ITAT directs AO to Share Information of Beneficiaries of Leading Kingpins Providing Bogus Long Term Capital Gains within 90 days [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has directed the Assessing Officer (AO) to share information of beneficiaries of leading kingpins providing bogus long term capital gains within 90 days.

Naresh Jain [Assessee] was one of the leading kingpins of providing bogus long term capital gains in connivance with the several directors of the companies whose share prices were rigged, several exit providers who engaged in price rigging and buying shares in fraudulent manners to help several beneficiaries who converted their unaccounted income in to alleged long term capital gain in shares exempt under Section 10 (38) of the Income Tax Act.

assessee filed its original return of income on 24th July, 2012, declaring total income. Subsequently, search under Section 132 of the Income-tax Act, 1961, was conducted by the investigation wing in connection with one Ranka Jewellers. Assessee was also covered in that search. The case of the assessee was centralised at Pune. This centralization was challenged by the assessee before the Bombay High Court, wherein High court quashed the order passed under Section 127 of the Income Tax Act.

Subsequent to that, the case of the assessee was retained at Mumbai, pursuance to the direction of High Court, the case was assigned to the Assessing Officer, Meanwhile, Mumbai Investigation Wing conducted another search on the assessee on 19 March 2019. In response, assessee submitted that return filed under Section 139 of the Income Tax Act may be treated as return filed under Section 153A of the Income Tax Act. The assessee was also issued notice under Section 142(1) of the Income-tax Act, which assessee did not comply.

The assessee was found to be and also admitted on oath in statement under Section 132(4) Income Tax Act, that he was engaged in manipulation of share price of various companies in order to provide bogus entries of long-term capital gain, short term capital loss and business loss. The evidence was gathered during the search showing links between the operators, promoters, share brokers, exit providers and intermediaries, who facilitated the sham transactions on the stock exchange. The assessee also admitted that he is earning commission of 2 to 3% of the amount.

For A.Y. 2012-13, 32855 persons were identified, wherein ₹1,680 crores were found which have been laundered by the assessee in 9 identified scripts. The Assessing Officer further referred to the statement of the assessee, wherein he named intermediaries arranging this money laundering.He further named 7 entities which were used for providing money-laundering services.

Based on this information and in absence of any submission from the side of the assessee, the Assessing Officer determined the commission income at the rate of 3% as undisclosed income of the assessee.

S Srinivasu, appeared on behalf of the revenue.

The two-member Bench of Prashant Maharishi, (Accountant Member) and Sandeep Singh Karhail,(Judicial Member) observed that the assessee had given names of (i) all the persons to whom the accommodation entries were provided, (ii) the persons who were working along with the assessee in the above money-laundering operation, (iii) names of directors of companies involved in this massive money laundering activities, (iv) and the rate of commission that he used to charge on the same

The modus operandi explained in the statements by assessee and others had clearly shown how blatantly and to the extent of several hundred of crores, , all these persons had used stock exchange platform through exit providers, connivance with the brokers, directors of suspicious companies, price rigging through synchronised trade a money laundering exercise involving serious violation of Income tax, Securities law, Corporate Laws, banking laws and several other economic laws. Such activities, if treated and dealt with in silos, were ineffective.

The Bench partly allowed the appeal filed by the assessee directing the assessing officer to complete certain directions within 90 days of the date of receipt of this order including sharing information of all those persons who were involved in the above racket of money laundering with the concerned Assessing officer to take action in their hands in accordance with the law and also to Intimate securities and exchange board of India the names of those directors who were involved in these operations.

To Read the full text of the Order CLICK HERE

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