NARESH MANAKCHAND JAIN ,MUMBAI vs. ACIT 2(1), MUMBAI

These are the two appeals filed by same assessee Mr. Naresh Manakchand Jain, who admittedly in his several statements at several times, is an accommodation entry provider of several hundred crores to almost 32000+ beneficiaries as under :-

Assessee has raised identical grounds of appeal for both the appeals. Therefore, the grounds of appeal in both these appeals are as under:-

In another appeal, assessee is contesting addition of Rs 2.69 of credit cards payments confirmed by CIT (A).

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

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

The assessee was also investigated by Hyderabad Investigation Wing, wherein it was found that M/s PFL Infotech Limited is the company wherein Mr. Abhinandan Jain and Mr. Amaresh Punia are the directors, was also used with their help in providing bogus long term capital gain. He also named 17 exit providers in search by Mumbai Investigation Wing. He further named 7 entities which are used for providing money-laundering services. The name of the beneficiaries in Nyssa Corporation Limited was also given, Mr. Pritesh Kumar Hasmukhbhai Shah, Hasmukhbhai Manilal Shah, and Asha Sanjay Shah. In case of Diamant Infrastructure Limited, he gave the name of Jigar Praful Ghoghari, Kiran Bhiku Bhanaes, Jinal Apurva Rawal for manipulation of Polytex India Limited, KGN Limited. Based on this information and in absence of any submission from the side of the assessee, the learned Assessing Officer determined the commission income at

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 assessee subject to any duplication. With respect to the credit card expenditure of ₹ 260,369/– the learned CIT (A) noted that the assessee has not submitted any explanation or related document and therefore, he confirmed the addition of the same.

The learned Departmental Representative vehemently supported the orders of the learned lower authorities.

We have carefully considered and perused the orders of the lower authorities. As per admission made by the assessee, he is engaged in the business of the providing bogus accommodation entries to various persons to convert their unaccounted income as tax-free, long-term capital gain, Business losses, and short-term capital gain by operating several companies through cartel of several persons. The assessee has given names of (i) all the persons to whom the accommodation entries were provided, (ii) the persons who are 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. Based on this, the learned assessing officer has estimated the total turnover of the various companies on the basis of information available on record about the volume of unaccounted income converted into tax-free income of various beneficiaries. On the above sum, the assessee as per his own admission has stated that he used to earn commission income at the rate of 2% to 3 %; the learned assessing officer computed the income of the assessee at the rate of 3% on the above sum. Ld CIT (A) confirmed it. We do not find any infirmity in the order of the lower

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.

The facts stated in Assessment orders, several statements extracted by ld AO, extracted statement of assessee, and modus operandi explained in those statements by assessee and others clearly shows how blatantly and to the extent of several hundred of crores, , all these persons have used stock exchange platform through exit providers, connivance with the brokers, directors of suspicious companies, price rigging through synchronized 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, are ineffective.

In the result, appeals filed by the assessee are partly allowed.