Monday, July 7, 2014

SAT affirmed penalty as appellant failed to make public announcement of acquisition of equity in excess of 5%


Where appellants-promoters acquired shareholding of target company beyond 5 per cent limit prescribed under regulation 11 of Takeover Regulations but failed to make public announcement, appellants were liable to pay interest.

Facts:


a)Appellant-promoters had acquired shareholding of target company which exceeded shareholding limit of 5 per cent prescribed under regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

b)After conducting enquiry, SEBI found the appellants guilty of having violated regulation 11(1) as appellants failed to make public announcement to shareholders of company.

c)SEBI directed appellants to make public announcement and to pay interest on offer price from date when appellants had acquired shares of target company. The aggrieved-appellant filed the instant appeal.

The Securities Appellate Tribunal held as under:

1)The acquisition of shares of the target company by each appellant was effected at the instance of appellant who was admittedly, the promoter and Managing Director of the target company. The appellants failed to make public announcement on acquiring shareholding beyond 5 per cent, and, thus, appellants were liable to pay interest.

2)In view of clear violation of the mandate of Takeover Regulations, there was no substance in the present case to take a lenient view in relation to making public announcement by altering the impugned order.

3)Thus, it was not found appropriate to interfere with the impugned order in exercise of powers conferred under section 15T(4) of the SEBI Act, 1992. - MS. SANGEETA SETHIA V. SEBI (2014) 46 taxmann.com 164 (SAT - Mumbai)

No concealment penalty if assessee opts to take route of presumptive taxation to escape sec. 40A(3) disallowance


Where at time of initiating penalty proceedings AO did not have any material on record showing that payments made by assessee were bogus, he could not have concluded that assessee had provided inaccurate particulars and levy penalty merely on basis of assessee's offer to be taxed on presumptive basis,

Facts


a)The assessee, a construction company, had issued large number of bearer cheques to small suppliers for delivering building material at construction site.

b)The AO disallowed said payments by invoking Section 40A(3). In response, assessee had shown its income on presumptive basis under Section 44AD to stay away from unnecessary litigation. The AO accepted the contention of assessee and completed the assessment by applying presumptive taxation.

c)After completing the assessment, the AO passed a penalty order under section 271(1)(C) and it was affirmed by the CIT (A). The Tribunal, however, set aside penalty order passed by CIT (A).The aggrieved-revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1)Since at time of initiating penalty proceedings the AO did not have any material on record to show that payments made to suppliers were bogus, he could not have concluded that assessee had provided inaccurate particulars in its return merely on basis of assessee's offer to be taxed on estimate basis,

2)Moreover, the course of action suggested by the Assessing Officer was, in fact, accepted by the assessee as reasonable. Thus, the imposition of penalty was not justified. Therefore, there was no infirmity in the impugned order of the Tribunal. - Vatika Construction (P.) Ltd v. [2014] 45 taxmann.com 471 (Delhi)