Instead of just going after the kingpin, the tax tribunal has directed that nearly 33,000 individuals or business entities engaged in a money laundering racket worth Rs 1,680 crore be probed. In a far-reaching order, the Income Tax Appellate Tribunal (Mumbai bench) has looked beyond just bringing to task an individual defaulting taxpayer and upholding lower tax authorities’ assessment order.
As Naresh Manakchand Jain – the defaulting taxpayer – was engaged in a significant money-laundering operation, the tax tribunal has directed his jurisdictional I-T official to provide details of 30,000-plus entities involved within 90 days to various regulatory authorities for further investigation and action. The authorities include I-T officials, Sebi, RBI, and the registrar of companies.
The ITAT bench said: The real beneficiaries are the persons who have obtained the exempt long-term capital gain by converting their unaccounted income. The money laundering exercise involved serious violation of various laws such as I-T, securities, corporate, and banking. Such activities, if treated and dealt with in silos, are ineffective. Hence, it directed that details of parties involved be shared with a wide range of regulatory authorities.
According to chartered accountants, apart from being subject to re-opening of their tax assessment, these parties will also find themselves subject to probe under the rigorous provisions of the anti-money laundering law.
An appeal filed with ITAT by Jain, described in the I-T orders as a money laundering kingpin, relating to his tax assessment for FY12 opened a Pandora’s box. One of the grounds of appeal filed by Jain was against the action of I-T authorities to treat Rs 50.4 crore in his hand as undisclosed income and tax the same.
Two searches conducted in subsequent years (in 2016 and 2019) by investigation wings of the I-T department threw up a host of incriminating evidence. For FY12 itself, 32,855 individuals and entities who participated in money laundering activities were identified, and Rs 1,680 crore was found to have been laundered by Jain by rigging nine identified scrips.