Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): G. Mahalingam (Whole Time Member), while exercising powers conferred under Section 12(3)  read with Section 19 of the SEBI Act and Regulation 27(5) of the Intermediaries Regulations, cancelled the certificate of registration of the Alliance Intermediaries and Network Private Limited (Noticee), on account of activity and willful issuance of fake and bogus contract notes against receipt of cash to show fictitious transactions as genuine ones and enable its clients to book fictitious speculative gains and short/long term gains/losses for tax purposes.

In the pertinent case, it was found by the Noticee was registered with the Securities and  Exchange  Board of  India as a  member of  Inter-Connected  Stock Exchange of India Limited. During 2004  to  2007,  contract notes were issued by intermediaries (i.e. person of any business in the market) to clients (individual entities) on behalf of the Noticee on accepting cash from intermediaries and giving cheques by the Noticee to intermediaries.  The Noticee was earning a commission of 0.15% for the deposit of cash in its various companies. Counsel appearing before the Investigating authority also presented the modus operandi of for issuing fake contract notes for speculative profits/losses on behalf of clients.

Therefore, recorded that as per the findings of the Income  Tax  Department, the Noticee was engaged in making accommodation entries for clients to facilitate speculative short term / long term profits/losses. And further noted that the activities of the Noticee, were inherently fraudulent and were aimed at aiding and abetting tax frauds. And held that the Noticee was no longer a ‘fit and proper person and thereby in respect of Alliance Intermediaries and Network Private Limited has violated  Regulation  5(e)  read with  Regulation  5A  of the  Stock  Brokers  Regulations read with provisions of  Schedule II of the Intermediaries Regulations.[Alliance Intermediaries and Network Private Limited, In re, 2021 SCC OnLine SEBI 24,  decided on 09-03-2021]

Hot Off The PressNews

IT Department conducts serach on Chinese Entities premises

Based on the credible information that few Chinese individuals and their Indian associates were involved in money laundering and hawala transactions through series of shell entities, a search action was mounted at various premises of these Chinese entities, their close confederates and couple of bank employees.

Search action revealed that at the behest of Chinese individuals, more than 40 bank accounts were created in various dummy entities, entering into credits of more than Rs 1,000 Crore over the period.

A subsidiary of Chinese company and its related concerns have taken over Rs 100 Crore bogus advances from shell entities for opening businesses of retail showrooms in India. Further, incriminating documents in respect of hawala transactions and laundering of money with the active involvement of bank employees and Chartered accountants has been found as a result of search action. Evidences of foreign hawala transactions involving Hongkong and US dollars have also been unearthed. Further investigations are under progress.

Ministry of Finance

[Press Release dt. 11-08-2020]

[Source: PIB]

Hot Off The PressNews

The Income Tax department has made history with a quantum jump in the e-filing of Income–Tax Returns (ITRs) with an all-time high record of 49 lakh 29 thousand and 121 ITRs filed in a single day on 31st August 2019. This has perhaps created history as the tax administration nowhere in the world has achieved such huge online e-filing ITRs in a single day and that too so smoothly; with the IT department actively interacting with taxpayers on social media to help them resolve their grievances and e-filing related queries and getting accolades in return.

The Central Board of Direct Taxes (CBDT) released the data on e-filing of ITRs for which last date of submission was 31st August 2019 said that this is a remarkable achievement as taxpayers are experiencing a whole new facet of the I-T department which is not only taxpayers’ friendly but also is of a facilitator providing informational assistance with the pre-filled forms and handholding e-filers besides being proactively responsive on social media to help and guide taxpayers.

CBDT said that setting new records in e-filing on 31st Aug 2019, the peak filing rate per second was at 196 ITRs and peak filing rate per minute was at 7447 ITRs while peak filing rate per hour was at 3,87,571 ITRs.

Ministry of Finance

[Press Release dt. 01-09-2019]

Legislation UpdatesNotifications

There is a substantial pendency of appeals of the Income Tax Department before various appellate fora. The CBDT is aware of the importance of litigation management and has been continuously working towards achieving the same.

To effectively reduce taxpayer grievances/litigation and help the Department focus on litigation involving complex legal issues and high tax effect, the monetary limits for filing of appeals by the Department were last revised on 11-07-2018 vide CBDT Circular No.  3 of 2018.

As a step towards further management of litigation by the Government, the monetary limits for filing Departmental appeals before various appellate fora including ITAT, High Court & Supreme Court have been revised as under:

Appellate Forum Existing Monetary Limit (Rs) Revised Monetary Limit (Rs)
Before Income Tax Appellate Tribunal 20,00,000 50,00,000
Before High Court 50,00,000 1,00,00,000
Before Supreme Court 1,00,00,000 2,00,00,000


Ministry of Finance

Central Board of Direct Taxes

[Press Release dt. 08-08-2019]

Legislation UpdatesNotifications

In a swift and coordinated action on Friday, 2nd August 2019, the Investigation Wing of Income Tax Department, NER carried out searches on certain businessmen in Meghalaya found to be involved in running a web of petrol pumps managed and controlled as Benami properties. These persons were depriving the State Government of legitimate revenue by suppressing sales and non-deposit of local taxes collected, while also indulging in massive evasion of income tax by misusing exemption under Section 10(26) of the Income Tax Act, 1961 meant for tribal persons.

In the enforcement operation that commenced in the early hours and went on till wee hours of the next day, more than Rs 2 crore of unaccounted cash along with incriminating documents have been seized by officials of the Department. The cash found was hidden in unexpected places like water tanks.

This search by the Department was a much-needed action on a long-existing racket run by some unscrupulous elements exploiting local citizens of Meghalaya and avoiding paying income tax using tribal persons who are exempted from income tax, as a front. The pre-search investigation involved extensive surveillance and covert enquiries which were continuing for over a year.

Following the searches exposing these Benami petrol pumps, the Executive Committee (EC) member of Khasi Hills Autonomous District Council (KHADC) in-charge of trade, announced to the media on the 8th of August, 2019 that urgent steps will be taken to prevent Benami transactions in the State. He noted that despite the law, Benami transactions are thriving due to collusion between some local people and their non-tribal business partners. The KHADC is a statutory autonomous body which regulates various aspects of trade and commerce in Meghalaya.

The action taken by the Department has been widely appreciated by the public and also local authorities as a timely and positive step that will help to control the menace of Benami commercial activities, as well as augment Government revenues.

Central Board of Direct Taxes

Ministry of Finance

[Press Release dt. 10-08-2019]

Case BriefsHigh Courts

Delhi High Court: A Division Bench of the Delhi High Court upheld the notice of the IT department proposing reassessment for NDTV for the financial years 2008-09 and 2009-10. The Court also ordered provisional attachment of it’s assets stating that there was reasonable apprehension that NDTV may liquidate it’s assets.

The department had received complaints from NDTV’s shareholders upon which the Revenue had acted. The Court held that mere disclosure of a transaction at the time of the original assessment proceedings does not protect the assessee from a re-assessment under Section 147 if the AO has information that indicates that the transaction is a sham or bogus.

The Court noted the AO’s decision to not attach the bank accounts and other trade receivables of NDTV so as to ensure uninterrupted operation of it’s operation. The Court relied upon Gandhi Trading v. Assistant Commissioner of Income Tax, [1999] 239 ITR 337 (Bom) wherein it was held that action taken under Section 281B must not hamper the business activities of the assessee, the Court found that the decision was in consonance with this principle.

The Court found that there were reasonable grounds for the AO to believe some transactions to be bogus. Therefore, it was held that the impugned reassessment notice is valid in law and the petition was dismissed. [New Delhi Television Ltd. v. Dy. Commissioner of Income Tax,  2017 SCC OnLine Del 9817, decided on 10.08.2017]