Incriminating material about Rs.37 Cr revealed during Search from Moraj Group Co-Founder: ITAT remands matter to AO for further Enquiry [Read Order]

In a case where incriminating material was found to the tune of Rs. 37 Cr, ITAT Mumbai remanded the matter to AO for further enquiry on assessee’s appeal.
Incriminating material - Moraj Group Co-Founder - ITAT - ITAT remands matter to AO - AO - Enquiry - taxscan

In a case where incriminating material of about Rs. 37 Crore was revealed during search in connection with Moraj Group Co-Founder Priya M Gurnani, the Income Tax Appellate Tribunal (ITAT) Mumbai Bench remanded the matter to Assessing Officer for further enquiry on appeal of the assessee.

The assessing officer noted that the assessee earned ₹ 37 crores in the name of family members of the group in the financial year 2011 – 12 to 2015 – 1216 in similar manner by obtaining accommodation entries from Mr. Vipul Vidhur Bhatt. It was on the search and seizure action these transactions were unearthed.

Priya Mohan Gurnani, the Assessee and Co-Founder of Moraj Group, filed a series of seven appeals covering the assessment years 2010-11 to 2016-17, addressing common issues arising from a single search and seizure action.

Both parties acknowledged that the appeals shared common grounds, facts, and circumstances across these years. Consequently, the authorized representative presented unified arguments encompassing all matters, while the departmental representative defended the lower authorities’ orders with consistent arguments.

The Assessee was represented by CA Pradip Kapasi and Revenue by Manoj kumar Sinha, Senior Department Representative.

The AO in paragraph number 6.2 further held that the assessee has not denied the factual record that the company is one of the paper companies of Shri Vipul Vidhur Bhatt. Adequate documentary evidence had been found in his premises to prove this fact. The facts also clearly shows that the simultaneous search under section 132 of the Act conducted on M/s sunrise Asian limited on 4/2/2016, Wherein statement of the directors of that company were recorded under section 132 (4) of the Act, director submitted that Shri Vipul Bhatt has used his name and has appointed him as a director in the above company for 2 ½ years ago.

Therefore, search action was also conducted on Shri Vipul Vidhur Bhatt on 5/2/2016. Statement of Mr. Bhatt was recorded wherein he accepted that he is an entry operator and has also accepted that sunrise Asian Ltd is a bogus paper entity and this company was used by him for providing bogus long-term capital gain accommodation entries to the various beneficiaries for commission including the assessee group.

Further, the trade data of sunrise Asian limited was analyzed and entities that have purchased shares after the price rise, were identified. Further enquiries were conducted on those entities. From the enquiries it was found that all the entities were bogus paper entities and are controlled, managed and used by Shri Vipul Bhatt.

During search, statement of Shri Mohan Gurnani, assessee’s father and assessee was recorded on 4/2/2016 and 5/2/2016 under section 132 (4) of the act. Assessee or his father were not knowing about why they have invested in the script, what is the fundamental analysis they did before considering the investment in the shares and whether any of the family members have attended the annual general meeting of the company in which they have invested in the shares. The answer of the assessee and his father was negative.

In fact, the assessee replied that she and her family members were not aware about this company nor do they know about the financial statements about it. Further they have never met any of the persons related to this company. Thus, assessee is completely unaware about company as well as investment relations in that company.

The assessee is not a regular trader on any of the stock exchanges. There is no history of any trading done by the assessee in the share market. She purchased shares of only one company and sold shares and earned huge capital gain which is exempt. The AO stated that the family has earned ₹ 37 crores of the long-term exempt capital gain, Assessee does not have any knowledge about the company, its working, it’s financials, who advised her, how did she come to know about this company and whether any of the family members have studied while making any investment in the preferential share allotment.

Thus, assessee is completely unaware about the company as well as the investment rationale in that company.

“Our reason for referring to it is that what should be onus on the assessee. Firstly assessee in her family as stated to have received Rs 37 crores of exempt capital gain in a nondescript listed company operated by the accommodation entry provider, who has confessed that he has provided accommodations entries to the beneficiaries , including assessee, Confirmed by SEBI in adjudication order for same time in which assessee has sold these shares. In our view, a wanderer who does not know anything about the shares, did not attend any meetings of the companies , even do not know the nature of the business of the company, company is not found at the place where notices issued u/s 133 (6) , invest Rs 1 Cr in 2012 and earns Rs. 10 crores in 2015-16 [her family earns whopping Rs 37 Crores] is really a fantastic story“, the bench remarked.

This needs to be rejected at threshold itself not only because preponderance of probability is against the assessee but also the facts found form Vipul Bhatt [documentary evidences i.e. various annexures] proves that the story is fake.

It was further observed that, “In present times, whopping gain earned by a wanderer who does not have any knowledge about the company earns Rs 10 Crores [in whole family Rs 37 Crores] is more surprising than winning in a horse race, Especially when the accommodation entry provider also says that, it is an arranged gain in the hands of family members of the assessee.”

In view of this, even if we ignore the original statement given by the accommodation entry provider and his retraction later on, those evidences still remain which needs to be examined, now, independently to ascertain whether the amount of loan taken by the assessee and the amount of long-term capital gain earned by the assessee is genuine or non genuine.

“In view of the above facts, we set-aside ground number 2 and 4 of the appeal back to the file of the assessing officer with a direction to the assessee to show the genuineness of the trade and unsecured loan with respect to the documents found as stated in the statement of various parties, exit entry providers details, Demat agencies and the cash trail found”, the bench held.

It is also the duty of the assessee to produce before the AO of her chartered accountant (whose statement is not retracted), Ms. Rukhsana who is stated to have been involved in transferring the cash for the long-term capital gain and conversion of loan entries, for further examination. It is also the duty of assessee to produce Mr. Vipul Bhatt before the Assessing Officer to be examined specifically with respect to documents in annexure 1 to 17 , his each of the reference in 90 questions referring to Moraj Group.

The assessing officer on appraisal of all the details furnished by the assessee may carry out further enquiry with respect to the observation made above and decide the issue afresh considering the standard operating procedure of investigation of penny stock.

The AO may also consider the inquiry pending before him from BSE etc. Assessing Officer may carry out the inquiries with respect to exit providers looking at date and time stamp of trades executed and sources of the fund of the exit providers tearing the layering where it is stated that in some of the cases funds are out of RTGS made by assessee for repayment of loan. The Assessing Officer is directed to make meaningful and relevant inquiries in accordance with law.

“It is also made absolute that, it is for the assessee to show that transactions are genuine, but Needless to say, assessee must be confronted with all evidences and there should not be any violation of principles of natural justice in accordance with the law”, the bench stated.

Accordingly, ground number 2 and 4 of the appeal of the assessee were allowed for statistical purposes.

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