Trading suspension in shares no justification for non-disclosure of off-market transaction |
SEBI directs disinvestment of shares acquired by noticees without making public announcement under Reg. 11(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ('Takeover Regulations, 1997'), also orders transfer of entire sale proceeds to Investor Protection & Education Fund; Observes that acquiring shares through off-market transactions which breaches prescribed threshold, violates Takeover Regulations and holds that wrong disclosure to stock exchange of a person not being 'promoter' is irrelevant as Takeover Regulations compliance is independent of stock exchange compliance; Rejects Noticees' contention that shares were held under Employees Welfare Trust which does not carry any 'voting rights', refers Press Note issued by Dept. of Company Law Administration u/s 153 of Companies Act, 1956 and holds that voting rights remain with Noticees and cannot be excluded from 'promoters shareholding'; Rejects noticees' preliminary objection that Takeover Regulations would not apply since trading in target company's shares was suspended at the time when acquisition was made, states in terms of Reg. 2(1)(o) of Takeover Regulations, 1997 'target company' means a 'listed company' and it is irrelevant that shares acquired in listed co. are traded or not; Further rejecting noticees' contention, states that proceedings initiated by show cause notice could not be vitiated merely because it refers to wrong provision of 2011 takeover Regulations, holds that "mentioning of a wrong provision...will not invalidate the order if the source of such power can be traced to a different provision":SEBI |
NEW DELHI, MAR 10, 2015: THE issue before the Bench is - Whether initiation of Sec 153C proceedings against company which no longer exists on account of its merger with another company is bad in law. YES is the answer. Facts of the case A Search & Seizure operation u/s 132 of the Act was carried out in the case of Sh. B. K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. During the course of search certain documents belonging to the assessee were seized. Therefore, the proceedings u/s 153C r.w.s 153A of the Act were initiated and the notice u/s 153C of the Act was issued to the assessee. It was also stated in a letter attached to the above said notice that for the earlier notice u/s 153A of the Act issued to the assessee may be treated as withdrawn as it was inadvertently issued. In response to the aforesaid notice u/s 153C of the Act, the assessee filed the return of income for the assessment year 2003-04 declaring Nil income. However, the AO framed the assessment at an income of Rs. 32,25,180/-. Being aggrieved the assessee carried the matter to the CIT(A) and challenged the initiation of proceedings u/s 153C of the Act. It was submitted to the CIT(A) that the assessee company was not in existence, following its merger with M/s Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 as per the order of the Delhi High Court dated 16.08.2010, hence the assessment was required to be made on M/s Windchimes Constructions Pvt. Ltd. Reference was made to several cases including the judgment of the Jurisdictional High Court in the case of M/s Spice Entertainment Ltd. Vs CIT - 2011-TIOL-971-HC-DEL-IT and the decision of the ITAT Delhi Benches 'E', New Delhi in the case of ACIT Vs M/s Micra India Pvt. Ltd. in ITA No. 1060 to 1065/Del/2012. The CIT(A), however, did not find merit in the submissions of the assessee by observing that the assessee filed the return of income in response to the notice u/s 153C of the Act on 18.09.2010 and in response to the notices u/s 143(2) and 142(1) of the Act, the Director wrote a letter dated 10.11.2010 by using the Letter Head of the assessee i.e. M/s Mevron Projects Pvt. Ltd. but remained silent about the amalgamation and informed the AO only in November, 2010 i.e. month before the case was getting barred by limitation. He further observed that the assessment proceedings were attended by M/s Windchimes Constructions Pvt. Ltd. also. Accordingly, the CIT(A) rejected the contention of the assessee. On further appeal by the assessee, the Tribunal held that, ++ it is an admitted fact that the assessee company amalgamated with M/s Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 vide order dated 16.08.2010 of the Jurisdictional High Court and the assessee informed the AO about this fact vide letter dated 27.08.2010 and the letter dated 23.08.2010 filed on 27.08.2010 with the Income Tax Department. Therefore, this fact was in the knowledge of the AO that the assessee was not inexistence at the time of preparation of the satisfaction note dated 05.07.2010 for issuing notice u/s 153C of the Act. From the above facts, it is clear that the notice u/s 153C of the Act by the AO was not issued to M/s Windchimes Constructions Pvt. Ltd. with which the assessee company i.e. M/s Mevron Projects Pvt. Ltd. amalgamated. Therefore, the assessment framed vide order dated 31.12.2010 u/s 153C/143(3) of the Act on the assessee was not valid; ++ similar issue had been adjudicated in the case of ACIT Vs M/s Micra India Pvt. Ltd. in ITA Nos. 1060 to 1065/Del/2012 order dated 21.09.2012 (supra) wherein it was held that assessment upon a dissolved company is impermissible as there is no provision of Income Tax Act to make an assessment thereupon; ++ Same view has been expressed by the Gujarat High Court on a similar issue in the case of Khurana Engineering Ltd. Vs DCIT (OSD) - 2013-TIOL-77-HC-AHM-IT wherein it has been held that the assessment proceedings could not be resorted to in case of amalgamated company; ++ so, respectfully following the aforesaid referred to order of the Co-ordinate Bench, the impugned order passed by the CIT(A) was set aside and the assessment framed by the AO on a non-existent company was held to be invalid, for the reason that the initiation of the proceedings for assessment was vitiated for not giving notice to M/s Windchimes Constructions Pvt. Ltd. with which the assessee company amalgamated; ++ in view of the aforesaid discussion, for making the assessment, it is absolutely essential that the person so to be assessed should be in existence at the time of making the assessment. In the present case the assessment has been framed by the AO on a date when the present assessee was not in existence and M/s Windchimes Constructions Pvt. Ltd. was fastened with the liability of the assessee but no notice was issued to the said amalgamating company i.e. M/s Windchimes Constructions Pvt. Ltd., therefore, the assessment framed by the AO vide assessment order dated 31.12.2010 was not valid. (See 2015-TIOL-249-ITAT-DEL) |
Govt. amends Securities Contracts (Regulation) Rules, 1957; Expands scope of 'Public Shareholding' |
Govt. amends Securities Contracts (Regulation) Rules, 1957, expands scope of term 'public shareholding'; 'Public shareholding' includes shares underlying Depository Receipts (DRs) if DR holder has right to issue voting instruction & DRs are listed on international exchange in accordance with DR Scheme, 2014; Equity shares held by trust set up for implementing employee benefit schemes excluded from ambit of 'public shareholding'; States that if public shareholding falls below 25%, such co. shall increase its public shareholding to 25% within 3 years.Click here to read more. |
No specific investment proposal received, but private investment is committed, says Minister |
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Posted by: Dipakkumar Shah <cadjshah@yahoo.com>
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