The recent decision by the Bombay High Court to quash an ITAT order in a money laundering case highlights the importance of due process and the limitations of the tribunal’s powers.
In a significant development, the Bombay High Court has overturned an order by the Income Tax Appellate Tribunal (ITAT) that upheld the addition of ‘unaccounted income’ as taxable for an individual involved in stock rigging. The court ruled that the ITAT had gone beyond its scope and had passed the orders without giving the individual a hearing opportunity. This decision emphasizes the importance of due process and fair treatment in legal proceedings.
The case revolves around Naresh Manakchand Jain, who was alleged to have engaged in rigging stock prices and money laundering by providing bogus entries to other parties. The ITAT had upheld the addition of ‘unaccounted income’ of Rs 90 crore in Jain’s hands and had directed the disclosure of details of over 30,000 individuals and entities involved in the scheme for investigation and action.
However, the high court found that the ITAT had passed these orders ex-parte, without giving Jain a chance to present his side of the story. The court held that the powers of the ITAT are limited to passing orders confined to the issues placed before it in appeal. Therefore, the ITAT’s decision to direct the disclosure of details of other parties went beyond its jurisdiction.
The high court’s decision to quash the ITAT order on technical grounds and direct a fresh hearing underscores the significance of following proper legal procedures. It ensures that individuals are given a fair opportunity to present their case and that the tribunal’s powers are not exceeded.
This case also highlights the need for thorough investigations into allegations of money laundering and stock rigging. While the ITAT had referred to Jain as a kingpin and ordered the disclosure of details of other parties involved, the high court has stressed that such directions should not have been passed in an appeal filed by the taxpayer. It is crucial for regulatory authorities, such as the Income Tax officials, Sebi, stock exchanges, RBI, and the Registrar of Companies, to conduct thorough investigations and take appropriate action based on concrete evidence.
Overall, this decision by the Bombay High Court serves as a reminder of the importance of due process, fair treatment, and the limitations of the powers of tribunals. It is essential for the justice system to uphold these principles to ensure a just and equitable society.