Taxation
Delhi HC vacates ITAT stay on Rs525 crore penalty on NDTV
The Delhi High Court has vacated a stay granted by the Income Tax Appellate Tribunal (ITAT) on the Rs525 crore penalty on New Delhi Television Ltd (NDTV), saying that the Tribunal does not have any powers in this matter. This is a big setback to the Prannoy Roy-controlled NDTV within this month.
 
The Delhi High Court was hearing the case (W.P.(C)­1327/2017) related with a stay granted by the ITAT on 15 September 2016. In its order, the ITAT had directed Income Tax (I-T) Department not to pass any order for the proposed penalty of Rs525 crore against NDTV till final disposal of the main appeal pending before the Tribunal. 
 
However, the HC Bench of Justice S Ravindra Bhat and Justice Najmi Waziri felt that, in such matters, the ITAT does not have any powers in the penalty matter and hence the stay given by the Tribunal was vacated. 
 
A senior official from NDTV said the company will appeal against the ruling of Delhi High Court. “This entire case relates to a baseless and outrageous charge by the Income Tax department that in effect accuses (Jeff Immelt, CEO) GE (US) as well as (Jeff Zucker, then CEO) NBC (US) of money laundering -- which is an offence that is punishable with jail in the US. In 2008, NBC (a 100% subsidiary of GE) invested $150 million in an entertainment wing of NDTV. Subsequently, without any evidence whatsoever, the I-T Department in Delhi called this legitimate investment a 'sham transaction' and in effect accused NDTV of round tripping money and using NBC and GE to act as a 'front' in a case of money laundering by GE and NBC,” says KVL Narayana Rao, Group Chief Executive & Executive Vice Chairperson of NDTV, in an email reply.
 
He says, “The ITAT has been unable to hear the case as the Delhi I-T Department has asked for 20 consecutive adjournments - with a succession of flimsy excuses. With the basic case not even being heard, the Delhi I-T department suddenly tried to levy a further penalty on NDTV for a delay in the case. Please note the delay is entirely the fault of the Delhi IT dept. asking for adjournments. The ITAT stayed the penalty. Now the Delhi High Court has ruled that the ITAT does not have the authority to stay the penalty. The Delhi I-T department's accusations against GE, NBC and NDTV are very damaging for the global image of India.  With all due respect to the High Court, NDTV will appeal against this ruling.”
 
Earlier this month, the Reserve Bank of India (RBI) rejected NDTV's application to compound from the Rs2,030 crore notice issued by the Enforcement Directorate (ED) under the Foreign Exchange Management Act (FEMA). "Filing compounding application to RBI by those who served notice under FEMA means that they have admitted their contravention in routing money from abroad and plead guilty by paying a fine. So NDTV admitted its guilt and offered its readiness to pay a fine. Many FEMA defaulters were using this compounding method to escape from being prosecuted under the FEMA. Continuing prosecution under FEMA also has a danger of converting the case to PMLA, when money laundering is established," says an article in PGurus.com
 
However, according to Mr Narayan Rao, the RBI has not rejected NDTV's application for settlement under FEMA provisions. “The RBI has asked NDTV to approach a particular division of the RBI called the Foreign Investment Division of RBI's Central Office,” he said.
 
Earlier in November 2015, the ED had slapped a Rs2,030 crore notice on NDTV for allegedly violating FEMA provisions for routing huge funds through the channel’s foreign units. The notice served to promoters Prannoy Roy, his wife Radhika Roy and senior executive KVL Narayan Rao stated that NDTV had violated RBI provisions on fund transfers. 

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COMMENTS

sachchidanand

3 months ago

Dr Pronoy Roy, Ur game is over..U were protected by Sonia Gang but finally got caught in ur own trap..Thank God, God is there to punish people who indulge in financial frauds .

Sumit Goyal

7 months ago

We are a Banana Republic under Modi. All govt. agencies and even the courts are now compromised. Inches away from being a dictatorship. Everyone who is against them is hounded.

Taxes under GST 'to increase a bit', says CBEC Chairman
While the effective rate of indirect taxes under the new Goods and Services Tax (GST) regime still remains unclear, as fitment in tax slabs is under way, the Central Board of Excise and Customs (CBEC) has said that taxes were likely to "increase a bit" from the current level.
 
"That is our belief (that the current level of taxation will not lessen at least for first five years). It will be the same, that's our belief, and it will increase a bit," CBEC Chairman Najib Shah told IANS in an interview here.
 
Shah said that the fitment of goods and services in the four tax slabs -- 5 per cent, 12 per cent, 18 per cent and 28 per cent -- is a work in progress.
 
Apart from the tax rates, there will also be a cess on top of it, which will form the corpus to compensate the states for any revenue loss for the first five years of implementation of GST.
 
"The Council will determine the commodities which will have the cess. We will suggest, but all decisions will be taken by the Council because, after all, it is a question of revenue for the states and the Centre," Shah told IANS.
 
"Rates is an issue that is sensitive and will be determined only by the Council," he said.
 
Revenue Secretary Hasmukh Adhia recently announced that the Council has increased the cGST (central GST) and sGST (state GST) peak tax rate from 14 per cent to 20 per cent each, amounting to a peak rate of 40 per cent.
 
Though the current tax slabs will remain the same, the peak rate has been increased for future contingencies, Adhia had said.
 
CBEC Chairman also said that GST is being looked upon as bringing about a possible 1-2 per cent increase in GDP.
 
"Whenever we talk of GST, we talk of a possible increase in GDP by 1-2 per cent. That's the sort of belief we have got, he said.
 
Where is that GDP going to come from?
 
He said that with the implementation of GST, tax evasion should come down as all filings will be IT driven and evasion will get difficult.
 
He also said the GST regime is likely to be rolled out by July 1.
 
The Chairman said that it will ensure that the laws regarding the new indirect tax regime are finalised by April 1, so that the industry has three months to prepare for the transition.
 
"That should give everybody time to adjust to the new requirements. We have trained 49,000 officers of the states and the Centre till last week. Goods and Services Tax Network (GSTN) -- GST's IT infrastructure arm -- and CBEC together will now conduct trainings, so that people know how to file their returns," he said.
 
"Outreach programmes from April 1 are going to be massive. We are targeting all major towns. We will first create a group of master trainers and then ask them to train the trade and industry," he added.
 
Shah said that he hoped the GSTN portal is able to handle the massive rush that it will see post July 1.
 
"Existing VAT dealers, central excise assessees and service tax assessees are approximately over six million. The total number of assessees (under GST) will be lesser than that as there is some overlap. Instead of filing three returns, they would be filing one return now. When the final migration takes place, then only we will know the exact number of assessees," he said.
 
Though any new change will have hiccups because of the existing legacy issues, the Central Board of Excise and Customs is trying to ensure the transition is smooth, he said.
 
"It's a new law, all the states and the Centre are moving to a new taxation regime. So there are going to be challenges because not only the trade and industry but the administration also has to change. All existing legacy issues may continue for some time," Shah said.
 
One of the hurdles before CBEC seems to be the concern of officials that their work load will reduce drastically, as 90 per cent of assessees below Rs 1.5 crore turnover will be assessed by the states.
 
"There is a certain section of officers that is concerned that perhaps they would be having lesser work under the GST. We have flagged the concerns, but the government will take a final call. The 90 per cent assessees below Rs 1.5 crore turnover to be assessed by states is a decision taken by government. That is an administrative arrangement," he said.
 
"We believe there would be enough work. Apart from the work, there are other concerns as well. We will be addressing those concerns as well," he added.
 
Shah said they will not require any additional staff as of now. "We will manage with the existing staff. As we go ahead, we will see how the workload is," he said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Black to White: Income Tax dept starts action against penny stock operators after SEBI fails to check them
The Income Tax (I-T) department has initiated criminal prosecution against shell companies, stock brokers, beneficiaries and operators involved in laundering over Rs10,000 crore in Mumbai alone by manipulating listed penny stocks to claim bogus long term capital gain (LTCG), says a report.
 
According to a report from Indian Express, first such criminal case has been filed on 28 February 2017 against Mukesh Ruia, promoter of Shekhawati Poly-Yarn Ltd, a listed entity. "The I-T has alleged that Ruia laundered over Rs 17 crore between 2012 and 2014 through Unno Industries Ltd, a listed penny stock and availed tax exemption by showing fake long term capital gains," the report says.
 
Earlier on 24 January 2017, the Central Board of Direct Taxes (CBDT) had issued guiding principles for determination of Place of Effective Management (POEM) of a company with an intention to target shell companies and companies, which are created for retaining income outside India although real control and management of affairs is located within the country.
 
Coming back to the action by the I-T Department, penny stocks are scrips of companies that trade at very cheap price and have lower market capitalisation. In the case against Ruia, the Department had alleged that he laundered over Rs17 crore between 2012 and 2014 through Unno Industries Ltd, a listed penny stock and availed tax exemption by showing fake long term capital gains, the newspaper report says.
 
As per the I-T Act, long term gain (holding period more than 12 months) from sale of equity shares on stock exchange is exempt from tax.
 
Citing a filing in the Court, the report from Indian Express says, " the I-T department has sought seven years of rigorous imprisonment under sections 276C (1), 278 of the I-T Act and sections 120 B and 420 of the Indian Penal Code for Ruia and six others — a Mumbai-based chartered accountant, three partners of a brokerage firm and two 'dummy' directors of four shell companies — who assisted Ruia in converting black money into white."
 
The report quoting court filing says, a Kolkata-based brokerage firm, Intellect Stock Broking Pvt Ltd, allegedly helped Ruia buy 41.71 lakh shares of Unno Industries in 2011 at Rs1.79 a piece through preferential allotment. The court filings state that in the next two years, the owners of the brokerage, through Kolkata-based shell companies Nimbus Vincom Pvt Ltd, Viewlink Dealer Pvt Ltd, Vedant Commodeal Pvt Ltd and Touchwin Dealcomm Pvt Ltd, rigged the share prices of Unno Industries through circular trading (buyers and sellers are connected) in its shares. As a result, in 2013 share price of Unno Industries touched about Rs38 a piece with Ruia’s stake valued at about Rs17 crore. Ruia then funded the same shell companies, allegedly bringing in the black money into these shell firms, which subsequently bought Ruia’s stake in Unno Industries, the court filings state.
 
Ruia then claimed tax exemption citing LTCG for the Rs17 crore he earned through trading in the penny stock. 
 
According to Indian Express, investigation agencies have identified close to 30.000 shell companies in Kolkata alone and most of them share the same office address and employ dummy directors — typically 'people of no means' to act as fronts for the main operators.
 
LTCG Scam: A Failure of SEBI's Surveillance System
Over the past seven years, Moneylife has been publishing reports of one case of market manipulation in every issue. These cases do not require much effort to unearth. We can start looking at the listed companies, alphabetically, and easily find cases of illiquid, closely-held stocks, with no business to speak of, that are rigged a few hundred percent. In other words, price-rigging for booking bogus long-term capital gains is widespread and continuing with impunity. 
 
Our objective has to be to prevent such manipulation. But, from 2001, when the Joint Parliamentary Committee (JPC) was enquiring into the Ketan Parekh scam, up to 2015, when the Special Investigation Team (SIT) of the Supreme Court on black money flagged this off, SEBI has been found lagging far behind the curve in catching price-rigging. 
 
Here is what the SIT said, in 2015: "SEBI has recently barred more than 250 entities, including individuals and companies, from the securities market for suspected tax evasion and laundering of black money through stock market platforms… There is an urgent need for having effective preventive and punitive action in such matters to prevent recurrence of such instances."
 
The SIT had recommended, "SEBI needs to have an effective monitoring mechanism to study such unusual rise of stock prices of companies… We believe that with effective and timely monitoring by SEBI a significant number of such instances can be checked in time." This clearly means that SEBI has singularly failed in its job, despite spending over Rs50 crore on installing sophisticated real-time surveillance systems.
 
The only action SEBI has taken, so far, is banning some entities from the stock market. But SIT says, "Barring such entities from securities market would not be of (sic) strong deterrence. In case it is established that stock platforms have been misused for taking LTCG benefits, prosecution should invariably be launched under relevant Sections of SEBI Act. Section 12A, read with Section 24 of the Securities and Exchange Board of India Act 1992, are predicate offences." SIT went on to suggest that the enforcement directorate should then be informed to take action under Prevention of Money Laundering Act for the predicate offences. It is remarkable that SIT had to tell SEBI what it should do in such cases! 
 
In 2013, Moneylife wanted to know how many cases of price manipulation, detected by SEBI's integrated market surveillance system (IMSS) and data warehousing business intelligence system (DWBIS), resulted in prosecution, or consent orders, or were dismissed due to lack of evidence or were still pending investigation. In a shocking disclosure, SEBI replied that it did not have information relating to its market surveillance system! 
 
SEBI has spent crores of rupees on the so-called state-of-the-art surveillance systems, IMSS and the more modern DWBIS. Earlier, SEBI had touted that the DWBIS project will "exploit the power of modern technology in terms of computation and speed of data analysis" and "host pattern recognition algorithms", to crack insider trading. Despite all this hype and the enormous amount of money spent, stock manipulation continues, right under SEBI's nose.
 
Moneylife had found out, in 2013 that 48 staff members are posted in the integrated surveillance department (ISD) of SEBI, which houses the IMSS and DWBIS. The IMSS contract value was of Rs20.55 crore. Then, SEBI adopted the Rs34.38 crore DWBIS, which became operational in 2010. This is a lot of taxpayers' money and nobody knows how effective the surveillance system is. Or if anybody in SEBI is truly looking at all the cases triggered by the systems or are they doing it selectively. Despite draconian powers and plenty of funds, SEBI is extremely reluctant to act effectively against price manipulation and LTCG scamsters. The Ruia case shows that maybe the revenue secretary has given up on SEBI and has started using income tax team to go after stock manipulators.
 
You may want to read…
 

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COMMENTS

jaideep shirali

7 months ago

If SEBI finds nothing wrong in penny stock manipulation, how is it acting in the investor's interest ? Many investors get caught in the circular trading in these penny stocks, when the operators cash out of the stocks, these investors suffer losses and never return to the capital markets. SEBI must stop behaving like the proverbial three monkeys and act, markets are its domain, if Income Tax has to act, it means SEBI is a watchdog that cannot even bark, leave alone bite.

Suketu Shah

7 months ago

This is why experts say out of 6000 stocks only 200-300 at the very max are worth keeping a track on.

Hemlata Mohan

7 months ago

Sebi is another place where friendly contacts matter both in appointment and in the supervision of companies. What can we expect from such a "watchdog"?

S Santhanam

7 months ago

My wife is a victim of SEBI inaction.. She holds equity shares in Teledata group companies. For the last three years the stocks of Teledata are not traded in the stock exchange. How to approach the it authorities to get me redressal.

Vaibhav Dhoka

7 months ago

SEBI has failed totally in boosting confidence of small investors .SEBI,s action helped culprits to boost their confidence to do WRONG,SEBI was never interested to make capital market healthy,In fact SEBI could have gained praises if it would have taken note of investigation of moneylife write ups i the magazine.Income tax investigation is rap on knuckles for SEBI.

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