ITAT remands matter of Moraj Group Director Priya Gurnani to AO for examination on alleged entry provider used to accommodate capital gains and unsecured loans [Read Order]

In a significant move, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench has remanded the matter of Priya Gurnani, Co-Founder of Moraj Group for fresh examination of the entry provider allegedly used to accommodate capital gains and unsecured loans. 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 assessing officer was of the view that the above long-term capital gain claimed by the assessee is bogus and therefore he denied exemption for the following reasons:- i. the AO found that assessee has acquired the shares through preferential allotment of Santoshima trade link Ltd which on 31/1/2012 (5 lakh shares) at a cost of Rs. 1,00,00,000/- which were sold partly in assessment year 2014 – 15 and partly in assessment year 2015 – 16 and 2016-17. The reason for making the addition is that search dated 4/2/2016 on sunrise Asia Ltd, the statement u/s 132 (4) of the act of the director Mr. Kalpesh Manharlal Jani was recorded. He submitted that one Vipul Vidhur Bhatt, his cousin brother, has used his name and has appointed him as a director in this company who is managing the affairs. Therefore, action under Section 132 of the Income Tax Act was also taken on 5/2/2016 on Mr. Bhatt. He accepted in his statement u/s 132(4) that he is an entry operator and sunrise Asia Ltd is a bogus paper entity, which was used by him for providing bogus long-term capital gain accommodation entries to the various beneficiaries for commission. On analysis of trade data of who are the entities purchasing the above shares, information was collected and further enquiries were conducted about who purchased the shares. On enquiry, it was found that all the entities that purchased the above shares were bogus paper entities controlled, managed and used by Mr. Bhatt. Mr. Bhatt confessed this in his statement. During search on assessee, the statement were recorded of assessee and her father, several questions were asked, replies to the same was not satisfactory and therefore the assessing officer issued a notice which was replied by assessee by submitting the details such as contract notes, brokers ledger accounts, confirmation of brokers, details of investment, physical share certificate copies showing the allotment, payment of invested amount, receipt of sale amount of shares, details of Demat account of the assessee where the shares are credited and subsequently when the shares are sold they are debited from the account. Assessee further stated that the statement of Mr. Bhatt, on the basis of which the inquiry started, has already been retracted. Therefore,the same is not relevant. The assessee denied any wrongdoing and stated that all transactions are above board. She submitted that she has sold 122,812 shares out of 5 lakh shares for ₹61,260,431 on various dates on stock exchange and payment received through banking channels after holding the shares for more than three years. The assessee submitted that she is a genuine share trader and she has nothing to do with any unfair activities on the sale of the shares. The AO held that assessee is not a regular trader and there is no history of any trading by the assessee. She has made investment in only three shares script all of them of similar nature and therefore the investment made by the assessee are not absolutely out of suspicion. Acquisition of two other companies are also non descript companies. Assessee does not know anything about Sunrise Asian Ltd., nor do her family members are aware and they have earned such a huge exempt capital gain. The AO then considered the modus operandi of earning tax-free capital gain on the shares. Factual position of transactions with entities controlled, managed and used by the entry operator is explained and the same has not been denied by the assessee that this company is one of the paper companies of an accommodation entry provider. Its share prices are rigged by him and beneficiaries, he also provided exit. Further accommodation entry provider has not brought any material contrary to the conclusion that the companies were real in terms of business and standing etc.. Therefore, AO came to conclusion that company did not have any real business at the time of transaction. Mr. Bhatt has accepted that he is an accommodation entry provider, providing accommodation entry of long-term capital gain through the company operated by him, where the company in which assessee has earned long-term capital gain is also mentioned, the manner of giving accommodation entry is also mentioned therefore nothing else is required to be proved by the AO. The retraction is at the behest of the assessee group, only a course adopted as a corrective step to reduce the damage. Nothing was shown that the original statement made by him i.e. Mr. Bhatt is not valid.He did not deny the evidence found, his explanation etc. Retraction is just to save the assessee from consequences. Original confessional statements were based on evidence, which are not denied. Investment pattern, sale of shares, the price variation, without support of financial backing of the company, the holding period, clearly proves that the whole transaction was crafted carefully to deceive the tax. Therefore, the long-term capital gain earned by the assessee is not genuine. Supreme Court in case of Abhisar Buildwell private limited has held that in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the Assessing Officer would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the Assessing Officer including the income declared in the returns. “Therefore, in the present case before us, there can be an addition on the basis of the incriminating material which has been made by the assessing officer on account of income from house property and further addition on account of the income under section 68 as well as under section 10 (38) of the act”, the bench noted. Even otherwise, when it is not denied by the assessee that the balance sheet was not disclosed to the revenue from which the assets were found, income of which is chargeable to tax under the head income from house property, even the addition of the capital gain claimed as exempt under section 10(38) could also have been added by the assessing officer as it is other income. In view of the following, the Income Tax Appellate Tribunal decided to remand the matter to the AO for examination of alleged accommodation entry provider —- i. statement of the accommodation entry provider Mr. Vipul Bhatt ii. Statement of assessee‟s chartered accountant shri Piyush Shah iii. Confirmation of statement of Mr. Mohan and Priya about Shri Piyush Shah iv. ignorance of the assessee and her father about the company its working or even where about of the company v. non service of 133 (6) notices to companies vi. pending information from BSE vii. association with the chartered accountant who operated and worked as link between Assessee group and Accommodation entry providers, viii. approaching settlement commission and withdrawal of application later ix. Acquisition of shares of company through private places held to be part of scheme explained by Mr.Bhatt x. Holding shares in Demat account by the assessee and same parties for demat mentioned in the statement of Mr. Bhatt xi. Transaction of transferring share from one demat account to another where shares could have been sold from any demat account particularly when those demat agencies were mentioned as part of scheme by Mr. Bhatt xii. Synchronized trade pattern of putting order on stock exchange platform and in seconds trade takes place in a nondescript company xiii. Identification of exit providers controlled by Mr. Bhatt xiv. Trail of money and commission in several annexure found where name of the assessee, her CA, cash/RTGS receipt were mentioned along with commission of Mr. Bhatt coupled with the RTGS and Cash from assessee matching with sale of shares of assessee or her family xv. Bald retraction of Mr. Vipul Bhatt by affidavit without any evidence and not denying any documents found Documentary evidences of purchase, sales confirmation etc provided by the assessee loses its sanctity. The Bench noted that, “Even otherwise, in case of loan of accommodation entry, confirmation bank statement and annual accounts, return of income etc loses its significance the moment it is shown to be an orchestrated arrangement of camouflage of the real transaction.” Similarly, in case of allegedly bogus long-term capital gain, the details of sale, bank payments, trading at the stock exchange platform, payment of STT etc are merely make-believe arrangements of the documents as those are necessary ingredients to claim exemption. The ITAT bench noted that, “So far as the issue of independent enquiry is concerned, when all the documents are proved to be a make-believe evidences for claiming the exemption under section 10 (38) of the act or section 68 of the Act , we do not find that any inquiry is required, despite everything coming out in the statement of Mr. Vipul Bhatt , Piyush Shah, Mohan Gurnani, and Priya Gurnani. If the assessee wants to dispute them, it is for her to show that the transaction is not non-genuine.” “Our reason for referring 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 is really a fantastic story”, the bench further 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 proves that story is fake”, the bench noted. However, “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. The tribunal bench of Prashant Maharishi, Accountant Member and Kavitha Rajagopal, Judicial Member added that, “It is also the duty of the assessee to produce before the AO of her chartered accountant (who 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.” Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates

ITAT remands matter of Moraj Group Director Priya Gurnani to AO for examination on alleged entry provider used to accommodate capital gains and unsecured loans [Read Order]

Your free access to Taxscan has Expired

To read the article, get a premium account.

Taxscan Premium

Topics