NDTV penalised under Sections 23A and 23E of the Securities Contracts (Regulation) Act
The appellant, NDTV had filed the return of income for the Assessment Year 2009-2010 under Section 139(1) of the Income Tax Act, 1961 (IT Act) declaring a loss of 64.83 crores. The appellants’ return was selected for scrutiny. The total income was computed at 641.08 crores. The appellant was aggrieved and thereby filed objections before the Disputes Resolution Panel (DRP) under Section...
The appellant, NDTV had filed the return of income for the Assessment Year 2009-2010 under Section 139(1) of the Income Tax Act, 1961 (IT Act) declaring a loss of 64.83 crores. The appellants’ return was selected for scrutiny. The total income was computed at 641.08 crores. The appellant was aggrieved and thereby filed objections before the Disputes Resolution Panel (DRP) under Section 144C(10) of the IT Act. The DRP confirmed the addition of 642.54 crores and, in addition thereto, enhanced the assessment by a further amount of 254.75 crores. A final order assessment order under Section 144C(13) of the IT Act was passed by the adjudicating officer (AO) under which the income of the appellant was determined at 838.33 crores. Thus a demand of 450 crore was raised.
A tax lawyer advised the appellant to institute an appeal. The appellant filed an appeal before the Income Tax Appellate Tribunal (ITAT).
The adjudicating officer imposed a total penalty of Rs. 2 crores under Section 15A(b) of the SEBI Act, 1992 as well as under Section 23A(a) and Section 23E of the Securities Contracts (Regulation) Act (SCRA) for violation of Regulation 13(6) of SEBI (Prohibition of Insider Trading) Regulations read with Clauses 2.1 and 7.0(ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading.
A show cause notice dated February 12, 2015 was issued calling upon the appellant to show cause why penalty should not be imposed under Section 23A and 23E of the SCRA for violation of Clause 36 of the Listing Agreement.
The AO found that for the violation of Clause 36 of the Listing Agreement monetary penalty was attracted under Sections 23A and 23E of the SCRA and accordingly imposed a penalty of 2 crores.
On appeal to the Securities Appellate Tribunal (SAT), the counsel for the appellant contended that the settlement order should have been placed by SEBI (respondent) before the Tribunal for appropriate orders. Since the said order was not placed, SEBI should not be heard in these proceedings.
The counsel for the SEBI contended that the order passed by the AO did not suffer from any manifest error of law as the appellant had clearly violated the provision of Clause 36 of the Listing Agreement and since necessary disclosure was not made, appropriate penalty was imposed on the appellant.
The SAT ruled that the networth of the company was 365 crores and a demand of 450 crores was made in the assessment order. Such demand which eats away the networth of the company was considered to be a material event and the assessment order had a material impact which the company was required to report to the SEBI promptly and which was required to be made public immediately.
The Securities Appellate Tribunal further held that there was gross failure on the part of the appellant in not making the disclosure under Clause 36 of the Listing Agreement.
The SAT concluded that there was gross failure on the part of the appellant in not making the disclosure under Clause 36 of the Listing Agreement. The tribunal dismissed the appeal thereby upholding the order of the ITAT.