Naresh Manakchand Jain v. Registrar, ITAT

Case snapshot

Sections / provisions: 254(1)

Questions before the Court / Tribunal

• Ex parte ITAT directions to enforcement/regulatory agencies: The reported writ concerns an ex parte Tribunal order containing wide directions to agencies such as SEBI/ED/MCA/ROC. The High Court is reported to have quashed the order; primary text is mandatory because the allegations and institutional directions are sensitive.

Material facts and background

For A.Y. 2012-13, assessee filed its original return of income on 24th July, 2012, declaring total income of ₹2,54,830/- [sources of income unknown]. Subsequently, search under Section 132 of the Income-tax Act, 1961 (the Act), was conducted by investigation wing on 20th October, 2016, in connection with one Ranka Jewellers. Assessee was also covered in that search. The case of the assessee was centralized at Pune. This centralization was challenged by the assessee before the Hon'ble Bombay High Court, wherein Hon High court vide order dated 15th July, 2019, quashed the order passed under Section 127 of the Act. Subsequent to that, the case of the assessee was retained at Mumbai, pursuance to the direction of Hon'ble High Court, the case was assigned to the learned

Page | 5 ITA Nos.1945 & 1946/Mum/2023 Naresh Manakchand Jain; A.Y. 2012-2013

Mumbai Investigation Wing conducted another search on the assessee on 19 March 2019. Therefore, notices under Section 143A of the Act was issued on 29 August 2019. In response to that notice on 5th September 2019, assessee submitted that return filed under Section 139 of the Act may be treated as return filed under Section 153A of the Act. The assessee was also issued notice under Section 142(1) of the Income-tax Act, 1961 (the Act) dated 29th September 2019, which assessee did not comply. The assessee was found to be and statement under Section 132(4) engaged

companies in order to provide bogus entries of long term capital gain, short term capital loss and business loss. The evidences were gathered during the search showing link between the operators, promoters, share brokers, exit providers and intermediaries, who facilitated the sham transactions

admitted that he is earning commission of 2 to 3% of the amount. 07.

For A.Y. 2012-13, 32855 persons were identified, wherein ₹1,680 crores was found which have been laundered by the assessee in 9 identified scripts. The assessee did not reply to any of the notices and therefore, the learned Assessing Officer passed the order under Section 144 of the Act. The learned Assessing Officer further referred to the statement of the assessee, wherein he named Mr. Abhinandan Jain, who was also one of the entities

Page | 6 ITA Nos.1945 & 1946/Mum/2023 Naresh Manakchand Jain; A.Y. 2012-2013

Appellant / assessee submissions

Mumbai Investigation Wing conducted another search on the assessee on 19 March 2019. Therefore, notices under Section 143A of the Act was issued on 29 August 2019. In response to that notice on 5th September 2019, assessee submitted that return filed under Section 139 of the Act may be treated as return filed under Section 153A of the Act. The assessee was also issued notice under Section 142(1) of the Income-tax Act, 1961 (the Act) dated 29th September 2019, which assessee did not comply. The assessee was found to be and statement under Section 132(4) engaged

Revenue / respondent submissions

012. Despite notice, none appeared before us on behalf of assessee and therefore, these appeals are decided on the facts available on record. 013. The learned Departmental Representative

Court / Tribunal analysis and reasoning

Mumbai Investigation Wing conducted another search on the assessee on 19 March 2019. Therefore, notices under Section 143A of the Act was issued on 29 August 2019. In response to that notice on 5th September 2019, assessee submitted that return filed under Section 139 of the Act may be treated as return filed under Section 153A of the Act. The assessee was also issued notice under Section 142(1) of the Income-tax Act, 1961 (the Act) dated 29th September 2019, which assessee did not comply. The assessee was found to be and statement under Section 132(4) engaged

For A.Y. 2012-13, 32855 persons were identified, wherein ₹1,680 crores was found which have been laundered by the assessee in 9 identified scripts. The assessee did not reply to any of the notices and therefore, the learned Assessing Officer passed the order under Section 144 of the Act. The learned Assessing Officer further referred to the statement of the assessee, wherein he named Mr. Abhinandan Jain, who was also one of the entities

Accordingly, the assessment order under Section 144 read with section 153A of the Act, was passed on 12th September, 2019, determining the total income of the assessee at ₹50,45,57,584/-. This is the impugned order which was decided by the learned CIT (A) and against that order of the learned CIT (A), assessee has filed appeal in ITA No.1946/Mum/2023. 010. In ITA No.1945/Mum/2023, the learned Assessing Officer has passed the assessment order for A.Y. 2012-13 under Section 143(3) read with section 143A of the Act wherein based on the admission of Mr. Naresh Jain, assessee and his allies and other operators it was established that assessee is engaged in rigging the price in the shares of further 12 companies in connivance with his various associates entered into prearranged transaction on the stock exchange using various dummy accounts. These prearranged transactions are accommodation entries to various beneficiaries, who brought their unaccounted income into the books of account without paying taxes. Therefore, assessing officer computed the accommodation entries covering all the trade data were made on the stock exchange in those companies. Accordingly, the learned assessing

the entire trade consideration at least 3% commission that was based on the statement of Mr. Naresh Jain, was computed at ₹ 398,099,612. Accordingly, assessment order was passed, which was assessing the total income of the assessee at ₹ 902,657,196. 011. Against both these orders, the assessee went into an appeal before the learned CIT (A). The learned CIT (A) passed a consolidated appellate order on 27 March 2023 wherein several grounds were raised. The learned CIT (A) on the facts and circumstances of the case and based on his appellate order for A.Y. 2013-14 to 2019-20, wherein he has decided the identical issue, he confirmed the commission income of 3%. Thus, assessment order passed by the learned assessing officer was confirmed. There was one more reason for the same because before him also the assessee did not produce any information or make any representation. However, the learned CIT (A) in most judicious manner gave a direction to the learned assessing officer that there should not be double addition of commission income as taxable income of the assessee. Accordingly, the commission income was held to be correctly charged by the learned Assessing Officer as income of the...

012. Despite notice, none appeared before us on behalf of assessee and therefore, these appeals are decided on the facts available on record. 013. The learned Departmental Representative

numbers 1 to 5 of the appeal in ITA No. 1946/Mum/2023 and ground numbers 1 to 5 of appeal in ITA No. 1945/Mum/2023 are dismissed. 015. With respect to the credit card expenditure confirmed by the learned CIT (A), we find that when the income of the assessee has been taxed, he has the source of such expenditure available and therefore, making the addition of the above sum once again, is taxing sources and application of income both, and also amounts to double addition in the hands of the assessee. Accordingly, we direct the learned assessing officer to delete the addition of ₹260369/- made in the hands of the assessee as unexplained expenditure under section 69C of the Act. Ground number 6 of the appeal is allowed. 016. The facts stated in Assessment orders, several statements extracted by ld AO, extracted statement of assessee, and modus

that assessee is merely an accommodation entry provider as held by the lower authorities. Therefore, the real beneficiaries are the persons who have obtained the exempt

Operative decision and relief

018. In the result, appeals filed by the assessee are partly allowed. Order pronounced in the open court on 31.08. 2023.

Authorities and precedents appearing in the judgment

• Honourable Supreme court in case of Pr. CIT v. Abhisar Buildwell (P.) Ltd

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Ex parte ITAT directions to enforcement/regulatory agencies. The operative result is classified as Partly Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Ex parte ITAT directions to enforcement/regulatory agencies. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Maintain a date-and-payment matrix for transfer, agreement, possession, investment and construction; capital-gains exemptions commonly turn on this chronology.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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