to the proceeds actually involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder shall be allowed to be attached; (f) direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable 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 accepted by non-banking financial companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (iii) being a contract of insurance to which the Insurance Act, 1938 (4 of 1938), applies; (iv) providing for any scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952); (v) under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 registers, or other documents, or record is relevant or necessary for the purposes of its investigation. (4) The Investigating Authority may keep in its custody any books, registers, other documents and record produced under sub-section (2) or sub-section (3) for six months and thereafter shall return the same to any intermediary or any person associated with securities market by whom or on whose behalf the books, registers, other documents and record are produced: Provided that the Investigating Authority may call for any book, register, other document and record if they are needed again: Provided further that if the person on who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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; and (c) to seize books, registers, other documents and record, it considers necessary for the purposes of the investigation: Provided that the Magistrate shall not authorize seizure of books, registers, other documents and record, of any listed public company or a public company (not being the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless such company indulges in insider trading or market manipulation. (10) The Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 lakh rupees for each day during which such failure continues or one crore rupees, whichever is less. 15B. Penalty for failure by any person to enter into an agreement with clients.- If any person, who is registered as an intermediary and is required under this Act or any rules or regulations made thereunder to enter into an agreement with his client, fails to enter into such agreement, 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.] I5C. Penalty for failure to redress investors' grievances.- [40] [If any listed company or any person who is registered as an intermediary, after having been called upon by the Board in writing, to redress the grievances of investors, fails to redress such grievances within the time specified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 registered under this Act, fails to comply with any of the regulations providing for restrictions on the activities of the asset management companies, such asset management company 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.] 15F. Penalty for failure in case of stock brokers.- If any person, who is registered as a stock broker under this Act, - (a) fails to issue contract notes in the form and in the manner specified by the stock exchange of which such broker is a member, he shall be liable to a penalty not exceeding five times the amount for which the contract note was required to be issued by that broker; (b) fails to deliver any security or fails to make payment of the amount due to the investor in the manner within the period specified in the regulations, he shall be liable to [48]_[a penalty of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty 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 sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, [54]_[15H, 15HA and 15HB], the Board shall appoint any of its officers not below the rank of a Division Chief to be an adjudicating officer for holding an inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of being heard for the purpose of imposing any penalty. (2) While holding an inquiry, the adjudicating officer shall have power to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the adjudicating officer, may be useful for or relevant to the subject matter of the inquiry and if, on such inquiry, he is satisfied that the person has failed to comply with the provisions of any of the sections specified in sub-section (1), he may impose such penalty as he thinks fit in accordance with the provisions of any of those sections. 15J. Factors to be taken into account by the adjudicating officer.- While adjudging quantum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority to deliver judgments related to fraud and other unethical practices in terms of the securities market. (ii) Quasi-Executive: SEBI has been empowered to ensure implementation of its Rules; Regulations; Guidelines and Orders. It has the power to take legal action against the violators. It is also authorized to inspect Books of account of the intermediaries and companies etc. in certain circumstances and other documents if it comes across any violation of the regulations of the investors. Some of its regulations consist of insider trading regulations, listing obligation, and disclosure requirements. These have been formulated to keep malpractices at bay. 5.7.3 Its orders can be challenged before the Securities Appellate Tribunal and thereafter directly before the Supreme Court of India. 5.8 The fact that SEBI has been exercising its powers for keeping the Indian Financial Market clean is evident from various reported orders in the Public domain as an illustration; https://www.business-tandardxom/article/markets/sebi-whip-on-shell-firms-blocks-investors-rs-9-000-cr-1170808014691.html is referred to highlight the fact that there was a crackdown against 331 "suspected shell co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs who have been barred from accessing the capital market for a specific period and refund 25% of their salaries received during the relevant period in view of specific lapses noticed as available in the public domain https://www.livenmint.com/industry/banking/nse-board-to-appeal-against-sebi-s-co-location-orders-1558068266306.html addressing that NSE is contesting the disgorgement amount on various grounds including calculation mistakes and pleading possible attraction of the charge of lack of due diligence as opposed to fraud which is a more serious charge, the fact remains that there is a fully functional Regulatory Body which is supervising the performance of the capital market, watching its activity and controlling it keeping its aims and objectives in mind. Empowered by the Act, it is issuing Guidelines, Rules and passing orders, directions compliance directing surveillance etc. It is a fact that guided also by the Ministry of Corporate Affairs in consultation with SFIO, SEBI acting in concert with the Income Tax Department is giving appropriate directions like restricting trading etc. A discussion on this crucial aspect in the orders on these issues qua the specific company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not. I am of the view that the facts, evidences and deficiencies noticed are sufficient to justify re-assessment or re-opening in cases where other statutory formalities in regard to re-opening etc. have been fulfilled as suspicions of stock manipulation etc. are damaging facts and are sufficient in certain circumstances to arouse suspicion and justify a greater scrutiny. However, ultimately whether a specific company is a bogus company or a sham company, is an order which has to be passed by the Appropriate Regulatory Authority. No such order has been referred to by the parties. 6. Accordingly, for want of relevant discussion on this material fact, the impugned order is set aside and the matter is restored back to the file of the CIT(A) with the direction to pass a speaking order in accordance with law. Needless to state that the assessee shall be afforded a reasonable opportunity of being heard. Said order was pronounced in the Open Court at the time of hearing itself. 7. In the result, the appeal of the assessee is allowed for statistical purposes. (ITA 1292/CHD/2018 : A.Y. 2015-16) 8. Addressing the facts in 2015-16 assessment year, it is seen that in the facts of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan' received from a 'paper company', it invariably means that such entry represents unaccounted money of the person in whose books of account the money has been credited as loan and the lender company is only a conduit for routing the money back to the books of account of that person. However, despite having knowledge of this fact and knowing the techniques and methods used by the assessees for this purpose, it remains a huge challenge for the tax authorities to bring all material facts and evidences on record so as to prove which in his opinion is a fact beyond doubt. In the case of appellant there are doubt that the assessee has taken accommodation entry from a penny stock company M/s. Golden Legend Finance and leasing Ltd., therefore, the application of special rate under section 115BBE on the amount of Rs. 28,98,987/- assessed under section 68 is upheld." 8.1 Considering the submissions and the material available on record for the reasons set out in ITA 1291/CHD/2018 with identical directions, the matter herein also is restored back to the file of the CIT(A) with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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