9911796707
TMI Blog2019 (1) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and cancelling the penalty levied u/s 271(1)(C) of Rs, 69,67,950/- without appreciating the fact that consent fees paid by the assessee to SEBI was nothing but in the nature of compounding of penalty to avoid suspension for infringement of law, which is disallowable u/s 37(1) of I.T. Act." 2. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. This is an appeal filed by the Revenue against appellate order dated 22.08.2017 passed by learned CIT(A) deleting penalty u/s 271(1)(c) of the 1961 Act which was levied by the AO vide penalty order dated 30.03.2015 u/s. 271(1)(c) of the 1961 Act . This order dated 30.03.2015 levying penalty passed by the AO u/s 271(1)(c) of the 1961 Act was later rectified by the AO u/s. 154 of the 1961 Act vide orders dated 08.06.2015 , wherein mistake apparent from record was rectified by the AO , as the amount paid by the assessee as SEBI fee was Rs. 2,05,00,000/- which was erroneously mentioned by the AO as Rs. 20,50,00,000/- in its penalty order dated 30.03.2015 passed u/s 271(1)(c) of the 1961 Act . Thus, the penalty u/s 271(1)(c) of the 1961 Act got levied by the AO erroneously on the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry officer to enquire into the allegation. Notably, in case of DSQ Software Led., the enquiry officer submitted his report stating therein that in the course of enquiry, it was found that the assessee has indulged in synchronized and manipulated transactions. Therefore, he recommended for suspension of registration certificate for a period of 12 months. Similarly, in case of transactions of shares relating to DSQ Biotech Ltd., the enquiry officer found that assessee has indulged in synchronized transactions, hence, recommended for suspension of registration certificate for a period of three months. On the basis of enquiry report submitted by the enquiry officer, SEBI issued a show cause notice to the assessee calling upon it to explain why the recommendation of the enquiry officer should not be implemented. As appears from the facts on record, the assessee filed a show cause contesting the charges brought against him. However, before the final adjudication on the issue of violation of SEBI regulations assessee filed a consent application and the issue was referred to a high powered committee constituted by the SEBI. The high powered advisory committee after considering the consent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid case and the ratio laid down by the Tribunal, the assessee's case stands in a much better footing. As could be seen in the case of Reliance Share & Stock Brokers Pvt. Ltd, (supra), there was adjudication of the issue by SEBI and when the matter was pending before the appellate authority, the assessee applied for settlement of dispute which was accepted. Whereas, in case of present assessee there was no final adjudication on the issue of imposition of penalty by the SEBI. Possibly, there could have been a situation where SEBI after considering assessee's explanation might have dropped the proceedings. Thus, when there is no order passed by the adjudicating authority imposing penalty, the settlement charges / consent fee paid by the assessee to SEBI cannot be treated as penalty for infraction of any law. At best, the payment made by the assessee can be said to be for mitigating the consequences of the allegations/charges brought against it which still remained to be decided finally. The other decisions cited by the AR also support this view. Thus, in view of the aforesaid, we hold that the settlement charges / consent fee paid by the assessee to SEBI not being in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and administrative charges as per consent order paid by the assessee . The AO considered erroneously an amount of payment of aforesaid charges paid under consent order to the tune of Rs. 20,50,00,000/- while computing penalty u/s 271(1)(c) of the 1961 Act instead of an correct amount of Rs. 2,05,00,000/- , which was later rectified by the AO u/s 154 vide orders dated 08.06.2015 . The assesssee filed first appeal with learned CIT(A) against penalty order dated 30.03.2015 passed by the AO u/s 271(1)(c) of the 1961 Act which penalty order was later modified by the AO vide orders dated 08.06.2015 passed u/s 154 of the 1961 Act. The Ld. CIT(A) was pleased to delete the penalty vide appellate order dated 22.08.2017 by following aforesaid tribunal order dated 16.06.2017 against quantum assessment in ITA no. 3986/Mum/2014, wherein penalty levied by the AO u/s 271(1)(c) stood deleted by Ld. CIT(A), by holding as under:- " 2.4.1 I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 2.4.2. This appeal is against the order u/s.271(1)(c) of the Act dated 30-03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. Undisputedly, the assessee has paid the amount of Rs. 2.05 crore through demand draft purchased on 29th December, 2008. Accepting the recommendation of high powered advisory committee, SEBI passed a consent order on 16tn February, 2009 disposing off the enquiry proceedings, pending against the assessee. Further, on going through the consent order dated 16th February, 2009, in consent application No. 72 and 73 of 2008, a copy of which is at Page 151 of the paper book, it is noticed that the assessee consented to settlement of charges without admitting or denying the charges. Thus, from the aforesaid facts, it is very much evident that the consent order was passed before final adjudication of proceeding before the SEBI. Though, the enquiry officer recommended for suspension of registration certificate of the assessee, however, there is no final order by the adjudicating authority imposing penalty on the assessee. The proceedings were terminated at a stage prior to final adjudication by virtue of the consent order. Thus the facts on record demonstrate that there is no order passed by the SEBI imposing penalty against the assessee. 13. In case of Reliance Shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. This ground is allowed." As the quantum addition has been deleted by the Hon'ble 'C Bench, ITAT, Mumbai (supra), imposition of penalty has no legs to stand and accordingly, the grounds raised are Allowed in favour of the appellant and the penalty imposed is hereby cancelled. 6. Now the matter has reached tribunal at the behest of Revenue and at the outset Ld. Counsel for the assessee as well as Ld. DR have agreed that the addition in quantum has been deleted by ITAT in ITA no. 3986/Mum/2014 vide orders dated 16.06.2017 , which order was later rectified by tribunal vide its orders dated 18.12.2017 in MA no. 402/Mum/2014 arising out of appeal in ITA No. 3986/Mum/2014. 7. We have considered rival contentions and perused the material on record including orders of authorities below . We have observed that the assessee is engaged in the business of share and stock broking including depository operations and proprietary trading in shares and securities . There were some allegations against the assessee of being involved in manipulations of scrips of DSQ Software Limited and DSQ Biotech Limited. The enquiry was conducted by SEBI against the assessee for manipulation in sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hence, recommended for suspension of registration certificate for a period of three months. On the basis of enquiry report submitted by the enquiry officer, SEBI issued a show cause notice to the assessee calling upon it to explain why the recommendation of the enquiry officer should not be implemented. As appears from the facts on record, the assessee filed a show cause contesting the charges brought against him. However, before the final adjudication on the issue of violation of SEBI regulations assessee filed a consent application and the issue was referred to a high powered committee constituted by the SEBI. The high powered advisory committee after considering the consent terms proposed by the assessee recommended the case for settlement subject to payment of Rs. 2.05 crore by the assessee. Undisputedly, the assessee has paid the amount of Rs. 2.05 crore through demand draft purchased on 29th December 2008. Accepting the recommendation of high powered advisory committee, SEBI passed a consent order on 16th February 2009 disposing off the enquiry proceedings pending against the assessee. Further, on going through the consent order dated 16th February 2009, in consent applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation where SEBI after considering assessee's explanation might have dropped the proceedings. Thus, when there is no order passed by the adjudicating authority imposing penalty, the settlement charges / consent fee paid by the assessee to SEBI cannot be treated as penalty for infraction of any law. At best, the payment made by the assessee can be said to be for mitigating the consequences of the allegations/charges brought against it which still remained to be decided finally. The other decisions cited by the AR also support this view. Thus, in view of the aforesaid, we hold that the settlement charges / consent fee paid by the assessee to SEBI not being in the nature of penalty cannot be disallowed in terms of Explanation-1 to section 37. Accordingly, we delete the addition. This ground is allowed. 14. Ground no. 3, being consequential to ground no.1 raised by the Revenue will be taken up while deciding the said ground in Revenue's. " We have observed that the penalty u/s 271(1)(c) of the 1961 Act was levied by the AO on the grounds that these payments of Rs. 2,05,00,000/- paid by the assessee to SEBI under consent order was in the nature of penalty for infraction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
