Naresh Manakchand Jain v. The Registrar, ITAT (Bom)(HC) www.itatonline.org

S. 254(1): Appellate Tribunal- Powers- Ex -parte order – Search – Alleged Accommodation entry provider – 32,000+ beneficiaries- Shell companies -Alleged Money Laundering – Direction issued by the Tribunal to AO to intimate/report to SEBI, ED, MCA and ROC regarding details of money laundering activities-Directed the Assessing officer to share information about all beneficiaries within 90 days – Ex -parte order was quashed – Direction of the Appellate Tribunal was set aside – Tribunal must try and confine itself to the question that really arises in the appeal before it and not travel outside the ambit of its jurisdiction and express opinions prejudicial to the assessee which may help the Department in taking proceedings against the assessee – Court directed the Tribunal decide on merits . [S. 68, 132, 150, Prevention of Money- Laundering Act, 2002; 11, Art. 226]

The Assessee was providing alleged bogus accommodation entries and availing a 3% commission on the same.  A search was conducted and it was found that the assessee provided bogus accommodation entries to 32,855 persons wherein thousands of crores were laundered by the assessee. Accordingly, the A.O. made an addition on the basis of a 3% commission which was charged by the assessee. Before the CIT(A), in an ex-parte order, confirmed the findings of the Assessing officer.

On appeal before the Hon’ble Tribunal,  the Tribunal passed an ex parte order and  it found that there was no infirmity in the order of the lower authorities. the Hon’ble Tribunal also noted that the Assessee was a mere entry provider and the real beneficiaries of the bogus transitions were those 32,000 + people identified by the Assessing Officer in the order. Thus, the Hon’ble Tribunal directed the Assessing officer to share information about all beneficiaries within 90 days, who were involved in the racket with their concerned Assessing officers, in order to reopen assessments of those individuals. Further, the AO was also directed to intimate the Securities Exchange Board of India (SEBI) with a list of beneficiaries, share brokers, depositories, list of synchronized transactions who were involved in the racket. Furthermore, the AO was also directed to provide the same to respective government authorities for applicability of section 11 of the Prevention of Money-Laundering Act, 2002 (PMLA) and also to the Ministry of Corporate Affairs (MCA) and Registrar of Companies (ROC) with a list of shell companies involved whose share prices are rigged on the stock exchange. On writ petition against the ex -parte order of the Tribunal ,  the Hon’ble Bombay High Court has set aside the order of the Tribunal  . The Court observed that the appeal was filed by the assessee hence the direction of the Tribunal was uncalled for .  Court set aside the ex -parte order and  directed the Tribunal to decide on merits . Relied on Indira Balakrishna , Manager of Estate of Balakrishna Purshottam Purvani v. CIT  (1956) 30 ITR 320( Bom)(HC ) wherein  the Court observed that “   Now, it is never desirable for any Judge to express an opinion which is not necessary for the decision of a case ; even so Judges, and some of them very eminent Judges, have indulged from time to time in obiters. But the only result of their doing so is possibly to encumber law reports and the giving expression to these obiters has not resulted in any prejudice to any party. But in the case of the Tribunal the position is entirely different. Every expression of opinion by them is likely seriously to prejudice the assessee. In this very case because they took the view that the Appellate Assistant Commissioner was in error in considering that the income from property fell under section 9(3), the Income-tax Officer has, as pointed out by Mr. Palkhivala, issued a notice against the assessees under section 34(1)(b). The Tribunal being the highest authority under the Income-tax Act, the Income-tax Officer is bound to respect any opinion expressed by it, and if it says that an assessee has been under-assessed or there has been a failure to assess properly, the Income-tax Officer is bound to take action under section 34, and that is exactly what has happened in this case. Therefore, in our opinion, with respect to the Tribunal, it should be very careful in giving findings and in expressing opinions. It must try and confine itself to the question that really arises in the appeal before it and not travel outside the ambit of its jurisdiction and express opinions prejudicial to the assessee which may help the Department in taking proceedings against the assessee. It may be said that if the Income-tax Officer is in error in issuing the notice under section 34 or that the view expressed by the Tribunal was not correct, the assessee would always have his remedy. But that is not the point. The assessee is harassed by a notice issued against him under section 34 and he has got to run the gamut of several Income-tax authorities before ultimately he gets justice, and all this arises because the Tribunal overlooks its own responsible position and the serious consequences of expressing opinions which do not really arise for the decision of the appeal before it.”  ( Affirmed by  CIT v. Indira Balakrishna (1960) 39 ITR 546 ( SC) . ( WP (L)No.27193  of 2023   dt.18 -10-2023 )( AY 2012-13] 

 

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