TaxTMI 
TaxTMI 
2016 (11) TMI 1042
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....ve chart of statements of Sanjay Sonawani Nil 088 091 19 1st statement of Sanjay Sonawani 16.03.2011 092 097 (i) 2nd statement of Sanjay Sonawani 12.04.2011 097- 099 (ii) 3rd statement of Sanjay Sonawani 12.05.2011 099 105 (iii) 4th statement of Sanjay Sonawani 30.12.2011 105 107 (iv) Assessee's written submissions before ITAT Nil 111 113 34 Assessee's submissions before CIT(A) 21.08.2014 114 116 37 Statement of Ms. Anita Paul 29.03.2011 128 132 60 Statement of Sh. Amitava Misra 29.03.2011 132 136 62 Expert report 11.09.2012 143 145 76 Assessee's request for appointing expert 25.03.2013 146 147 78 High Court order upholding grant of registration 10.03.2015 151 151 88 Computations of income Nil 153 156 92 Note : This "Partial Index" has been necessitated due to the fact that relevant portions of the assessment order and the Commissioner of Income-tax (Appeals)'s order in one of the appeals, and relevant parts of the record, as mentioned in this Index, have been reproduced in extenso in the body of the order. This Index, it is....
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....ice and in the alternative, the Assessing Officer/ Commissioner of Income-tax (Appeals) has wrongly held that the whole income is taxable and not restricting the taxability to the amount which is allegedly covered under section 13(1)(c) of the Act. 8. That the depreciation on computer software has been illegally and wrongly denied and the Commissioner of Income-tax (Appeals) has erred in upholding the same. 9. Without prejudice and in the alternative, expenses claimed has been illegally and wrongly disallowed and income has been wrongly and illegally assessed at a highly exorbitant figure. 10. That the evidence filed and materials available on record have not been properly construed and judiciously interpreted, hence the addition/disallowance made are uncalled for. 11. That interest under sections 234A, 234B, 234C and 234D of the Income-tax Act, 1961 has been wrongly and illegally charged and has been wrongly worked out. 12. That the applicant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing." 3. As stated at the bar by the learned counsel for the assessee and not disp....
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....arag V. Mehta, Chartered Accountant, located at 114/114A, Jolly Bhawan No. 1, 10 Marine Lines, Mumbai, during the course of which, it was found that Sh. Parag V. Mehta had given table space in his office premises to various bogus companies, which did not actually transact any business, but were engaged in providing accommodation entries to needy persons/concerns and which helped these persons/ concerns to claim bogus expenses. Such companies included M/s. Washington Software Ltd., which is stated to have been run by one Sh. Sanjay D. Sonawani. The fact that M/s. Washington Software Ltd. was a bogus company was also stated to have been admitted by Sh. Parag V. Mehta in his statement recorded during the course of search and seizure operation on March 22, 2011. It was further stated to be admitted by Sh. Parag V. Mehta that the said bogus company was providing accommodation bills to interested parties/concerns and Sh. Sanjay D. Sonawani was managing all the affairs of the said company. Sh. Sanjay D. Sonawani, in his statements recorded on March 16, 2011, April 12, 2011 and May 12, 2011, was also stated to have admitted that his company, M/s. Washington Software Ltd., was involved in p....
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....autiyal, Accountant, Apeejay School of Management, Dwarka, Shri Amitava Misra, Head of IT Department and Sh. Vijay Berlia (trustee), General Secretary and Authorised Signatory of the assessee-society were also stated to have been provided to the learned authorised representative of the assessee-society by the Assessing Officer. The relevant portions of the statements of the persons as mentioned above have also been reproduced in the assessment order. Apart from reproduction of the abovementioned statements, the relevant portion of the statement of Shri Sanjay D. Sonawani, dated May 12, 2011, has also been reproduced in the assessment order. 5.3. During the course of assessment proceedings, the Assessing Officer examined the statements given by Sh. Sanjay D. Sonawani and other persons, as well as the various submissions filed by the assessee-society to the contrary and he came to the conclusion that no software was ever purchased by the assessee from M/s. Washington Software Ltd. The Assessing Officer came to such a conclusion, as on physical verification during the course of survey operations under section 133A of the Act, conducted at various premises of the assessee group, inc....
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....sing Officer that payments given to M/s. Washington Software Ltd. were received back in cash after paying some commission in respect of the accommodation entries. In view of all these observations, the Assessing Officer has concluded that the assessee-society has violated the provisions of sections 13(1)(c)/13(3) of the Act and it is not entitled for exemption of its income under sections 11 and 12 of the Act. He, therefore, disallowed the deduction claimed by the assessee-society under sections 11 and 12 of the Act and computed the taxable income of the assessee-society under the provisions of sections 28 to 44 of the Act. As per the provisions of sections 28 to 44 of the Act, the Assessing Officer computed the excess of income over expenditure at Rs. 10,05,35,645 and brought it to tax. Apart from this, the Assessing Officer has also disallowed the depreciation of Rs. 1,91,69,549 on alleged bogus purchases of ERP Software claimed by the assessee during the year under consideration, as well as in earlier years. Apart from this, expenses stated to be incurred on bogus purchase of software amounting to Rs. 38,60,900 from M/s. Washington Software Ltd. and claimed as revenue expenses h....
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.... the Income-tax Act, 1961 with effect from April 1, 1998 vide order No. CIT-JUlTO(TECH.)/99-2000/1466, dated May 13, 1999. The assessee-society is running 24 educational institutions in various cities of India under its control and management. 4. Brief facts of the case are that information was received that a search and seizure operation under section 132(1) of the Income-tax Act, 1961 was conducted by the Director of Income-tax (Investigation)-II, Mumbai, at the premises of one Sh. Parag V. Mehta located at 114/114A, Jolly Bhawan No. 1, 10 Marine Lines, Mumbai. During the course of search and seizure operation, it was found that Sh. Parag V. Mehta had given table space to various bogus companies in his premises which do not actually transact any business but are engaged in providing accommodation entries to certain persons/ concerns. Such companies included M/s. Washington Software Ltd., (WSL) which was being run by one Sh. Sanjay D. Sonawani. The fact that M/s. Washington Software Ltd. was a bogus company was admitted by Sh. Parag V. Mehta in his statement recorded during the course of search and seizure operations on March 22, 2011. It was further admitted by Sh. Parag....
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.... 2003-04 16,18,25,345 2. 2004-05 6,36,30,300 11 under section 143(3) 3. 2005-06 7,86,30,300 4. 2006-07 5,94,35,001 5. 2007-08 1,06,00,090 6 2008-09 4,62,11,110 7. 2009-10 4,85,10,900 8. 2010-11 5,70,00,000 Total 52,58,42,956 Ans. Yes, I do agree that the profit and loss account and the balance-sheet of the company from financial year 2003-04 to financial year 2009-10 are showing the sale figures as tabulated above. I also agree that the sales figure for current financial year are shown to be at Rs. 5,70,00,000 however in a sound state of mind I am making a responsible statement whereby I in the capacity of chairman of Washington Software Ltd. confirm that all these sales are non-genuine sales (bogus sales). There are no actual delivery challans in the case of any of these sales as the physical sale of any software has never taken place. All the sales bills raised are non-genuine and bogus sale bills. The delivery challan numbers mentioned on the bills are false since such delivery challans are non-existent. I confirm that all these sales are in the form of accommodatio....
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....there was no any actual activity in regard to development of software. As such the figures debited are adjusted figures match up with the sales. Though the books of account are audited, the books of account were never maintained and no actual audit took place. Q.9 From the balance-sheet it is observed that there is substantial investment in the non-trade shares of various companies such as Ishu Software Ltd., Suryodha Allo-Metal Power Ltd., Amity Interlinked Steel P. Ltd., Angarika Investment and Financial Pvt. Ltd., Ashish Fashions Pvt. Ltd., Begani Dyeing Mills Pvt. Ltd., C. S.Components Pvt. Ltd., etc. Ans. I hereby confirm that all these transactions pertaining to investment used to be taken care by Sh. Parag Mehta, he used to send me blank share application forms as well as share transfer forms which after signing I used to send him by post/courier. To the best of my knowledge he used to utilise the funds available in the bank accounts of WSL for payment towards these investments. Q.10 Please give details of all the entities (corporate and non- corporate) to whom such accommodation entries have been provided by your company M/s. Washington Software L....
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....Trust. During the course of the survey operations, genuineness of purchase of software by assessee from M/s. Washington Software Ltd. was examined from different aspects. Also the statements of various persons actively involved in the management and running of Apeejay Group of Institutions were recorded like Ms. Anita Paul, Principal of Apeejay School Saket, Sh. Alok Saklani Director, Deepankar Chakarborti, Dean and IT Head and Sh. Nagendra Nautiyal, Accountant, Apeejay School of Management Dwarka, Sh. Amitava Misra, Head of IT Department and Sh. Vijay Kumar Berlia, General Secretary and authorised signatory of assessee. None of these persons including Sh. Vijay Berlia, (who has personally approved all the bills of WSL) could give any satisfactory reply regarding the purchase and installation of software stated to be bought from M/s. Washington Software Ltd. Copies of all these statements were provided to the assessee's authorised representative during assessment proceedings. The relevant portion of these statements is reproduced as under : (i) Statement on oath dated March 29, 2011, of Smt. Anita Paul, Principal of Apeejay School, Saket. Q.22 I am again-askin....
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....warka. Q. 10 Did you buy any software ever from M/s WSL ? If yes, please tell 1. The year of transaction. 2. The purpose for which it was purchased ? 3. Name of software module. 4. Whether fresh version or updated version of any previous Software. 5. If a standard version of any software or tailor made catering to your specific requirements. 6. Whether only onetime purchase or regular transactions in the form of annual maintenance contract (AMC). Please explain ? Ans. No, we did not have any transaction with M/s. WSL financially or otherwise. I am hearing this name for the first through you, hence, the need to reply to all the six points mentioned in question above does not arise at all. Q.11 I am giving you opportunity to think again whether your Institute had any relationship with M/s. WSL ever in the past ? Ans. I cannot recall because I have heard this name for the first time, hence, my reply to this question is also the same as that to the question No. 10. Q. 16 I am showing you Annexures- 'B', 'C' and 'D' made part of the statement of Sh. Nagendra Nautial....
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....t, as already mentioned by me, we have no bills for any of the entry sent to us through Annexure "A" to this statement. Q. 13. I am showing you page Nos. 59 to 66 of Annexure, A-1 which contains the ledger account of 'computer software' of the institute Apeejay School of Management for the period 2003-04 to 2010- 11. Few of these ledger accounts are blank, however in other ledger accounts specific narrations have been given against the entries made on 31st March of the relevant period. These narrations are reproduced as per the details given below : Period Narration Amount 2005-06 Amount spent by AES on our behalf 30,00,000 2006-07 Amount spent by H.O. on our behalf 30,00,000 2007-08 - - 2009-10 Secondary Cost Centre Administrator being the amount paid by H.O. during the year 2009-10 now entries taken by us as per reconciliation 1,80,00,000 Please explain what these narrations means and what context these narrations have been made in the books ? Ans. These narrations only means to highlight the particular trans actions recorded against these narrations that these entries have been made only at the direc....
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....Q. 13. We have searched for the above CDs along with you and with your team and could not find the original CDs purportedly supplied by the above company. Your people have also shown us the softwares purportedly procured from the above company. However, nowhere in the above software the name of M/s. Washington Softwares Ltd. appeared, rather the name of your institutions, i.e., Apeejay Education Society. Can you show us any evidence that the said software were developed or conceptualised by any other entity other than your Apeejay Education Society ? Ans. No. (vi) Statement on oath dated March 29, 2011 of Shri Vijay Berlin, General Secretary and authorised signatory : Q. 5 What kinds of transactions are being carried out by your societies with M/s. Washington Software Ltd. ? Ans. I do not know much about the transaction but they are regularly suppliers of our software as I was not involved directly to deal with the parties. Q. 6 What is the normal procedure followed in purchase of any commodity for any of the school/institution of the society ? Ans. I am not fully aware of the procedure as I am not looking the day-to-day affairs....
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....Why these payment have been made ? Ans. Presently I am not in a position to make any comment. Q. 16 It is seen that an amount of Rs. 2.60 crores have been paid to the above company within a period from September 2010 to February 2011 without any receipt of bills or goods. It is the period after the sad demise of Shri Satya Paul. Please explain. Ans. This order must have been placed when he was alive. Invoices must have come which is not available/traceable at the moment. Q. 19 In reply to several above question you have made evasive replies saying that you were not aware, you were not in a position to comment, etc. You being the person at the helm of the affair at the society besides the person being making huge payments to non- descript company without actually receiving any commodity or services. All the relevant persons are present here and you have also consulted them. You have also been accorded opportunities to consult relevant persons telephonically still no correct replies has come out. Please state why you are not in a position to furnish the replies and who is the person who can reply all such questions ? Ans. I was not fully i....
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.... from M/s. Washington Software Ltd. in the form of bogus bills of purchase of ERP software without receiving any actual delivery thereof. 7. Violation under section 13 of the Income-tax Act, 1961. In view of the above discussion, it is clear that no actual procurement of the software was made by the assessee from M/s. Washing ton Software Ltd. The assessee merely procured bills from WSL and booked the amount of bill as expenses in its books of account and inflated its expenses to that extent over a period of time. During the post survey proceedings, Investigation Wing, Mumbai was requested to conduct further inquiry in this regard. Statement of Sh. Sanjay Sonawani was again recorded by Deputy Director of Income-tax (Inv.), Unit-VII(4), Mumbai on May 12, 2011. In this statement, in addition to other aspect of the case, questions related to issuance of fictitious bills and routing of money were specifically asked. Sh. Sonawani categorically stated that he used to send fictitious bills to Apeejay Group through an employee of the group and that the amount used to be deposited in his account either through cheques or RTGS transactions. Regarding routing back of amount,....
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....a and balance Rs. 38,60,900 through various bank drafts). Thus, as per statement of Sh. Sonawani, the amount debited in books of assessee for purchase of alleged software from WSL, was received back by the persons managing the affairs of the assessee-society. This amount did not come back to the corpus of assessee, meaning thereby, the income derived from the property of trust was misutilised by the beneficiaries/members of the assessee-society over a continuous period for many years. As per section 13(1)(c) read with section 13(3) of the Income-tax Act, 1961, this is a clear violation of exemption granted to the assessee-society under section 12AA. 7.1. In this case, on the basis of evidences, gathered during survey operation dated March 29, 2011, a report was sent by my predecessor (which has been followed up by me) to the Commissioner of Income- tax, Jalandhar-II, Jalandhar, requesting him to review the registration under section 12AA already granted to the assessee-society vide order dated May 13, 1999. On the basis of said reports, the worthy Commissioner of Income-tax-II, Jalandhar after considering the provisions of section 13(1)(c) read with section 13(3) of the In....
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.... Apeejay School 14.12.2009 6,84,000 7 Apeejay School 28.12.2009 12,02,000 8. Apeejay School 06.01.2010 11,84,000 9. Apeejay School 18.01.2010 2,35,000 10. Apeejay School of Marketing 27.04.2009 50,00,000 Total 2,68,59,000 As per information available in this office, a statement under section 131 of the Income-tax Act, 1961 of Sh. Sanjay D. Sonawani S/ o Sh. Devi Dass Sonawani, director of M/s. Washington Software Ltd. was recorded by the Deputy Director of Income-tax/Inv.) Unit-I(I), Pune on March 16, 2011. In this statement Sh. Sanjay D. Sonawani has stated that his company provided accommodation entries in the form of bogus sales from financial year 2003-04 to financial year 2010-11. He also stated that since financial year 2003-04, there was neither necessary set up for developing of software nor the man power and expertise required in the company. Thereafter a survey under section 133A was conducted in your case at New Delhi on March 29, 2011 and statement of Ms. Anita Paul, Principal of Apeejay School, Saket, New Delhi was recorded wherein she stated that there was no admission or scholar....
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....nawani and Meena Surendar Naidu. How is it possible that the person does not. Regarding shareholding pattern he has stated that he is holding 3,55,000 shares, Mahesh Kadu 10 shares and Prafull Mehta 10 shares. Whereas as per record of MCA the paid up capital is 1,10,52,000 shares and out of it Sanjay D. Sonawani is holding 18,65,000 shares and Pushpa Sanjay Sonawani is holding 90,000 shares and as per last record available at the site of MCA there are 1,480 shareholders. So here at the first instance itself he has totally misled the Department even after taking oath. How the statement of such person can be trusted. In reply to question 5 he has admitted that the company was carrying on the business of software development up to financial year 2003-04. Further, he is claiming that he was imprisoned but for what offence he was imprisoned, he has not clarified. May be he was doing development without proper permissions and just for that he was arrested and to cover up that he is denying having done any development work. Reason for his imprisonment needs to be verified. Further he is saying in his statement that he was getting his accounts audited but no accounts were....
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....asis of a false statement by a person who himself is man of dubious character. In case any further information/clarification is required or you want to hold a contrary view, further opportunity to explain, may please be given. To further elaborate, we may be provided the copies of balance-sheets and also bank statements of Washington Software Ltd. In case still any adverse opinion is to be formed, an opportunity may be given to us to elaborate our case.' 8.2 The reply of the assessee as reproduced above has been carefully considered. It is seen that the assessee's authorised representative stressed more on the general conduct of Sh. Sanjay D. Sonawani and did not give any explanation regarding the findings of survey and could not produce any supporting evidence to show when and where the alleged software was actually installed. From the statements of key persons including I.T. heads of the assessee-society, it is clear that none of these persons ever heard the name of company M/s. Washington Software Ltd. The Dean/IT head even stated that no new Software is installed since 2006 and that only old software were updated. The I.T. head of society, Sh. Amitava ....
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....nstitution from Washington Software Ltd. Your attention is invited to replies given by him to question Nos. 10 and 11 of his statement recorded under section 131(1) on March 29, 2013. Further, in reply to question No. 16, he stated that since 2006 no new software has been purchased. Further, Sh. Nagender Nautiyal, Accountant in Apeejay School of Management, Dwarka was specifically asked to explain the process of accounting and entries pertaining to payment made to M/s. Washington Software Ltd., in books of account. He categorically stated that he records these entries in his books on the instructions of head office and that no related bills of Washington Software Ltd. were ever provided to him. Your attention is invited to replies given by him to question Nos. 12, 13 and 14 of his statement dated March 29, 2011 recorded under section 131(1) of the Income-tax Act. Statement of Smt. Anita Paul, Principal of Apeejay School, Saket, New Delhi was also recorded on oath. She was asked to check whether the said software was installed in the systems of the school with the help of I.T. professional at the school. In her reply, she accepted that the software were never insta....
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....d were installed on computer systems of various institutions from where payment has been made. Also show entries of software, respective CDs and their licence in the stock register of all institutions. As per bills issued by Washington Software Ltd. available in this office, software of Rs. 50,00,000 was purchased in Apeejay School of Marketing (now Management) Dwarka whereas as per books impounded from above institution during survey, it is seen that Software of Rs. 1,80,00,000 has been purchased in this institution and vouchers entered in books, though bills were not found available at institution. Please reconcile the difference and explain the actual amount of software purchases from Washington Software Ltd. debited in various institutions of society. Produce complete books and bills for verification and copy of bank account statements from which payment was made to M/s. Washington Software Ltd. During the course of survey operations under section 133A of Income-tax Act, 1961 on March 29, 2011 certain documents and computer hard disc were impounded as per impounding order dated March 29, 2011, it is requested that the authorised person should be present at next date of....
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....s going on before and you are our Assessing Officer. We want to cross-examine the witness in your presence as you have to decide our case on the basis of his cross- examination. No doubt he is witness of the Department and we have right to cross-examine him at Jalandhar. However, keeping in view your limitations and we being law abiding citizens are ready to bear all the expenditure of Mr. Sanjay D. Sonawani for travelling to Jalandhar as witness. For this purpose we are enclosing herewith demand draft No. 652343 dated February 27, 2013 drawn on OBC Pune for Rs. 15,000 in the name of Mr. Sanjay D. Sonawani. You are requested to call him to depose here in Jalandhar before you. In case his expenditure is more than this, we will reimburse the same on his arrival or if you want we can pay in advance. Hence it is prayed that he may please be called to Jalandhar.' 9.3. In reply to Commission dated February 18, 2013, the Deputy Director of Income-tax (Inv.), Unit--I(I), Pune vide letter No. PN/ DDIT(Inv.)/WSL/2012-13/960 dated March 6, 2013 informed that neither the Principal officer nor the representative of the assessee-society attended his office....
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....airport at Jalandhar. There is no direct air connectivity even between cities of Pune and Amritsar (i.e. the airport nearest from Jalandhar), therefore, in view of the provisions of Civil Procedure Code, this office has no jurisdiction to issue summons to Sh. Sanjay D. Sonawani to appear in person at Jalandhar for cross-examination. The only way available for providing an opportunity of cross-examination of Sh. Sanjay D. Sonawani to assessee, was to issue Commission under section 131(1)(d) to my counterpart at Pune, who has territorial jurisdiction over Sh. Sonawani. Accordingly, in the interest of justice, one more opportunity was afforded to the assessee to cross-examine Sh. Sonawani before Deputy Director of Income-tax (Inv.) at Pune, vide this office's letter No. 7099 dated March 11, 2013 which is reproduced as under : Last and final opportunity To, M/s. Apeejay Education Society, Apeejay School Building, Bhagwan Mahavir Marg, New Jawahar Nagar, Jalandhar PAN : AAATA3534F Sir, Sub : Assessment proceedings in the case Apeejay Education Society, Jalandhar for the assessment year 2010-11-reg. Ref ....
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....and stated that he is going to Pune on March 4, 2013 to cross-examine Sh. Sonawani. However, perusal of your letter dated February 28, 2013 reveals that you failed to avail of the opportunity granted to you for cross-examination of Sh. Sanjay Sonawani. The Deputy Director of Income-tax, Inv, U-I(I), Pune was been requested again and he has accordingly conveyed me his availability on March 20-21, 2013. Therefore, you are requested to camp in Pune between March 20-21, 2013 and present yourself in the office of Deputy Director of Income-tax, Inv, U-I(I), Pune, so as to avail the opportunity of cross-examination of the Departmental witness Shri. Sanjay Sonawani. 6. In case, you wish to avail this opportunity of cross-examination as stated above, kindly communicate your intention in writing to the undersigned on or before March 15, 2013, so that necessary arrangements could be made. In case, you do not wish to avail of this opportunity, kindly communicate the same. 7. If your reply in this regard is not received on or before 1100 hrs on March 15, 2013, the undersigned will be constrained to presume that you do not wish to cross-examine the Departmental witness Shri. Sa....
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....now it has no ground and justification to object to the contents of statement given by Sh. Sanjay D. Sonawani. 10. On the next date of hearing, i.e., March 6, 2013, again no reply to the observations given vide order sheet dated February 14, 2013 was filed. The books of account for Apeejay Institute of Management, Rama Mandi were produced and examined by test check. The assessee's authorised representative was asked vide order sheet entry of same date as under : 'To further furnish : i) Complete reply to queries raised vide order sheet noting dated January 15, 2013 and February 14, 2013. ii) Produce original CDs along with copies of bills for purchase of Computer Software, also state where each such software for what purpose same are used. (Institute-wise). iii) Produce fixed asset registers and stock register where the Software have been entered after purchase. iv) Produce books along with bank statements of the following institutions. a) Apeejay School, Noida. b) Apeejay School, Greater Noida. c) Apeejay School, Faridabad. d) Apeejay School, Jalandhar. e) Apeejay School of M....
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....tallation of software, which is also entered on stock register. Stock register was also produced and it was seen that no software from M/s. Washington Software Ltd. has even been purchased or installed on the computer system of schools at Jalandhar. Photocopy of relevant pages of stock register, signed by IT (Manager) are taken and placed on record. Sh. Yogesh is working with society since year 2003 and he has categorically stated that ERP software from M/s. Washington Software Ltd. is never installed at any school of Jalandhar since 2003. Further, he stated that he has never heard name of M/s. Washington Software Ltd. All these proceedings are recorded vide order sheet dated March 8, 2013 duly signed by the assessee's authorised representative and Sh. Yogesh Gupta, IT (Manager). The assessee's authorised representative was again asked to furnish reply to earlier order sheets and to produce books of other institutes for verification. 10.3 On the next date of hearing, i.e., March 11, 2013, again no reply was furnished. Books of accounts of Apeejay School of Management, Dwarka, and Apeejay School, Noida as well as Faridabad were produced and same were examined by tes....
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....que name given to it by its developer ? b) On which platform it is based, whether oracle or some other ? c) What are different modules of this ERP ? d) Who had been given the access to different modules of ERP ? e) Who are the person in charge of the server of ERP ? f) Name of the person who handles the maintenance issues of ERP? g) Name of person who handles the updates of this ERP system ? h) After how many months, the ERP is updated ? i) Who supervised the installation of activation of ERP in each institute ? j) Name the person, who gave/gives training for ERP operations ? k) Who are the persons actually operating this ERP in each institute ? l) Mention in detail, how the ERP software from M/s. Washington Software Ltd. is being purchased, i.e., whether the society called quotations, how order is placed, how bills raised/received and how payment is being made. How the delivering of software is received and how it is installed on computer.' To furnish replies to order sheet entries dated January 15, 2013, February 14, 2013, March 5, 2013, March 8, 2013. To produce some a....
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....tock exchanges can dare to say that it is not maintaining any books of account. To verify his statement, has the Department tried to examine the auditor of the company or informed the SEBI about that. The Department has started the proceedings against the innocent customers who have purchased software relying on an unreliable person and has not bothered to verify from auditor or inform the SEBI for violations and to verify sanctity of his statement. Relying on a part of the false statement and not bothering about the facts of the other part of the statement is nothing but against the justice. Otherwise also it has been held by the hon'ble Madras High Court that statement under section 133A is not a statement on oath and has no evidentiary value unless it is supported by some documentary evidence. The special leave petition of the Department has duly been dismissed by the hon'ble apex court. Here the Department is acting against us just on his statement and has not bothered to collect any documentary evidence by cross-examining the auditors who have audited the accounts. Further the assessments of WSIL must have been reopened, what has happened to them ? What treatment has b....
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.... of the institutions. Mrs. Berlia was following his directions. Further it was late evening when he faced the survey team and being tried got confused and could not recollect full details. The software purchased from Washington Software Ltd. though debited to various institutions, is installed in the central server at the head office being of utmost importance and requiring secrecy. The software includes various modules and various types of reports are generated which include data of students and also about the institutions. It generates reports which are very big and contains large number of pages. Some of the reports are being produced herewith for your verification and also for perusal at your end. From these reports you will be satisfied that the software has duly been installed in real sense and it contains source key generated by Washington Software Ltd., which the party is now trying to deny due to reasons best known to him. In addition to above reply to your queries it is further submitted that regarding no supply of software by the vendor, it seems to be a concocted story by the vendor to save his skin and putting onus on others to prove it. We are enclos....
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....ly to safe guard data and maintain confidentiality as also to avoid being hacked and misused. j. Name the person who gave/give training for ERP operations ? Initially training was given to Mr. K. K. Varghese at the central office by Washington Software Ltd. persons. k. Who are the persons actually operating this ERP in each institute ? Not applicable, as ERP was installed centrally. l Mention in detail, how the ERP software from Washington Software Ltd. is being purchased, i.e. whether society called quotations, how order is placed, how bills raised/received and how payments is being made. How the delivery of software is received and how it is installed in computer. The purchase of software was handled directly by Dr. Satya Paul, Chairman. (Since deceased). Bills were received from time to time and the bills were paid by banking channel. Software was delivered by Washington Software Ltd. persons and installed centrally. The bills of softwares purchased from WSL along with bank statements are enclosed herewith and reply to same has already been furnished in this reply. As regards presence of IT expert is concerned, we feel it will not serve any pu....
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.... statement of Sh. Vijay Berlia, the authorised representative has stated that he did not have the complete background of academic issues of the institutions and software decisions were made by chairman Dr. Satya Paul (since deceased). Further that Sh. Berlia, being tired on the day of survey, got confused. h) Software purchased from WSL is installed in the central server at the head office being of utmost importance and requiring secrecy. i) That the assessee is an innocent customer who has purchased software relying on an unreliable person. 11.1 The above arguments of the assessee have been duly considered but the same are not found to be acceptable due to reasons mentioned below : a) The general conduct of Sh. Sanjay D. Sonawani has no bearing on the present case as this does not justify the alleged bogus purchases made by the assessee from M/s. Washington Software Ltd. Sh. Sonawani might have undergone imprisonment but it would not negate the fact that he has actually given accommodation entries to the assessee-society and that based on these entries the expenses of the assessee were inflated and its funds were misutilised. The argument of the....
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....rovisions of Civil Procedure Code vide this office's commission dated February 18, 2013 and letter dated March 11, 2013, which has been refused by the asses see for the reasons best known to it. This has already been discussed in detail vide paras 9 to 9.7 of this order. d) It is wrong on the part of the assessee to allege that the Department has not examined the auditor of WSL, as the necessary examination has been carried out in this respect. The audit report of WSL has purportedly been signed by one Sh. K. Sampath, chartered accountant having registration No. 14457 and address at 428/2, New Mangalwar Peth, Near Apollo Talkies, Pune-30. From the field enquiries conducted by Deputy Director of Income-tax (Inv.) U-1(1) Pune, it was found that the address and phone number mentioned in audit report were wrong and that this chartered accountant actually works from Chennai and has never dealt with WSL and that the signature appearing on the audit report of WSL does not match with his signatures. (The copy of letter written by Sh. Sampath to Deputy Director of Income-tax (Inv.)U-1(1), Pune in this respect is placed on record). This proves that the statement (reproduced in p....
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....hat purchase/payment for software was looked after by Dr. Satya Paul and not Sh. Berlia because perusal of impounded record reveals that the bills of WSL since the year 2003, were signed by Sh. Berlia and word "approved" has been written in his handwriting. The assessee is just trying to shift the entire blame for wrong doing on a deceased person but this would not serve any purpose because the evidence placed on record proves otherwise. g) Vide order sheet dated March 11, 2013, the assessee was required to explain about various modules of ERP software and as to who all installs, handles, manage, and operate each such module and overall software. The perusal of submission reveals that the authorised representative gave very insufficient and incomplete information and failed to produce any evidence in support of his reply. It is incorrect to say that the software have been purchased and installed in the central office. The investigation carried out by the Department during the course of survey clearly established that the ERP software were never purchased from WSL or installed in any of the institutions or head office of the assessee-society. The perusal of bills of WSL rev....
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....institutions/ colleges for data entry and usage but the same has not been done, which is very strange. The reply given by the assessee that ERP is installed centrally to safeguard data and maintain confidentiality is also not acceptable because even at head office of the assessee no such ERP software was found to be installed during the course of survey operation on March 29, 2011. During survey, the IT head/ computer experts of the society could not show any ERP software developed by M/s. Washington Software Ltd., Pune, installed on the computer system neither could they produce original CD or licence received from WSL. Even during the course of assessment, sufficient opportunities were provided to the assessee vide order sheet notings dated February 14, 2013, March 6, 2013, March 7, 2013, March 8, 2013 and March 11, 2013, to produce the original CD of ERP software, stock register and fixed asset register showing receipt of software as well as licence of software. However, the assessee failed miserably on all these counts and even after repeated opportunities, he could not show any entry regarding receipt of software at central office/schools, etc., in the stock register/fixed ass....
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....n at the addresses mentioned above, and not to the head office as alleged by the asses see now. Further, the peculiar thing is that ERP software with the same description has been procured for Rs. 50 lakhs as per invoices mentioned at Nos. "a, b, d and e" above, and for Rs. 30 lakhs as per invoice at No. "c" above and the same has been the case with ERP software for nursery classes. The reason for this variation in rate could not be ascertained. Further that, had the assessee actually purchased and installed the ERP software at its head office, the bill should have mentioned delivery address of head office and there was no need to procure many software of same kind for this purpose because one multiple user ERP software and one ERP for nursery classes would have served the purpose of assessee. Furthermore, as per normal procedure followed by the assessee during procurement of any software, the date of installation along with report of successful installation/running of software have to be mentioned on bills of WSL, also the software CD and licence were required to be entered in stock register/fixed assets register. However, nothing of this sort has been done in case of sof....
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....010 60026 Swati Spentose P. Ltd. 40,00,000 30.03.2010 60028 Swati Spentose P. Ltd. 35,00,000 From the description of the name of the parties itself like Netania Shares and Securities P. Ltd., Omega Lifestyles and Technologies, Topsun Rim Iron Ore Industries, A to Z Alloy P. Ltd., Karma Ispat Ltd. and Swati Spentose P. Ltd, it is clear that the subsequent payments have been made to parties other than those involved in software development services. Therefore, it is proved beyond any doubt that the statement given by Sh. Sonawani that his company did not develop software from financial year 2003-04 onwards and that it was providing only accommodation entries without actual delivery of software to certain concerns, is correct, the assessee being one of the major beneficiary of these bogus transactions. 12. Taking into account the entirety of facts, circumstances, observation and evidences, it is concluded that the assessee-society has been procuring bogus bills of software from WSL since financial year 2003-04, and the money has been routed back to the persons managing affairs of assessee-society. Thus, the assessee is clearly hit by the provisio....
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....the following details : Table-1 Purchase of software from WSL Financial year Amount 2003-04 1,30,00,000 2005-06 2,50,00,000 2006-07 3,40,00,000 2007-08 80,00,000 2008-09 2008-09 1,20,00,000 2009-10 2,68,60,900 (2,30,00,000 +38,60,900) 13.1 Out of total amount of Rs. 2,68,60,900 paid during the year under consideration, software worth Rs. 2,30,00,000 only has been taken to fixed asset block of "computer" and depreciation at 60 per cent. is being charged on this software. Whereas the balance ERP software of Rs. 38,60,900 has not been added to fixed assets but has been claimed as revenue expenses by either debiting to 'other expenses under activity expenses' or by writing off against the income shown under 'other fees'. In fact it is wrong to treat expense on purchase of software as revenue as the same is a capital asset as per New Appendix I to rule 5 of the Income-tax Rules and depreciation rate is prescribed for it. In this case, the assessee has wrongly claimed the same as revenue expenditure. Further, these software are also purchased from WSL and during assessment proceedings, the asses see ....
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....,19,49,248 1,91,69,549 1,27,79,699 As per above table, out of total depreciation of Rs. 3,53,21,395 debited under the Block-'Computer', depreciation of Rs. 1,91,69,549 pertaining to ERP software purchased from WSL is being disallowed for the year under consideration and the same is being added to the total taxable income of assessee. Since, the assessee has concealed and furnished inaccurate particulars of its income and expenses, penalty proceedings under section 271(1)(c) of the Income-tax Act are being separately initiated. 14. Donation to Apeejay Society a education foundation During the course of assessment proceedings, it was seen that the assessee has debited Rs. 25,00,00,000 on account of donation in its income and expenditure account. Perusal of record revealed that the said amount has been paid to Apeejay Society a education foundation. The assessee's authorised representative was asked vide order sheet entry dated March 6, 2013, as under : '(v) Justify the payment of donation of Rs. 25 crores to Apeejay Society a education foundation ; also explain whether this foundation is registered under section 80G.' ....
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....furnishing of inaccurate particulars of income are being separately initiated in this regard. 15. In view of above discussion, the total income of the assessee for the year under consideration is computed as under : (in Rs.) Excess of income over expenditure as computed in para 12.1 10,05,35,645 Addition as discussed in para 13.1 above 38,60,900 Addition as discussed in para 13.2. above 1,91,69,549 Addition as discussed in para 14 above 21,49,46,436 Total taxable income 33,85,12,530 Assessed as above. Give credit for prepaid taxes after verification. Charge interest under sections 234A, 234B, 234C and 234D and with draw interest under section 244A as applicable as per Income-tax Act. Issue penalty notice as per paragraphs 12.1, 13.1, 13.2 and 14, demand notice and Challan along with a copy of this assessment order." 8. Before the learned Commissioner of Income-tax (Appeals), the assessee raised the following grounds of appeal : "1. That the order of the learned Assistant Commissioner of Income-tax is against the law and facts of the case. 2. That the learned Assistant Commissioner of Income-tax is not....
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....the following written submissions dated August 13, 2014 before the learned Commissioner of Income-tax (Appeals) : "The present appeal is against the order dated March 28, 2013 passed by the Assistant Commissioner of Income-tax, Circle-3, Jalandhar, under section 143(3) of the Income-tax Act, 1961. When the assessment proceedings were going on the registration under section 12AA was withdrawn by the worthy Commissioner of Income-tax-2, Jalandhar with retrospective effect. However the same has duly been restored by the honourable Income-tax Appellate Tribunal, Amritsar Bench vide order dated May 8, 2014. The assessee is an educational society, duly registered under section 12AA and running various educational institutions. It is being assessed regularly and the year under appeal was also taken up for scrutiny. The Assessing Officer assessed the assessee as association of persons applying the provisions of sections 28 to 44 of the Income-tax Act, 1961. This has been done presuming that the assessee has done bogus purchase of software from Washington Software Ltd. Pune (hereinafter mentioned as WSL). A statement of Sanjay Sonawani director of WSL was recorded by the ADIT, Pune....
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..... . Ans. to Q. No. 8 'As stated earlier up to 2007, Mr. Rohidas Kumbharkar brought all the parties and to the best of my knowledge Mr. Rohidas Kumbharkar was responsible for getting the parties. After 2007 only one party was there, i.e., Apeejay Group who was handled by me.' On perusal of the above, the appellant fails to understand that as to how Mr. Rohidas Kumbharkar who deserted the company in 2003 could bring clients till 2007. c. In the first statement, in response to Q. No. 6, Mr. Sonawani had replied that 'all these sales are non-genuine sales (bogus sales)'. However, in the second statement, in response to Q. No. 3, Mr. Sonawani had inter alia, replied that 'In respect of Q. No. 6, I would like to make a slight correction to the answer. There are some sales which are genuine. The percentage of genuine sale would not be higher than 3 per cent. to 4 per cent.' d. In the first statement, in response to Q. No. 7 Mr. Sonawani had replied that 'my company was in deep financial crisis in the year 2003 due to legal and other personal problems.' On perusal of audited accounts of ....
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.... 'Q. No. 4 Do you know the concern-Apeejay Education Society as a director of Washington Software Ltd. ? Ans. No. I do not know the concern Apeejay Education Society.' From the above it is absolutely clear that Mr. Sonawani has contradicted his own replies in different statements and hence it is not possible to understand that which part of the statement is reliable and which is unreliable. It is submitted that apart from the aforesaid contradictions, not much of credence could be given to statements of Mr. Sanjay D. Sonawani who is man of no standing for the reason that : He has been imprisoned in the past, as admitted by him in the first statement ; and SEBI had launched penal proceedings against him as director of WSL due to some irregularities in the trading of shares. In the first statement at Pune he has stated that he was just a puppet in the hands of Mr. Parag Mehta. But in his second and third statement he has admitted that he was doing all this of his own and Mr. Parag gave him just table space. However in his last statement he again admitted being a puppet of Mr. Parag. From the above it is crystal clea....
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....owance could be made merely on during the course of survey, if there is no corroborative evidence : (i) CIT v. Dhingra Metal Works [2010] 328 ITR 384 (Delhi) ; (ii) CIT v. Subhash Chand ITA No. 875/2010 ; (iii) Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker) ; (iv) CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad) SLP dismissed by the Supreme Court ; (v) ITO v. Vijay Kumar Kesar [2010] 327 ITR 497 (Chhattisgarh) ; and (vi) TDI Marketing (P.) Ltd. v. Asst. CIT [2009] 28 SOT 215 (Delhi). Further the statement recorded ex-parte cannot be relied upon in the absence of cross-examination. It is submitted that the statements of Mr. Sanjay D. Sonawani was recorded by the Department behind the back of the appellant and such person was not made available for cross-examination by the Assessing Officer, even after the appellant's repeated specific requests. It is respectfully submitted that in the following judicial precedents it has been consistently held that ex- parte statements/recorded behind the back of the assessee cannot be relied on without allowing opportunity of cross-examination of the witness/author of such ....
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....ht and the opportunity of such cross-examination is one of the corner-stones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination in chief. It is the necessary requirement of the process of taking evidence that the examination in chief is followed by cross-examination and re-examination, if necessary.' The Assessing Officer has rejected the request of the assessee citing the reason that Pune and Amritsar are not having direct flight. Hence it is clear that statement was recorded behind the back of the assessee and no opportunity was given to cross-examine that being basic right of the assessee. No addition can be made on the basis of such statement. In the impugned order, the Assessing Officer had alleged that the software purchased by the appellant from WSL had not been installed since the same was not found on the verification conducted by the Department. I. The appellant had placed on record complete documentary evidences, like details of software purchased from WSL and details of payments made to WSL, copies of the repor....
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.... of sub-sections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as 'relevant income', 'part of relevant income' and 'beneficiaries', respectively), tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate : Provided that in a case where- (i) none of the beneficiaries has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under another society; or (ii) the relevant income or part of relevant income is receivable under a society declared by any person by will and such society is the only society so declared by him ; or....
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....ase where the relevant income is derived from property held under society in part only for charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or is of the nature referred to in sub-section (4A) of section 11 and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the income so applicable are indeterminate or unknown, the tax chargeable on the relevant income shall be the aggregate of- (a) the tax which would be chargeable on that part of the relevant income which is applicable to charitable or religious purposes (as reduced by the income, if any, which is exempt under section 11) as if such part (or such part as so reduced) were the total income of an association of persons ; and (b) the tax on that part of the relevant income which is applicable to purposes other than charitable or religious purposes, and which is either not specifically receivable on behalf or for the benefit of any one person or in respect of whi....
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....see or any part thereof shall be deemed as being not specifically receivable on behalf or for the benefit of any one person unless the person on whose behalf or for whose benefit such income or such part thereof is receivable during the previous year is expressly stated in the order of the court or the instrument of society or wakf deed, as the case may be, and is identifiable as such on the date of such order, instrument or deed ; (ii) the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is received shall be deemed to be indeterminate or unknown unless the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable, are expressly stated in the order of the court or the instrument of society or wakf deed, as the case may be, and are ascertainable as such on the date of such order, instrument or deed.' Proviso to section 164(2) is absolutely clear that in case of applicability of section 13(1)(c) or 13(1)(d), only the income which has violated the provisions is to be taxed at the higher rate and whole of the income cannot be taxed. The relianc....
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....s dated August 21, 2014. After going through the arguments, it is submitted as under : The Assessing Officer has placed reliance on his assessment order citing the arguments of the assessee are almost repetition of the arguments given at the time of assessment and the same have duly been dealt with. The arguments put up by us before you are on the basis of analysis of assessment order in addition to arguments filed before the Assessing Officer during the course of assessment proceedings. Main crux of the case is based on statement of Mr. Sonawani and the Assessing Officer has relied upon that, whereas, in assessment order the Assessing Officer has extracted the statement of Mr. Sonawani. For example : Sonawani has stated that he used to discount the cheques and return the cash to the assessee. However the Assessing Officer has mentioned that it was RTGS or cheques were being deposited in the account of the WSL. The Assessing Officer has failed to clarify on this point in his reply. Mr. Sonawani has stated that he used to return cash to the asses see but the Assessing Officer has said that the amount paid by asses see was being invested in securit....
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.... of registration, onus lies on him/her to support the same with cogent and tangible evidence and it should not be based on surmises or imagination. The honourable Lucknow Bench of the Income-tax Appellate Tribunal in ITO v. Virendra Singh Memorial Shiksha Samiti [2009] 18 DTR (A.T.) 502 (Lucknow) (1-15) has held as under : 'It is an undisputed fact that various expenses claimed by the assessee-society are not verifiable and therefore, could be inflated. But the Assessing Officer has not pointed out any instance out of various expenses as to whether it was not at all incurred or it was incurred excessively or the funds or money relating to such expenses was diverted to other persons and in particular, to the founder member of the society. Thus, rest of the inferences other than the expenditure not being verifiable/proved are hypothetical and therefore, not acceptable. There is no material evidence collected by the Assessing Officer to prove the expenditure, if inflated, has resulted in the benefit to the founder member of the society. Therefore, the provisions of section 13(2) could not be invoked. There has to be direct nexus of out flow of money with the interested me....
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.... cash to the appellant. However the Assessing Officer has explained about each and every cheque of the appellant and has confirmed that no cheque has been discounted and encashed but all the cheques were deposited in the account of WSL and further invested in the securities. Hence no cash has been withdrawn and it has not been confirmed from which source the cash has been returned to the appellant. The enquiry by the Assessing Officer is one sided and he/she has not bothered to confirm the same from WSL and also to enquire that which statement is reliable. Complete investigation by the Assessing Officer is not based on any tangible material and is based on false statement of Mr. Sonawani. The pre-requisite for initiating action under section 13(1)(c) read with section 13(3), i.e., tangible materials and proper evidence is missing. On the contrary the appellant produced its books of account ; reports generated out of the said software and further offered that the Department can send its own expert at the cost of appellant to verify the installation of said software in the main server of the appellant. The Assessing Officer for the reasons best known to him/her without verif....
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.... exclude from the total income of the previous year of the person in receipt thereof-. . . (c) in the case of a society for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such society or institution has been created or established after the commencement of this Act and under the terms of the society or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the society or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) : Provided that in the case of a society or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the society or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the society or a mandatory rule governing t....
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....itution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate; (g) if any income or property of the society or institution is diverted during the previous year in favour of any person referred to in sub- section (3) : Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees ; (h) if any funds of the society or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971) in any concern in which any person referred to in sub-section (3) has a substantial interest. (3) The persons referred to in clause (c) of sub-section (1) and sub section (2) are the following, namely :- (a) the author of the society or the founder of the institution ; (b) any person who has made a substantial contribution to the society or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fif....
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....that the assessee has not purchased the software and comes within the ambit of section 13(1)(c) and section 13(3), only that amount of software will be presumed to have not been used for charitable purpose and only that amount will forfeit exemption and will be taxed at maximum marginal rate. Keeping in view the above, it is prayed that justice may please be done to the assessee by quashing the illegal order passed by the Assessing Officer and assess the assessee as association of persons." 13. The assessee, as noted at page 74 in paragraph 6.5 of the impugned order, also relied on Central Board of Direct Taxes Circular No. 387, dated July 6, 1984 in support of its alternative claim that the income of the society is to be taxed only to the extent of income which has been alleged to have been misappropriated, and the income which has been brought to tax by the Assessing Officer is not exigible to tax. 14. The learned Commissioner of Income-tax (Appeals), vide the impugned order dated September 26, 2014 held as under : "6.6. I have considered the observations of the Assessing Officer as made by him/her in the assessment order as well as in the remand report. I....
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..... Sanjay D. Sonawani has categorically and unambiguously admitted to have provided accommodation entries to the Apeejay Group of cases including the assessee-society. He changed his stand only with regard to the person, who was instrumental in providing accommodation entries and not with regard to providing accommodation entries to Apeejay Group of cases. He in his statement has tried to put blame on Sh. Parag V. Mehta with regard to providing accommodation entries but he has never turned back from his admission that the accommodation entries have actually been provided by him through his company M/s. Washington Software Ltd. It has also been noticed that the representatives of the assessee-society have also denied cross-examination of Sh. Sanjay D. Sonawani on one pretext or other. In my opinion, the representatives of the assessee-society did not want to examine Sh. Sanjay D. Sonawani as they know the truth. The Assessing Officer has made proper arrangement for cross-examination of Sh. Sanjay D. Sonawani at Pune but the representatives of the assessee-society have insisted his presence at Jalandhar on the ground that he is the witness of the Department and he should be produced a....
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....ng in the representatives of the assessee-society (never tried to prove the genuineness of the purchase of the Software by producing original CD or hard disc or any other evidence but kept themselves busy in finding mistakes in the statement of Shri Sanjay D. Sonawani who in fact categorically admitted that he has provided accommodation entries to the assessee group through his company M/s. Washington Software Ltd. When asked that as to whether the original CD of software or the hard disc of computer is available with the assessee-society, the learned authorised representative of the assessee-society could not offer any satisfactory explanation. This also proves that the assessee-society is not having any CD or hard disc in its possession to prove that the software purchases are genuine. 6.8 The submissions made during appellate proceedings by the learned authorised representative of the assessee-society are no more different from that of the submissions made during assessment proceedings which have already been dealt with in detail assessment proceedings. I would also like to make it clear that the assessment framed by the Assessing Officer is not based only on the statem....
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....ular No. 387, dated July 6, 1984 is also misplaced. The main and clear cut provisions of section 13 of the Act talks about entire disallowance claimed under sections 11 and 12 of the Act and do not talk about part disallowance. My view is further supported by the following judicial pronouncements of various honourable High Courts/Income-tax Appellate Tribunals and the honourable Supreme Court : 1. DIT v. Bharat Diamond Bourse [2003] 259 ITR 280 (SC). 2. DIT v. Bharat Diamond Bourse [2004] 192 CTR (SC) 506. 3. CIT v. Shree Eklingji Trust [1985] 155 ITR 383 (Raj). 4. CIT v. Nagarathu Vaisiyargal Sangam [2000] 246 ITR 164 (Mad). 5. Champa Charitable Trust v. CIT [1995] 214 ITR 764 (Bom). 6. Kanahya Lal Punj Charitable Trust v. DIT (Exemption) [2008] 297 ITR 66 (Delhi). 7. CIT v. Audh Educational Society [2011] 203 Taxman 166 (All). 8. CIT v. Sree Narayana Chandrika Trust [1995] 212 ITR 456 (Ker). 9. Sree Narayana Chandrika Trust v. CIT (No. 2) [1997] 224 ITR 464 (Ker). 10. CIT v. Chandrika Educational Trust [1997] 224 ITR 449 (Ker). 11. Chandrika Educational Trust v. CIT [1997] 224 ITR 4....
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....d have perused the material placed on record. The learned Commissioner of Income-tax (Appeals) has upheld the disallowance of the deduction claimed by the assessee-society under sections 11 and 12 of the Act, broadly, on the following points : "(i) Sh. Sanjay D. Sonawani, chairman and director of M/s. Washington Software Ltd., from whom, the assessee stated to have purchased the software, admitted to have provided accommodation entries to the assessee. Though he later put the blame on Sh. Parag Mehta, chartered accountant, with regard to providing accommodation entries, he never retracted from his admission that the accommodation entries had actually been provided by him through his company, M/s. Washington Software Ltd., to the assessee. (ii) The assessee-society had refused to cross-examine Sh. Sanjay D. Sonawani, on one pretext or the other. (iii) The assessee had failed to produce the original CD of the Software, or the hard-disk of the computer where it was installed, though specifically asked for by the Assessing Officer. (iv) Even in the survey at various premises of the Group, no evidence regarding purchase of software was produced. ....
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....n the appeal against cancellation of registration under section 12AA of the Act. The said synopsis is being relied on in these appeals also. (ii) It is mentioned at pages 345-46 of the paper book in the statement of Sh. Sanjay D. Sonawani that cheques received from assessee were discounted from the market and cash was given to the assessee, whereas at pages 129-130 of the appeal paper book for the assessment year 2010-11, the Assessing Officer has recorded that cheques received by assessee were credited in the bank account of M/s. Washington Software Ltd. and were used by the said company to make investments in other companies. Similar finding is there in other years also. (iii) At page numbers 336-337 of the paper book, in his statement, Sh. Sanjay D. Sonawani has mentioned that his company was involved in development of software till assessment year 2003-04, whereas at page 337, he says that there is a slight correction and some of the sales are genuine. The percentage of genuine sales is 3-4 per cent. (iv) In the statement dated May 12, 2011, at page 334 of the paper book, it is mentioned that after 2007, it was only one party, i.e., the Apeejay Group,....
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....erprises [1994] 210 ITR 103 (Cal) (pages 80 to 83 of CLC). 20. A comparative chart of the four statements of Sh. Sanjay D. Sonawani, recorded under section 131 of the Income-tax Act, has been filed on behalf of the assessee. These statements are dated March 16, 2011, April 12, 2011, May 12, 2011 and December 30, 2011. This chart is being reproduced hereunder : Date of statement 16.03.2011 12.04.2011 12.05.2011 30.12.2011 Remark Original Copy pg. No. 322-327 333-335 338-342 347-351 Typed Copy pg. No. 328-332 336-337 343-346 352-356 Submission before CIT(A) Page number-330, question number-7 Page number-336, question number-3 Page number-344, question number-7 Page number-353, question number-6 Page 61 of appeal paper of 2010-11 (Paragraph A) My company was in deep financial crisis in year 2003 due to legal and other personal problems. During that period Shri Parag Mehta who is a charted accountant having his office at 115 Jolly Bhawan 10, Marine Lines, Churchgate Mumbai 20, approached me and made an offer of providing accommodation entries in the form of bogus sales as stated above ....
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....which are genuine. The percentage of genuine sale would not be higher than 3 per cent. to 4 per cent. Considering the fact that business was closed down in 2003, how he was doing genuine. Page number, question number Page number, question number Page numbers-344, 346 question numbers 11, 27 Page number, question number Remark Page 61 of appeal paper of 2010-11 (Paragraph F) Cheques/RTGS were directly deposited by Apeejay Group in our bank. At pages 129-130 the Assessing Officer has given a finding that all cheques Further, in the very same statement, in response to question 27, Mr. Sonawani has replied that we would issue the bills to the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with parties in Zaveri Bazar and cash received from them was given back to the billing party. were credited in bank account of WSL and further invested by WSL. It proves there was no bill directly. No cash was withdrawn and funds were used by WSL for own purpose. On per....
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....rector. I have filed my return of income for the assessment year 2009-10. As far as M/s. Washington Softwares Ltd. is concerned return of income up to the assessment year 2010-11 have been filed. Q.4 Please give the details regarding date of incorporation, board of directors, shareholding pattern of Washington Software Ltd. Ans. This company was incorporated in the year 1995. The board of directors consists of : 01. Shri Mahesh Kadu, 02. Prafful Mehta and 03. Sanjay D. Sonawani. The shareholding patten of M/s. Washington Software Ltd. is as under : Sanjay D. Sonawani 3,55,000 shares Mahesh Kandu 10 shares Praful Mehta 10 shares Q.5. What are the various business activities of M/s. Washington Softwares Ltd. ? Ans. Till 2003 this company was actually developing various kind of softwares such as Mechanical Design Software, Process Audit Softwares, My home and Business (Brand Name) software, etc. In the year 2003 there were some financial and legal problems ; on account of which I was not in a position to pay attention to the day-to-day affairs of the company : All the other directors of the company namely....
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....ry challan numbers mentioned on the bills are false since such delivery challans are non-existent. I confirm that all these sales are in the form of accommodation entries provided to various corporate entities in order to help them inflating their expenses. My company, M/s. Washington Software Ltd. was never the direct beneficiary of the huge amounts received towards these non-genuine sales and my company used to only get 1 per cent. commission on the sale bill value of each bill. Q.7. As replied by you in the preceding question, please explain the actual modus operandi in respect of providing such accommodation entries to these corporate entities ? My company was in deep financial crisis in the year 2003 due to legal and other personal problems. During that period Shri Parag Mehta who is a chartered accountant having his office at 115, Jolly Bhavan, 10 Marine Lines, Churchgate, Mumbai-20, approached me and made an offer of providing accommodation entries in the form of bogus sales as stated above for a consideration of 1 per cent. commission on such bills. He had asked me to open a current account at ICICI Bank, Nariman Point, Mumbai. I had only signed the docume....
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....the bank accounts of WSL for payment towards these investments. Q.10 Please give details of all the entities (corporate and non- corporate) to whom such accommodation entries have been provided by your company M/s. Washington Software Ltd., Pune. Ans. The entities in respect of whom the accommodation entries in the form of bogus sales have been provided by M/s. Washington Software Ltd., Pune for a period between financial year 2003-04 to the current financial year are as follows : Sr. Name of the entity 1. Shaf Broadcast Pvt. Ltd. 2. Himachal Futuristic Co. Ltd. 3. TVC Skyshop Co. Ltd. 4. Vishnu Chemicals Pvt. Ltd. 5. Montclair Systems Pvt. Ltd. 6. Global Telecom Ltd. 7. Mahaveer Corporation Ltd. 8. Melstar Infotech Pvt. Ltd. 9. Mokshil Comm. Traders 10. Situation Advertising and Marketing 11. Shyam Ltd. 12. S. K. Trading Corporation 13. S. K. Trading Corporation 14. Kesar Entertainment Ltd. 15. Indibiz Infotech Pvt. Ltd. 16. RucKiFN. Slpah 17. Global Energy Ltd. 18. Apeejay School 19. Aptech Ltd. 21. GMR Technologies and Industries EW. ....
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....nbsp; (ii) Statement dated April 12, 2011 APB 336-337 "Statement recorded under section 131 of the Income-tax Act, 1961. Statement of Shri Sanjay D. Sonawani son of Shri Devidas Sonawani age 46 years occupation businessman resident of L-5, Mantri Park, Kothrud, Pune, recorded under section 131 of the Income-tax Act on oath on April 12, 2011 at the office of Deputy Director of Income-tax (Inv.), Room No. 234, Scindia House, Ballard Pier, Mumbai-400038. "I swear in the name of God that whatever I speak, I will speak only truth and nothing but the truth". Sd. 12/4/2011 Sd. 12/4/2011 oath administered by oath taken by (Sonia Kumar) (Sanjay D. Sonawani) DDIT (Inv)-Unit VII(4), Mumbai Q 1. Please identify yourself ? Where are you currently located ? Ans. I am Sanjay D. Sonawani, son of Shri Devidas Sonawani, aged 46, occupation businessman, resident of L/5 Mantri Park, Kothrud, Pune. My educational qualification is M.Com (Master of Commerce). I am currently having a small space at 114/114A, Jolly Bhavan No. 1, 10 Marine Lines, Mumbai. Q 2. Please confirm that oath has been administered to you and the con....
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....as we did not have an office in Mumbai. The relevant bank accounts were opened by us. We have used this office for our company purposes. The cheque books and slip books were kept with his office employees for ease of transaction as lot of our parties were from Mumbai. In respect of Q. No. 6. I would like to make a slight correction to the answer. There are some sales which are genuine. The percentage of genuine sales would not be higher than 3 per cent. to 4 per cent. In respect of Q. No. 9, I would like to state that the investments have been made from the capital and reserves of Washington Softwares Ltd. and are genuine in nature. All the investments were made directly by us. In some cases, we have sought Mr. Parag Mehta's advice. In respect of Q. No. 11, I would like to state that it is true that the company has earned commission in cash from bogus billing of Rs. 32 lakhs from various parties. We have not received anything from Mr. Parag Mehta. Because of some internal dispute with Mr. Roy and the other directors I was misinformed that Mr. Parag Mehta was involved. In fact Mr. Parag Mehta was not involved in any of the bogus billing transactions of....
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....o 4 months. Q. 5. Q. 6. On whose directions did you issue bills and what was the frequency. Whether it was once a month, 15 days or every day ? Ans. Up to 2007, the bills were been issued under the instructions of Mr. Rohidas Kumbarkar who was the director of the company and after that I have issued the bills and the frequency would be some times 3 bills in a month and sometimes no bills for 3 to 4 months. Q. 7. Why did you say in the statement recorded in Pune or March 16, 2011 as follows : "As replied by you in the proceeding question. Please explain the actual modus operandi in respect of providing such accommodation entries to these corporate entities. Ans. My company was in deep financial crisis in year 2003 due to legal and other personal problems. During that period Shri Parag Mehta who is a chartered accountant having his office at 115, Jolly Bhawan No. 1, 10 New Marine lines, Churchgate, Mumbai, approached me and made an offer of providing accommodation entries in the form of above for a consideration of 1 per cent. commission on such bills. He had asked me to open a current account at ICICI Bank, Nariman Point, Mumbai.....
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....know Mr. Anil Roy and where did you meet him ? Ans. Mr. Anil Roy was a financial journalist and I knew him since 2002 when we met during the share placement of our company. Q14. How often did they, that is the directors, talk with you, say during the day ? Ans. Between the period 2002 to 2007, we use to talk on a daily basis. Q15. Where did they come and meet you ? Ans. We use to meet every day in the office of the company in Pune. Q16. Where do they live ? Kindly furnish their residential address and telephone/mobile number. Ans. Mr. Rohidas Kumbarkar is no more. However his residential address is as under Vaishnavi Construction (Pvt) Ltd. Dhayri Phata, Sinhagad Road Pune-51. I have no contact with Mr. Anil Roy since 2007 hence I am not able to furnish his mobile number and address. However I will try to get the same. Q. 17. Why was your company de-listed ? Ans. Our company was de-listed because we had issued bonus shares and preferential shares and these shares were listed on Pune Stock Exchange but were not listed on Mumbai Stock Exchange. Q. 18. What were the nature of financial c....
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.... have a heavy liability of 100 crores, so I got frightened and I took Mr. Parag Mehta's name thinking that he being a chartered accountant would be able to help me out. Further that retracted my statement dated March 16, 2011 in respect of the income disclosed by the company. I still reiterate and stand by the fact that we will be offering Rs. 32,00,000 as income of the company in respective years and pay tax thereon. Q 24. Why not provision under section 277A (falsification of books of account or documents) may not be invoked in your case ? Ans. In view of the fact that I have agreed to pay the tax on the income disclosed. You are requested to take a lenient view of the matter. Q 25 Why not section 278B (offences by companies) be invoked as you and other director are jointly and severally responsible for the offences of defrauding the Revenue by giving accommodation entries ? Ans. In view of the fact that I have agreed to pay the tax on the income disclosed. You are requested to take a lenient view of the matter. Q 26. How were you generating cash to give back to parties ? Ans. We were inflating expenses and also discountin....
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....tered to you and the consequences of giving false statement on oath have been explained to you. Ans. Yes I do confirm that an oath has been administered to me and the consequences of giving false statement on oath have been explained to me. Q. 3. Are you assessed to Income-tax ? Please provide your PAN and also brief about your sources of income. Ans. Yes, I am assessed to tax my PAN is ACZPS9915M. My source of income is salary drawn from M/s. Pushpa Prakashan Ltd., 302, Narayanpeth, Pune and also royalty in lieu of books written by me. Q. 4 Do you know the concern-Apeejay Education Society as a director of Washington Software Ltd. ? Ans. No. I do not know the concern-Apeejay Education Society. As far as my transactions as a director of Washington Software Ltd. are concerned, I would like to state that all the transactions of Washington Software Ltd. from financial year 2003-04 onwards without side parties were handled by Shri. Parag Mehta, chartered accountant based in Mumbai. All the details, regarding my dealing with Shri. Parag Mehta have been given in my earlier statement dated March 16, 2011. Q. 5 Do you still confirm that....
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....e-mail account was allowed to operate the assessee. The mail was traced out and a screen shot of this mail is copied and pasted below after the permission received by Shri. Sonawani.)" 22. A perusal of the afore-quoted four statements of Sh. Sanjay D. Sonawani shows that in his first statement, Sh. Sanjay D. Sonawani stated that it was Sh. Parag Mehta, chartered accountant, who approached him and made an offer of providing accommodation entries. In his second statement, however, Sh. Sanjay D. Sonawani retracted this stand and stated that Sh. Parag Mehta did not approach him. In his third statement, he maintained his second statement. In his fourth statement, Sh. Sanjay D. Sonawani stated that as stated in his first deposition, Sh. Parag Mehta used to handle all the transactions with outside parties. In this statement, Sh. Sanjay D. Sonawani resiled from his retraction in his second and third statements and again put the blame of providing accommodation entries on Sh. Parag Mehta, as he had stated in his first statement. 23. Then, in his first statement, Sh. Sanjay D. Sonawani said that in 2003, Sh. Rohidas Kumbharkar, director, deserted the company. In his third statement, ho....
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....e., Sh. Sanjay D. Sonawani, has taken mutually intrinsically inconsistent and contradictory stands in all his statements. He was continually and continuously shifting his stand. He is, thus, decidedly, a very shifty and inconsistent person as a witness. 30. The learned Commissioner of Income-tax (Appeals) has concluded that the retraction by Sh. Sanjay D. Sonawani in his statements was that of the blame he had put on Sh. Parag Mehta in his original statement, but he had never withdrawn from his deposition of having provided accommodation entries to the assessee group. Thus, according to the learned Commissioner of Income-tax (Appeals), there was no inconsistency in this stand of Sh. Sanjay D. Sonawani and on this count, his statements were to be accepted. 31. While doing so, however, the learned Commissioner of Income-tax (Appeals) has failed to take into consideration the basic legal tenet that a statement has either to be accepted in full, or it has to be rejected in toto. There is no mid-way to this. It cannot be that a certain portion of a statement, which suits the convenience of a particular party, is accepted, whereas those which do not fit in, are rejected. Further, i....
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....e assessee wanted ; and that in fact, the representative of the assessee-society did not want to cross-examine Sh. Sanjay D. Sonawani and instead, put the blame on the Assessing Officer, who had perfectly made arrangement for his cross-examination, as per the provisions of law. The learned Commissioner of Income-tax (Appeals) rejected the assessee's plea for allowing cross-examination of Sh. Sanjay D. Sonawani, observing that such plea was being summarily rejected, as it was the fault of the representative of the assessee-society to not avail of the opportunity provided to them for cross-examination. 35. In this regard, the assessee has stated as follows : "Cross-examination of Shri Sanjay D. Sonawani was not allowed. 1. The assessee has specifically asked for cross-examination vide letter dated February 28, 2013 at page 790 of the paper book and has also deposited sum of Rs. Fifteen Thousand for the travel expenses of said person. 2. The assessee has asked for cross-examination before the Assessing Officer who has to adjudicate the matter. The said letter is also reproduced by the Income-tax Appellate Tribunal order of granting registration under ....
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....13 (SC) ; and b) Andaman Timber Industries v. CCE-Civil Appeal No. 4228 of 2006 (SC) [2016] 38 GSTR 117 (SC) (copy enclosed)." 36. On the other hand, the learned Departmental representative has supporting the learned Commissioner of Income-tax (Appeals)'s order, contended that the assessee has not been able to rebut the categorical finding of fact recorded by the learned Commissioner of Income-tax (Appeals), to the effect that it was the assessee, who had been avoiding cross-examining Sh. Sanjay D. Sonawani on one specious pretext or the other, which ploy was seen through by the learned Commissioner of Income-tax (Appeals), who rightly rejected the assessee's request for cross-examining Sh. Sanjay D. Sonawani. 37. Here, it is seen that the assessee filed the following letters of request before the Assessing Officer, asking for being allowed to cross-examine Sh. Sanjay D. Sonawani : Sl. No. Particulars Pages of PB 1. 13.03.2014 686 2. 19.03.2014 687 and 725 3. 14.03.2014 794 4. 28.02.2013 790 38. Before the learned Commissioner of Income-tax (Appeals), vide submissions dated August 21, 2014 (APB 691 to 705, relev....
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....research institute. The correctness of that report itself having been under challenge by the assessee who had not only filed objections thereto but also sought permission on several occasions to cross-examine the analyst even agreeing to pay the necessary expenses, the report could not automatically have been accepted. Since the Assessing Officer did not permit the correctness or otherwise of the report to be tested, there was a clear violation of the principles of natural justice by him in relying upon it to the detriment of the assessee. Even if the strict rules of evidence may not apply to assessment proceedings, the basic principles of natural justice would apply to the facts of the case." The Assessing Officer in her order has stated that the assessee was given opportunity by issuing commission to go to Pune and cross- examine the witness but the same was not availed of by the assessee. It is wrong to say on the part of the Assessing Officer. From the day one we made request to give us opportunity to cross-examine the witness with a condition that he being witness of the Department be called to Jalandhar and the assessee should not be put to hardship to go to Pune. Be....
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....t Jalandhar was of the opinion that the cross-examination ought to be conducted at Pune. Now, the four statements of Sh. Sanjay D. Sonawani were recorded by the ADITs, at Pune and Mumbai. The adjudicating authority, on the other hand, is undeniably the Assessing Officer at Jalandhar. This is so, obviously because all the assessees are located in Jalandhar and, therefore, it is the Assessing Officer at Jalandhar, who has the territorial jurisdiction over the assessee, and the Assessing Officer at Jalandhar being the adjudicating authority, it is he who was to record the evidence relevant to such adjudication. It is in pursuance of this, that it was only logical and legal that the cross-examination of Sh. Sanjay D. Sonawani be got conducted by the Assessing Officer at Jalandhar, before himself only and not at Pune, or elsewhere. 42. As per section 131 of the Income-tax Act, 1961, the Assessing Officer shall, for the purposes of the Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit, in respect of, inter alia, enforcing the attendance of any person and examining him on oath. Section 131(1)(b) (relevant portion) of the Act ....
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....n, the Assessing Officer would require the attendance of persons, for examining them as witnesses. It is for enforcing such attendance of witnesses, that the Assessing Officer has been vested with the same powers as are vested in a court under the Code of Civil Procedure, when trying a suit. 46. Now, as per section 30(b) of the Code of Civil Procedure., the court may issue summonses to persons whose attendance is required, either to give evidence, or to produce documents, or other material objects producible as evidence. For ready reference, section 30 of the Code of Civil Procedure, is reproduced hereunder : "30. Power to order discovery and the like.-Subject to such conditions and limitations as may be prescribed, the court may, at any time, either of its own motion or on the application of any party,- (a) make such orders as may be necessary or reasonable in all matters relating to the delivery and answering of interrogatories, the admission of documents and facts, and the discovery, inspection, production, impounding and return of documents or other material objects producible as evidence ; (b) issue summonses to persons whose attendance is require....
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....er XVI Summoning and attendance of witnesses "Rule 19. No witness to be ordered to attend in person unless resident within certain limits.-No one shall be ordered to attend in person to give evidence unless he resides- (a) within the local limits of the court's ordinary original jurisdiction, or (b) without such limits but at a place less than one hundred or (where there is a railway or steamer communication or other established public conveyance for five-sixths of the distance between the place where he resides and the place where the court is situate) less than five hundred kilometers distance from the Court-house : Provided that where transport by air is available between the two places mentioned in this rule and the witness is paid the fare by air, he may be ordered to attend in person." 51. Thus, as per the proviso to Order XVI, rule 19, Code of Civil Procedure, if there is air connectivity between the place of residence of the witness and the locus of the court, then a witness can be called, even if the distance between such two places is more than five hundred kilometers. This provision of the law is, obviously, to facilitate the at....
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....onawani were recorded by the ADIT(s) at Pune and Mumbai. However, the cross-examination requested by the assessee was required for the purposes of the assessment of the assessee, which was to be made at Jalandhar. It is, therefore, that the cross-examination was required to be conducted before the adjudicating Assessing Officer, i.e., the Assessing Officer at Jalandhar, and not before the ADIT(s) at Pune. Hence, the learned Commissioner of Income-tax (Appeals) is incorrect in holding the assessee's request for the cross-examination at Jalandhar to be merely a ploy to actually avoid the cross-examination. The learned Commissioner of Income-tax (Appeals), in holding so, remained oblivious of the applicable provisions of law, as discussed hereinabove. 55. Then, once the cross-examination of Sh. Sanjay D. Sonawani was disallowed to the assessee, the statement of Sh. Sanjay D. Sonawani could not in law have been utilised against the assessee, as has wrongly been done, transgressing the natural justice principle of audi alterem partem. 56. In Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC), it has been held, inter alia, that it is true that the proceedings under the Income....
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.... have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail of the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross- examination. Therefore, it was not for the adjudicating authority to pre-suppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above." 58. The learned Commissioner of Income-tax (Appeals) has also observed that the representatives of the assessee-society ins....
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....and nothing else ; that the onus lay entirely on the representatives of the assessee to produce the original software CD and hard-disc of the computer where it had been installed ; that the representatives of the assessee-society, who were present during the survey operations, had never taken the stand that the software had been installed in the central server in the assessee's Head Office, otherwise, the survey team would have found out the truth at that time itself ; and that when asked as to whether the original CD of the software, or the hard-disc of the computer was available with the assessee-society, the authorised representative of the assessee-society could not offer any satisfactory explanation. 60. The assessee, in this regard, has submitted that Ms. Anita Paul, Principal, Apeejay School, J-Block, Gurudwara Road, Saket, New Delhi, of the assessee-society, had, in her statement (APB 373A-373C) dated March 29, 2011, recorded under sections 132(4)/133A of the Income-tax Act, 1961, confirmed that the software had been purchased from M/s. Washington Software Ltd., and that this software might have been installed at the head office of the assessee. The assessee has stat....
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.... I cannot name the software which are used in this school. Q.8. Which are the companies from whom these softwares were brought. Ans. The list is as under : 1) Softlink Asia Pvt. Ltd. 2) Tally Software 3) Integrated Solutions 4) Microworld 5) Taarak India P. Ltd. 6) Washington Software Ltd. Q.9. Do you purchase the software from M/s. Washington Software Ltd. ? Ans. Yes. Q.10. How you come into contract with the company, M/s. Washington Software Ltd. ? Ans. I have not got in touch with M/s. Washington Software Ltd. Q.11. Do you know the person in Apeejay Management who got in touch with M/s. Washington Software Ltd. for purchase of these softwares ? Ans. No. Q.12 Who gives the financial approval for purchase of softwares from M/s. Washington Software Ltd. Ans. No, I have no idea. Q.13 Who is the person responsible for receiving these softwares in your school and please produce a copy of the delivery challan from M/s. Washington Software Ltd. ? Ans. I do not have the delivery challans and this software may have been installed....
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....giving you another opportunity-check and confirm your IT professional at your school ? Ans. No, they are not installed. I have checked up with the IT professionals whose signatures are attested below : 1. Sd. 2. Sd. Rakesh Kumar Jha Mamta Ghei Computer Lab Incharge PGT Computers 558/1,Devli Bank Colony, Devli, New Delhi C-203,Paryavaran Complex, N. Delhi. Q.23. Is there any admission software or scholar software installed in the school ? Ans. No, no such type of softwares are installed at my school independently which I have again checked/confirmed up with I.T. professional named above. Q.24. A person named Amitabh Mishra, I.T. personnel or his team who is working at your head office has ever installed any software at your school ? Ans. He has visited the school for installing the Symantec antivirus software and monitoring the functioning of IT. Department of the school. Q. 25 Do you want to say anything more ? Ans. No. Sd/ Anita Pual, 29.03.2011 Sd. H. S. Dahiya Income-tax Officer (Inv.) Unit-VI(4), Room No. 290 Jhandewalan Extension, New Delhi." 62. A perusal of Ms. Anita ....
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....computer aided learning software. Q. 5. Please state when these softwares were supplied, who had provided the basic requirement/frame work for the preparation of the software. How the software was supplied. How many time these were upgraded and when. Ans. The softwares were supplied over a period of 5-6 years. Basic requirement/framework was not prepared by myself or by my team. We were involved with the installation execution. We were given the software on CD by the management, Dr. Satya Paul. My team was responsible for in putting the date which varies from year to year. Some 2-3 years back the upgraded form of some of the softwares were also supplied by M/s. Washington Softwares Ltd. Q. 6. How did you know that software were supplied by M/s. Washington Softwares Ltd. Do you have any kind of evidence document of otherwise in, support of your claim. Ans. Dr. Satya Paul on a few occasions once or twice called me and related persons and would mentioned it or give us some of the CDs. Other than that I do not here any knowledge of my accounts of the softwares. Since I never involved in the purchase of the software other than the information from Dr.....
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.... the system of the office. However we do not have the original softwares CDs of M/s. Washington Softwares Ltd. Q. 13. We have searched for the above CDs along with you and with your team and could not find the original CDs purportedly supplied by the above company. Your people have also shown us the softwares purportedly procured from the above company. However nowhere in the above software the name of M/s. Washington Software Ltd. appeared rather the name of your institution, i.e., Apeejay Education Society. Can you show us any evidence that the said Softwares were developed or conceptualised by any other entity other than your Apeejay Education Society. Ans. No. Q. 14. Other than your statement regarding M/s. Washington Softwares Ltd. from you discussed no evidence either in the form of purchased order, or in the form of purchase order, or in the name of the above company in any of the software, nor any documentary evidence regarding supply of the software by the above company or even existence of such original CDs could be ascertained, some of your institutions have categorically stated that they had received bills of above company from head office and....
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....y supplied by M/s. Washington Software Ltd., and he responded by stating that the softwares supplied by M/s. Washington Software Ltd., the ones which he dealt with, were softwares related to admission (school) talent scholarship, fees, website and ERP. To Q. No. 8, he replied that the softwares were mostly installed in Apeejay School, Delhi, NCR, except for a few softwares, which were only installed in Apeejay School, Delhi. Answering Q. No. 9, he confirmed that Sh. Satya Paul, erstwhile chairman of the assessee-society, had given him CDs of the softwares once again 2-3 years earlier, stating that those CDs, though, were from M/s. Washington Software Ltd. ; and that apart from this, he did not have any other evidence that those softwares had been obtained from M/s. Washington Software Ltd. By way of Q. No. 12, Sh. Amitava Misra was asked to produce the software CD purportedly supplied by M/s. Washington Software Ltd. He responded by stating that they could show the software installed in the system of the office ; and that, however, they did not have the original software CD of M/s. Washington Software Ltd. In Q. No. 13, it was stated that the survey team had been shown the software....
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....assessee. 66. Apropos the statement of Sh. Amitava Misra, the position remains much the same. He too maintained, in response to Q. No. 12 that the software installed in the system of the office (the head office at Apeejay House, 144 Commercial Complex, GK-II, New Delhi), where the statement of Sh. Amitava Misra was recorded during the course of the survey proceedings, as available at APB 412A, in the first para thereof, could be shown to the survey team. In response to Q. No. 17, he categorically deposed that the software had been installed in the server/system impounded by the survey team during the survey proceedings. 67. It is, therefore, totally incorrect on the part of the learned Commissioner of Income-tax (Appeals) to have observed that the assessee-society failed to produce the hard-disc of the computer where the software had been installed, though it was specifically asked for by the Assessing Officer during the assessment proceedings pertaining to all the assessment years involved. This discrepancy in the order under appeal takes on an intense glare in the face of the undisputed fact that the server/system where the softwares were stated to have been installed, stoo....
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....d during the survey conducted at the central/head office of the assessee-society. 73. Thus, impounding of the computer server at the head office of the assessee also puts to naught the observation of the learned Commissioner of Income-tax (Appeals) that the representatives of the assessee-society, who were present during the survey operations, had never taken the stand that the software had been installed at the central office of the assessee. Would that the server impounded had been examined ! However, nothing in this regard has been brought to the fore by the Department and we would be loath to register any comment in this regard. 74. Further, the learned Commissioner of Income-tax (Appeals) has observed that providing some printouts with the plea that they had been taken from the software, would not prove, in the absence of the original CD and the hard-disc of the computer where it had been installed, the actual purchase thereof. In this regard, the assessee has stated that the "some printouts" were not merely some printouts, as dubbed by the learned Commissioner of Income-tax (Appeals). Rather, they were sample reports (APB 106 233) generated from the software, which repo....
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....he assessee from 2004 to 2011. The said report dated September 11, 2012 is reproduced hereunder : Sub : Software Certification of "ERP Software for School" installed at Apeejay Education Society. This is to certify that Trident Information Systems Pvt. Ltd. (with office at M-31A, M-Block Market, Greater Kailash Part II, New Delhi- 110048, India) undertook the verification of 'ERP Software for school" at the Apeejay Education Society's Central Office (located at Apeejay Satya House, 14 Commercial Complex, Masjid Moth, Greater Kailash II, New Delhi-110048) on September 10, 2012. Trident's verification team comprised Akbar Jafri, Software Test Engineer and Praveeen Sharma, Technical Consultant. During the verification visit, the Trident's team went through the various modules and reports of the software along with the source code available at the office of the Apeejay Education Society (AES). The following observations were made by the Trident team : (1) The software 'ERP Software for school' (multi-user and client- server based) was found installed on the computers of the Apeejay Education Society's Central Offi....
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....alia, also certifies that the name of M/s. Washington Software Ltd. is indicated in the source code of the software. This report adequately meets the Assessing Officer's objection in this regard. However, this aspect of the matter has also remained untouched by the learned Commissioner of Income-tax (Appeals), in so far as this report failed to earn even as much as a mere mention in the order under appeal. 79. And not only this, the assessee had requested to the Assessing Officer, as it also brought to the knowledge of the Commissioner of Income-tax (Appeals) (page 74, 1st para of this order) that the Department itself appoint an expert to verify the contention of the software having been installed at the head office of the assessee. This request was also made by the assessee by way of written submissions dated March 25, 2013 (APB 39- 43, relevant portion at APB 42, 4th para), before the learned Commissioner of Income-tax, Jalandhar-II, in proceedings under section 12AA(3) of the Act. This request reads as follows : "On the contrary we have provided in our replies most of the evidence and also print outs of the reports generated out of the Software for verification.....
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....ctly for the benefit of any person referred to in section 13(3). The learned Commissioner of Income-tax (Appeals) has erred in observing that everything was done under the instructions of Sh.Vijay Berlia, meaning thereby, that it was Sh. Vijay Berlia, who was benefitted. Now, it is also not the case of the Department, as submitted on behalf of the assessee, that money was withdrawn from the bank and it was returned to any such person. 84. In this regard, the Delhi Bench of the Tribunal, in Devinder Kumar v. Deputy CIT vide order (authored by one of us, the Judicial Member) dated January 28, 2011 (copy placed on record) passed in ITA Nos. 1141, 1142 and 1773/Delhi/2008, for the assessment years 2001-02 and 2004-05, has held that addition made on suspicion or alleged statement, in view of direct evidence placed on record to the contrary, cannot be sustained. 85. Then, it has also been contended on behalf of the assessee that the money paid by the assessee Group to M/s. Washington Software Ltd., has never been returned to the assessee. 86. In this regard, in the assessment order dated March 28, 2013, passed in the case of the assessee for the assessment year 2010-11 (concerni....
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....is company did not develop software from financial year 2003-04 onwards and that it was providing only accommodation entries without actual delivery of software to certain concerns, is correct, the assessee being one of the major beneficiary of these bogus transactions." 87. Thus, the assessee is correct in contending that the money having been paid by M/s. Washington Software Ltd. to different parties, as tabulated in the various assessment orders, including that extracted above, obviously, the money cannot be said to have been ploughed back to the assessee. 88. Further, Sh. Sanjay D. Sonawani, in his statement, deposed that the cheques were discounted. This, however, gets negated by the observation of the Assessing Officer that the payments were made through RTGS. In the statement of Sh. Sanjay D. Sonawani, there is no allegation of any benefit having accrued to Sh. Vijay Berlia and there is no finding adverse to the assessee recorded in this regard by the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has erroneously not kept in view this angle too. 89. Then, the above apart, consideration of the alleged evidence wrongly construed against the assess....
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....entitle an assessee to the benefit of section 11, ipso facto ; that non-compliance with the provisions of section12A bars an assessee from being granted the benefit of sections 11 and 12 ; that the compliance with the provisions of section 12A only indicates that the assessee is a trust or institution entitled to claim the benefit of sections 11 and 12 ; that however, is not the end of the matter ; that an assessee would be entitled to be granted the benefit only if it complies with the other requirements of these sections ; and that an assessee that has complied with the provisions of section 12A must also establish that the conditions of sections 11 and 12 are satisfied before it is entitled to the exemption under sections 11 and 12. It would be apt to quote here the observations properly made by their Lordships : "21. Compliance with the provisions of section 12A is not the only requirement for the applicability of section 11. It is only one of the requirements. Section 12A merely provides that the provisions of sections 11 and 12 would not apply in relation to the income of any trust or institution unless the person in receipt of the income has made an application for ....
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....ration are reproduced hereinbelow : Apeejay Education Society New Jawahar Nagar, Bhagwan Mahavir Marg Jalandhar City Status : Society PAN : AAATA3534F Year ended : 31.03.2008 Assessment year : 2008-09 Ward : Range-III, Jalandhar Computation of income 1. Receipts : (Amount in Rs.) Revenue receipt 968,098,761.98 Capital receipt 62,344,558.00 1,030,443,319.98 2. Amt. incurred for educational purpose Revenue expenses 570,353,445.88 Capital expenses 322,483,011.70 Depreciation 111,325,090.55 1,004,161,548.13 Surplus during the year, amount set apart to be incurred for the purposes of the society 26,281,771.85 3. Amount of income accumulated or set apart/finally set apart for application to charitable or religious purposes to the extent it does not exceed 15 per cent. of total receipts 26,281,771.85 4. Amount of income, in addition to the amo....
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....5,061,495.76 2. Utilization 1,516,765,937.83 1,516,765,937.83 Surplus during the year, amount set apart to be incurred for the purposes of the society 41,704,442.07 3. Amount of income accumulated or set apart/finally set apart for application to charitable or religious purposes to the extent it does not exceed 15 per cent of total receipts - 4. Amount of income, in addition to this amount referred to in item 3 above, accumulated or set apart for specified purposes under section 11(2) - Total of (3+4) Net income Nil Tax due Nil Tax paid (TDS) 72,193.00 Refund due 72,193.00 94. In the present case, as evident from the above, all the above-conditions of section 11 of the Act stand fully satisfied by the assessee cumulatively. Section 12 is not applicable to the facts of the case. Firstly, the income is derived from property held wholly for charitable purposes. Hence, the mandate as per "M. Visvesvaraya Industrial Research and Development Centre" (supra), as to whether the....