TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1042
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 hoped, will facilitate a ready reference to these documents. 1. These are the assessee's appeals for the assessment years 2008-09, 2010- 11 and 2011-12 in ITA Nos. 712 to 714(Asr)/2014, respectively, and the assessee&....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 disputed by the learned Departmental representative and as also discerned from the record, ground Nos. 1 to 6 concern the main issue, ground Nos. 7 and 8 are with regard to the first without prejudice challenge and ground No. 9 is the second alternative argument. Ground No. 11 is consequential, whereas the ground No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 providing accommodation entries and he was also stated to have accepted the fact that he had provided accommodation entries to the Apeejay Group of cases through his company, M/s. Washington Software Ltd. The statement of Sh. Sanjay D. Sonawani S/o Sh. Devi Dass Sonawani, chairman and director of M/s. Washington Software Ltd., under section 131 of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, including its head office, the software alleged to have been purchased from Washington Software Ltd. was not found, whereas bogus bills from M/s. Washington Software Ltd. were found to have been entered in the books of account of different entities of the group. The Assessing Officer has further pointed out that persons of various entities of the assessee group....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 have also been disallowed and added to the taxable income of the assessee-society. The deduction claimed by the assessee-society under section 80G of the Act has also been restricted to Rs. 3,50,53,564, as against that claimed by the assessee-society at Rs. 25,00,00,000. The assessment in this case was ultimately completed by the Assessing Officer under secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 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 V. Mehta that the said bogus company was providing accommodation bills to interested parties and Sh. Sanjay D. Sonawani was managing all the affairs of said company. Sh. Sanjay D. Sonawani in his statements recorded on March 16, 2011, April 12, 2011 and May 12, 2011 also admitted that his company M/s. Washington Software Ltd. was involved in providing accommodation entries and also accept....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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 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 entiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d., 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 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 : Sl. No. Name of the entry 1. Shaf Broadcast Pvt. Ltd. 2. Himachal Futuristic Co. Ltd. 3. TVC Skyshop Co. Ltd. 4. - - - - - 36. Apeejay School of Design 37. Apeejay Institute of Design 38. Apeejay Institute of Management 39. Apeejay School of Fine Arts 40. Apeejay Sc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rsons 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-asking you that the software purchased vide vouchers dated March 25, 2008, September 16, 2006, February 11, 2006 and March 9, 2004 are not installed at your school. In this regard, I am giving you another opportunity to check and confirm through your I.T. professionals at your school. Ans. No, they are not installed. I have checked up with the I.T. professionals whose signatures are attested below 1. Signature 2. Signature Rakesh Kumar Jha Mamta Ghai Computer Lab Incharge PGT, Computer 558/1, Devli, Bank Colony C-203, Paryavaran Complex Devli, New Delhi 302 New Delhi-30 Q.23. Is there any admission software or scholar software installed in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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, Accountant. These Annexures-'B', 'C' and 'D' are the trial balances of Apeejay School of Management for the financial years 2009-10, 2005-06 and 2006-07 where in purchase of computer softwares worth Rs. 1,83,15,408, Rs. 30,00,000 and Rs. 30,50,489.31 have been recorded respectively. Please explain which softwares have been purchased during these three financial years. Please give a brief description and demonstration of these softwares. Please also explain how the requirement of these softwares was identified, who took the decision to purchase these softwares and where these softwares have been installed ? Ans. As far as I remember, since 2006, I am looking after the work as I.T. Head however, since 2006 no new software has been purchased. And also as per my knowledge no new software has been installed during this period ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns only means to highlight the particular trans actions recorded against these narrations that these entries have been made only at the directions of head office. These narrations have been made in the end of the financial years in which these entries have been sent to us for recording of them in the books as per their directions at the instruction of head office. Q.14. I am showing you Annexure-B to this statement which is a trial balance of Apeejay School of Management for the period April 1, 2009 to March 31, 2010 containing one to three (1 to 3) pages. As per this annexure-B at first page under the sub-head outer software of fixed assets it is seen that an amount of Rs. 1,83,15,408 has been made on purchase of computer software. Please explain which computer software have been purchased during this period and where the bills of these purchases are lying ? Please produce these bills related to the purchase of computer software of Rs. 83,15,408. Similarly, I am showing you annexures C and D made part of this statement and are trial balance of Apeejay School of Management for the period April 31, 2005 to June 31, 2006 and April 1, 2006 to March 31, 2007. In these also amount of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the procedure as I am not looking the day-to-day affairs of all the transactions. Q. 9 It is learnt that you have endorsed cheques/payment advices to the bank for making payment to M/s. Washington Software Ltd. Please state what was the purpose/basis of making such payments ? Ans. So many cheques comes for signing, sometime cheques comes along with the vouchers, sometime not, I simply sign the cheques. Q. 10 How do you verify the authenticity of the vouchers as to whether goods were actually received or not, or whether the head under which the payment is made is authenticated or not ? Ans. I do not do it myself I trust my people. Q. 11 You are hereby shown a bunch of loose papers mentioned as annexure A-1, impounded from your Apeejay School, Saket. These are bills of M/s. Washington Software Ltd. and their respective vouchers. In all the vouchers your signatures are there. In the bills also your signature along with the word 'approved' is mentioned in your handwriting. Please comment in the light of your above reply. Ans. I approved the above bills for payment only assuming that the material must have come. It is the normal course. Q. 12 Who authenticate the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er. As you have seen that I have not known the full procedure. Hence, I am not in a position to give the answer. I am not in a position to answer the question that who can reply all such question. 6.1 It is seen from the above statements, that no software were ever purchased from WSL. Moreover, on physical verification by survey team, software alleged to have been purchased from M/s. Washington Software Ltd. were not found to be installed and even the original CD could not be located though the head of IT Department was present. However, bogus bills from M/s. Washington Software Ltd. were found to be entered in the books of account of different entities of the assessee. It was also admitted by the key persons that various entities of the group have received only bills for entering in the books of account and no software were ever installed or received by them. It is pertinent to mention here that all the payments made to M/s. Washington Software Ltd., were personally approved by Sh. Vijay Berlia, General Secretary and authorised signatory of the assessee-society. He being a member/office bearer, is a specified person and covered under definition given under section13(3). Perusal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....zar, Mumbai and cash received from them were given back to the Apeejay Group. Copies of all the statements of Sh. Sanjay Sonawani have been provided to the assessee's authorised representative. Relevant portion of statement dated May 12, 2011 of Shri Sonawani is reproduced below : 'Q. 8 Who brought the clients or interested parties to you ? Ans. As stated earlier up to 2007, Mr. Rohidas Kumbarkar were handling all the parties and to the best of my knowledge Mr. Rohidas Kumbarkar was responsible for getting the parties. After 2007 only one party was there, i.e. Apeejay Group who was handled by me. Q. 9. Please tell me the name of the contract persons of the parties who used to collect these bills from you ? Ans. I do not remember the exact names of the persons but the bills were collected by one of the employee of the Apeejay Group. Q. 10. Did you give these bills talking to any important persons of the interested companies ? Ans. Since we were already giving bills to Apeejay Group prior to 2007, the requirement was never there. Q. 26. How were you generating cash to give back to parties ? Ans. We were inflating expenses and also discounting cheques with va....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isfied that the activities of the assessee-society are not genuine, as its- funds are being misutilised continuously for many years as mentioned above and hence the registration granted to it under section 12AA(1) of the Income-tax Act, 1961 is liable to be withdrawn and cancelled. I am also satisfied that the funds of the assessee-society are also not being utilised for the objects of the society from the past many years. Accordingly, taking recourse to the provisions of section 12AA(3) of the Income-tax Act, 1961, the registration granted to the assessee-society on May 13, 1999 is hereby cancelled with effect from the assessment year 2004-05.' 7.2 On the basis of findings given in paragraph 7 of this order, it is concluded that the assessee-society is clearly hit by the provisions of section 13(1)(c) read with section 13(3), and therefore, does not qualify to claim any exemption under sections 11 and 12 of the Income- tax Act, 1961. In addition to this, the registration granted to the asses see under section 12AA has also been cancelled by the Commissioner of Income-tax, Jalandhar II, with effect from the assessment year 2004-05 vide his order passed under section 12AA(3)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... also recorded on March 29, 2011. Sh. Vijay Kumar Berlia, could not give satisfactory reply regarding the purchase and installation of software statedly bought from M/s. Washington Software Ltd. (The copies of all the statements were already given to you during the course of assessment proceedings for the assessment year 2004-05). In the light of the above facts, please show cause as to why not the expenses of Rs. 2,68,59,000 in the name of purchase of software be treated as bogus and added to the total income. Case adjourned to December 31, 2012.' On December 31, 2012, the authorised representative of the asses see attended but no reply was furnished, on his request case was adjourned to January 8, 2013. On the said date neither anybody attended nor was any written explanation furnished. Therefore, notices under sections 143(2) and 142(1) were issued on January 9, 2013 fixing case for January 15, 2013. 8.1 In response thereto, the assessee's authorised representative vide reply dated January 15, 2013 submitted as under : "The, detailed reply to point raised at the time of last hearing is as under : This query is based on the statement of Mr. Sanjay D. Sonawani w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....auditors of the company on oath to find out the sanctity of the person who is telling nothing but lies to cover his misdeeds. Otherwise also the statement recorded behind the back of the assessee cannot be used against the assessee unless he is given an opportunity to cross-examine the person who has deposed against him. Reliance is being placed on the honourable Punjab and Haryana High Court in ITA No. 638 of 2007 decided on January 16, 2009 in the case of CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P&H). We may be given the opportunity to cross-examine Mr. Sanjay D. Sonawani. As regards the purchase of software is concerned, it has duly been purchased and even Sanjay D. Sonawani has admitted that during the financial year 2003-04, he was doing the business of software development. Further, the desired software is being used in head office at Delhi and same has been told to the official visiting the assessee's office in Delhi and also later on in the office of DDI concerned a demonstration was also given. As regards the statement of Anita Paul is concerned, she has clearly admitted that the software may have been installed in head office. Here we may clarify that this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1,80,00,000 have been debited to its books in the end of financial year, at the instruction of head office. In view of all the material and statements available on record, the authorised representative was specifically asked vide order sheet entry dated February 14, 2013 to explain as under : 'During the course of survey, it was found that no actual deliveries of any services or software, etc., were provided by M/s. Washington Software Ltd. to the assessee-society, though bills were received and claimed in your accounts. Statements of key persons like Principals, Directors, I.T. personnel and General Secretary and Authorised Signatory of the society were recorded on oath. In their statements on oath, they all have stated that they have never heard the name of M/s. Washington Software Ltd., they have also accepted the fact that no software was purchased from M/s. Washington Software Ltd. They have never ordered or recommended any software from the abovementioned company. In almost every institution they have provided the list of the software installed in their institutions/schools along with the name of the companies, which did not include the name of software purchased fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m Washington Software Ltd. and was unable to show the name of "Washington Software Ltd." as developer of the software installed on the computer. Your attention is invited to replies given by him to question Nos. 12 and 13 of his statement dated March 29, 2011. Statement of Sh. Vijay Kumar Berlin, General Secretary and authorised signatory of the assessee-society was also recorded under section 131 by Deputy Director of Income-tax (Inv.) Unit VI(3), New Delhi on Sh. Vijay Kumar Berlia, could not give satisfactory reply regarding the purchase and installation of software statedly bought from M/s. Washington Software Ltd. His replies to question Nos. 5, 6, 9, 10, 11, 12, 13, 14, 15, 16 and 19 of said statement clearly shows that he gave evasive replies and tried to escape his responsibility of being General Secretary and authorised signatory of the assessee-society, though all the payments to M/s. Washington Software Ltd. were approved by him. He were given enough opportunities to reply after consulting the relevant persons but he failed to produce anything in support of transaction with M/s. Washington Software Ltd. (copies of all the statements separately handed over). You are r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the judgment of the hon'ble Punjab and Haryana High Court in ITA No. 638 of 2007 decided on January 16, 2009 (CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P&H)) and requested that the opportunity to cross-examine Mr. Sanjay D. Sonawani may be provided to the assessee. 9.1. Sh. Sanjay D. Sonawani is a resident of Pune, Maharashtra, and therefore, in the view of request for cross-examination made by the assessee's authorised representative, a commission under section 131(1)(d) was issued vide this office letter No. 6754-59 dated February 18, 2013 to the Deputy Director of Income-tax (Inv.) Unit I(I), Pune requiring him to cross-examine Sh. Sonawani on March 4, 2013 in the presence of principal officer of the assessee-society. 9.2 The authorised representative of the assessee-society appeared on February 27, 2013 and stated that he shall file reply to various observations given vide order sheet dated February 14, 2013, after cross-examining Sh. Sanjay D. Sonawani on March 4, 2013 at Pune, and therefore, confirmed that he shall be going to Pune on March 4, 2013 to avail the opportunity of cross-examining Sh. Sanjay D. Sonawani. The entire arrangement was made by the Depu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8. In this respect, Order 16, rule 19 of Code of Civil procedure, is reproduced as under : '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 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.' High Court amendments Allahabad. In Order 16, rule 19(b) : Insert the words "or private conveyance run for hire" between the words "public conveyance" and "for five-sixths" and Punjab-Add the following proviso to rule 19(b) : "Provided that any court situate in the State of Punjab may require the personal attendance of any witnes....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., your assertion that, all the proceedings, inter alia the cross-examination of Shri. Sanjay Sonawani, has to be necessarily conducted in the office of the undersigned at Jalandhar, is based on faulty understanding of the provisions of law. As per the Code of Civil Procedure, summons can be issued to a per son only if he is within 500 kms of the distance from the issuing authority. Where the person/witness is more than 500 kms away from the summons issuing authority, commission has to be issued by such authority, authorising other authority to cause/carry out such necessary examination/cross-examination/re-examination, on his/her behalf. 4. In the instant case, the person you wish to cross-examine, namely Shri. Sanjay D. Sonawani, is a resident of Pune and as such, the undersigned is not empowered to issue summons to him so as to accord an opportunity of cross-examination to you. Therefore, the undersigned has no other alternative but to issue commission to Departmental officer in Pune to make you available an opportunity of cross-examining Shri. Sanjay D. Sonawani. 5. Accordingly, the undersigned has issued commission under section 131(1)(d) of the Income-tax Act to the Depu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d letter is returned herewith, as the undersigned has no power under Civil Procedure Code to issue summons to Sh. Sanjay D. Sonawani who resides at Pune. Yours faithfully, (Ratinder Kaur) IRS Asstt. Commissioner of Income tax, Circle III, Jalandhar Encl : Original demand draft 9.6 In response to the above letter, the assessee's authorised representative vide letter dated March 14, 2013 stated as under : 'We acknowledge the receipt of your letter number ACIT/CIII/JAL/ 2012-13/7099, dated March 11, 2013. In response to same it is sub mitted as under : As already replied vide earlier letter, we would like to cross-examine Mr. Sanjay D. Sonawani at Jalandhar. Mr. Sonawani is the witness of the Department and the onus to bring/ensure presence of its own witness squarely lies with the Department and the same cannot be relegated to the assessee. Further there is no bar for distance under amended provisions of the Civil Procedure Code. Hence it is prayed that he may please be called to Jalandhar.' 9.7. In view of replies filed by the assessee on March 1, 2013 and March 14, 2013, it is seen that though the assessee was provided a reasonable and sufficient oppor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ck register/fixed assets register, etc., as is done in the case of all other software purchased by the school (copies of certain bills of software other than purchased from WSL have been taken, signed by accountant and are placed on record). These facts have been duly noted vide order sheet of same date (March 7, 2013) signed by the assessee's authorised representative and accountant and the authorised representative was required to further explain as under : '(1) From where payment of this Rs. 50 lakhs has been made. (2) Produce stock register/fixed assets register for verification along with IT Manager of the assessee school. (3) Reply to queries raised vide order sheet dated January 15, 2013, February 14, 2013 and March 6, 2013. (4) Produce books of other institutes as per order sheet dated March 6, 2013.' 10.2 On the next date of hearing, i.e., March 8, 2013, again no reply was furnished. The authorised representative of the assessee attended along with Sh. Yogesh Gupta, IT (Manager) of Apeejay School Jalandhar (all branches). Sh. Yogesh Gupta is specifically asked about how software is purchased. To this, he explained that requirement for software purchas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his statement recorded during survey on March 29, 2011, especially question Nos. 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16, wherein he has categorically stated that he recorded these entries on the instructions of head office and no bill or ledger account of WSL was available with them. When this statement is confronted to Sh. Nautiyal, he stated that he stands by the replies given by him and that bills from WSL were never provided to the institute, only entries were made in books at the instructions of head office. Further perusal of stock register produced during hearing also shows that ERP software was never received or installed at this institute. Copy of relevant page of stock register is taken, signed by accountant, Sh. Nautiyal and is placed on record. Further, from the perusal of the invoices raised by M/s. Washington Software Ltd. in the name of various schools/institutes of the assessee-society, it is seen that the description of the item refers to 'Multiple User ERP Software' in most of the cases. Therefore, the assessee's authorised representative was specifically asked to provide following information related to alleged ERP software vide order sheet entry date....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Mumbai. If you go through all those statements that he was retracted from major points in his subsequent statement recorded by Deputy Director of Income-tax, Mumbai but again when he appeared before the Deputy Director of Income-tax, Pune, for the second time, he retracted from his statements in Mumbai and confirmed the contents of first statement given in Pune. How reliance can be made on the statement of the person, who has claimed to be giving statement on oath, but there is a huge difference in his statements before two authorities on same matter. If we see his statement, he has discussed about his shareholding, if we compare the same with the information filed with the Registrar of Companies regarding shareholding and directorship it totally differs. A person who does not know about his shareholding and directorship how can he tell about huge transactions for a number of years that too without following books of account which he claims he has never maintained. He himself has stated that his accounts have been prepared by his chartered accountant without maintaining books of account and have even been audited. We may let you know that company WSIL is a public limited company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow about software which was admittedly installed at the head office. As the head office in Delhi is well equipped to install and maintain especially since the softwares are for management information/control purposes to which school staff is not fully privy to. As the software was installed at the head office she also stated that the Software may have been installed at head office. As already mentioned, the cost of the software is debited to different cost centres but same is installed at head office. As regards Mr. Amitava Misra, even though he showed ignorance about the availability of original CD's but he at no stage admitted that WSL software is not installed. He may not have been able to show any printing at that time due to confusion. Various reports generated from the software are being produced herewith for your verification and for your record. Being voluminous, the same are being provided separately and not being attached with this reply. As regards Mr. Vijay Berlia, he did not have the complete back ground on academic issues of the institutions and software decisions that had been made by the Chairman Dr. Satya Paul (since deceased) who directly handled and was res....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ERP for Schools b. On which platform it is based, whether oracle or some other ? Database : Ms SQL Server 7.0 Dev Tool : Ms Visual Basic 6.0 and Crystal Reports c. What are different modules of this ERP ? Attendance Finance Inventory Fees Payroll Library Admission Student Development Time Table E-Learning d. Who had been given the access to different modules of ERP ? ERP was installed and used centrally. It was primarily used to hold data and generate reports as well when needed. It was initially operated by Mr. K. K. Varghese. It is currently operated by Mr. A. D. Dutta. e. Who are the person in charge of the server of ERP ? Currently Mr. A. D. Dutta f. Name of the person who handles the maintenance of ERP ? During the year under consideration no maintenance was required. g. Name of person who handles the updates of this ERP System ? Persons from Washington Software Ltd. who delivered the software also installs the update. h. After how many months, the ERP is updated ? Washington Software Ltd. delivered and installed update as and as when they had them ready. i. Who supervised the installation of activation of ERP in each institute ? ERP was installed cent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vided to assessee. d) That accounts of WSL are audited and the Department has not examined the auditor concerned. Further, that the assessments of WSL must have been reopened. e) Regarding statements of Smt. Anita Paul, Sh. Alok Saklani and Sh. Deepankar Chakrabarti, the authorised representative stated that they are academicians and does not have a computer background and that same is the situation with Sh. Nagendra Nautiyal, he being an Accountant. Further, that while the institution staff makes use of their own software for day-to-day use, they need not know about software installed at head office, since these are for management information/ control to which school staff is not fully privy to. f) That regarding statement of Sh. Amitava Misra, even though he showed ignorance about the availability of original CD's but he has not admitted that WSL software is not installed. Further, that he may not have been able to show any printing due to confusion. The authorised representative also produced certain reports allegedly generated from software as an evidence for its installation. g) Regarding statement of Sh. Vijay Berlia, the authorised representative has stated that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d through cheques/drafts was routed back to the persons managing affairs of assessee-society. This has been discussed in detail vide para 7 of this order. The argument of the authorised representative that SEBI has taken action against WSL further shows that all was not well with the affairs of said company, and given the circumstances, the admission made by Sh. Sonawani, that his company resorted to giving accommodation entries from the year 2003-04 onwards because its financial health was not good, all the more proved to be correct. b) Further, the argument that statement of Sh. Sonawani has no evidentiary value, since it is recorded under section 133A, is also not acceptable because the statements of Sh. Sanjay D. Sonawani have been recorded under section 131, which draws its power from Code of Civil Procedure, 1908 and not under section 133A as alleged by the authorised representative, therefore, these statements have full evidentiary value. c) The assessee was given reasonable and sufficient opportunity to cross-examine Sh. Sanjay D. Sonawani as per the provisions of Civil Procedure Code vide this office's commission dated February 18, 2013 and letter dated March 11, 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were entered in books only on the directions of head office and that no software from WSL has ever been received/installed at their institutions. f) The authorised representative has argued that Sh. Vijay Berlia did not have complete background and that the software decisions were made by Dr. Satya Paul (since deceased). This argument is nothing but an effort to save the office bearer Sh. Vijay Berlia, who is at helm of affairs at the society besides being the person who has approved huge payments totalling over Rs. 15 crores from financial years 2003-04 to 2010-11, to a company without receiving any product or service in return. Question 16 of his statement (as reproduced in paragraph 6(vi) of this order) proves it beyond doubt that even after demise of Dr. Satya Paul, payment of Rs. 2.60 crores were approved and by Sh. Berlia to WSL, and that too without receipt of any bill or product/software from and not from Pune. On enquiries in this respect, Sh. K. Sampath informed that he is not aware of WSL. Otherwise also it cannot be said that purchase/payment for software was looked after by Dr. Satya Paul and not Sh. Berlia because perusal of impounded record reveals that the bills o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e organisation. In short, ERP is a comprehensive system which manages the entire information of an organisation at one place. It is seen from reply dated March 18, 2013 that the assessee has mentioned following modules of ERP software : * Attendance * Finance * Inventory * Fees payroll * Library * Admission * Student development * Time-table * E-learning The authorised representative has further stated that the alleged software is installed centrally to maintain secrecy and that only one employee Sh. K. K. Varghese was trained in operation of ERP, than how the assessee is able to operate and maintain such a comprehensive software as the same is multiple user software system which is designed to integrate all departments ? Further, out of modules mentioned above, the modules like attendance, library, time-table, student development and e-learning are institution specific for which the access should have been provided to the respective 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 accept....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Dwarka, New Delhi c) Invoice date May 5, 2009, Multiple user ERP software for Rs. 30,00,000 Deliver to : Apeejay School, Greater Noida (U.P.) d) Invoice date May 14, 2009, Multiple user ERP software for Rs. 50,00,000 Deliver to : Apeejay School, Faridabad e) Invoice date May 26, 2009, Multiple user ERP software for Rs. 50,00,000 Deliver to : Apeejay School, Jalandhar. f) Invoice date December 28, 2009, ERP Software for nursery classes for Rs. 12,02,400 Deliver to : Apeejay School, Pitampura. g) Invoice date January 18, 2010, ERP Software for nursery classes for Rs. 2,35,000 Deliver to : Apeejay School, Faridabad. etc. . . . . The perusal of bills show that during the year the assessee has procured a number of ERP software (i.e. 5 Multiple user ERP software and 5 ERP software for nursery classes) and as per bills, these should have been delivered to the respective institution 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Netania Shares and Securities P. Ltd. 25,00,000 01.07.2009 288644 Omega Lifestyles and Technologies 40,00,000 14.07.2009 288647 Omega Lifestyles and Technologies 10,00,000 31.07.2009 288648 Netania Shares and Securities Pvt. Ltd. 10,00,000 10.08.2009 60003 Netania Shares and Securities Pvt. Ltd. 10,00,000 12.10.2009 60007 Amit International Ltd. 25,00,000 22.10.2009 60008 Rahul Enterprises 11,00,000 22.10.2009 60010 Sanjay Sonawani 2,00,000 23.10.2009 60009 Suiyoday Finmark 5,00,000 15.02.2010 60016 Topsun Rim Iron Ore Industries 10,00,000 18.02.2010 60018 A to Z Alloy P. Ltd. 10,00,000 12.03.2010 60024 Karma Ispat Ltd. 20,00,000 22.03.2010 60025 Swati Spentose P. Ltd. 50,00,000 23.03.2010 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 ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 10,05,35,645 is taxable and since the assessee, by procuring bogus bills for purchase of software, concealed its income from assessment and also furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) of the Income-tax Act for concealment as well as furnishing of inaccurate particulars are being separately initiated. 13. Bogus bills for software from WSL From perusal of record as well as details provided by assessee, it is seen that the assessee has procured bogus bills of software from M/s. Washington Software Ltd. from financial year 2003-04 to financial year 2009-10, as per 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....March 1 2 3 4 5 6 2003-04 0 1,30,00,000 1,30,00,000 78,00,000 52,00,000 2004-05 52,00,000 0 52,00,000 31,20,000 20,80,000 2005-06 20,80,000 2,50,00,000 2,70,80,000 1,62,48,000 1,08,32,000 2006-07 1,08,32,000 3,40,00,000 4,48,32,000 2,68,99,200 1,79,32,800 2007-08 1,79,32,800 80,00,000 2,59,32,800 1,55,59,680 1,03,73,120 2008-09 1,03,73,120 1,20,00,000 2,23,73,120 1,34,23,872 89,49,248 2009-10 89,49,248 2,30,00,000 3,19,49,248 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Deduction allowable under section 80G (25,00,00,000 x 50% restricted to 10% of GTI) Rs. 3,50,53,564 Thus, out of total donation paid of Rs. 25,00,00,000, after allowing deduction of Rs. 3,50,53,564 under section 80G, net amount of Rs. 21,49,46,436 (i.e. 25,00,00,000 3,50,53,564) is being added back to taxable income of assessee. Penalty proceedings under section 271(1)(c) for 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... legally erred in disallowing depreciation on software are purchased during the year. 11. The learned Assistant Commissioner of Income-tax has legally erred in disallowing, depreciation on software purchased in the earlier years." 9. The assessee filed 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Sonawani had replied that answer to Q. No. 4 Up to 2007, the business was handled by Mr. Rohidas Kumbharkar and after his death the business was drastically reduced. . . 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 fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r. Sonawani had replied that '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 clear that the Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvey, 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 document to the assessee and that material intended to be used against the assessee must be confronted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 reports generated from the software, etc. II. The appellant had submitted before the Assessing Officer that the software purchased from WSL had been installed in the central server at the head office, which is of utmost importance and requires secrecy. It was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 (iii) the relevant income or part of relevant income is receivable under a society created before the 1st day of March, 1970, by a non testamentary instrument and the Assessing Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the society was created bona fide exclusive....
X X X X Extracts X X X X
X X X X Extracts X X X X
....poses (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 which the shares of the beneficiaries are indeterminate or unknown, at the maximum marginal rate : Provided that in a case where- (i) none of the beneficiaries in respect of the part of the relevant income which is not applicable to charitable or religious purposes has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d ; (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 reliance is being placed on : (i) DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust [2001] 249 ITR 533 (Bom). (ii) CIT v. Fr. Mullers Charitable Institutions [2014] 363 ITR 230 (Karn), ITA No. 588 of 2007, decided by the honourable Karnataka High Court on February 10, 2014. From the above citations, it is clear that in case there is 13(1)(c) or 13(1)(d), the whole of income cannot be taxed at higher rate. Ground Nos. 8-11 Without prej....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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 securities. So the Assessing Officer has faded to clarify from where the cash was being refunded. Mr. Sonawani has stated that he has made sale exclusively to Apeejay Group after 2007. But if we see the sale figure given by the Assessing Officer in the order, the sale is much more than the sale made to Apeejay Group. No reply on this from the Assessing Officer. The Assessing Officer has failed to clarify which statement of Mr. Sonawani is reliable as he has given contradiction in all his statements. These are some the examples. From the above ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 members.' The honourable Agra-Bench of the Income-tax Appellate Tribunal in Shri Amol Chand Varshney Sewa Sansthan v. Addl. CIT [2013] 25 ITR (Trib) 211 (Agra) ; [2013] 95 DTR (Agra-Trib) 72 (16-29) has held as under : 'For applicability of clause (c) of sub-section (1) of section 13 read with clause (b) of sub-section (2) of section 13 of the Act, conditions mentioned in sub-section (3) read with Explanation 3 have to be fulfilled. The Revenue has failed to bring on record any evidence in the form of bill, voucher or other records proving that the amount of purchase which has accou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 verifying the facts produced by the assessee acted on her predetermined mind and activated section 13(1)(c) on the basis of false shifting statement and without any cogent material. No doubt it is the duty of the Assessing Officer to collect revenue, but being quasi-judicial authority, the Assessing Officer is supposed to act in a judicial manner and do justice to the assessee. The honourable Gujarat High Court in Surat City Gymkhana v. Deputy CIT [2002] 254 ITR 733 (Guj), (49-59) has referred to a citation of the honourable Supreme Court (CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC)) which states as under (page 747) : 'The taxing authorities exerci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the institution : Provided further that in the case of a society for religious purposes or a religious institution (whenever created or established) or a society for charitable purposes or a charitable 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), in so far as such use or application relates to any period before the 1st day of June, 1970 ; . . . (2) Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1), the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 fifty thou sand rupees ; (c) where such author, founder or person is a Hindu undivided family, a member of the family ; (cc) any trustee of the society or manager (by whatever name called) of the institution ; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid ; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. . .' From the above it is absolutely clear that section 13(1)(c)(ii), 13(2) and 13(3) are relevant in this case. However the Assessing Officer has failed to prove that how the property of the society has been used for the benefit of the person referred in sub-section (3) and in the method referred in sub-section (2). The Assessing Officer has relied upon only the statement which has foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 have also considered the written submissions filed by the learned authorised representative of the assessee-society vide letters dated August 13, 2014 and September 26, 2014. I have further considered various judicial pronouncements relied upon by the learned authorised representative of the assessee-society on the issue under reference. I have again considered the clarification issued vide Circular No. 387, dated July 6, 1984. On careful consideration of the assessment order, it has been noticed that the Assessing Officer has disallowed the deduction claimed by the assessee-society under sections 11 and 12 of the Act in view of alleged violation of the provisions of section 13(1)(c)/13(3) of the Act. The Assessing Officer has categorically held that the assessee-society has not purchased any software from M/s. Washington Software Ltd. and the entries reflected in the books of account in respect o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ruth. 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 at a place where the assessee wants. I fail to understand this attitude of the representatives of the assessee-society. On one hand they want to cross-examine Sh. Sanjay D. Sonawani and on the other hand do not avail the opportunity on frivolous grounds. In fact the representatives of the assessee-society do not want to cross-examine Sh. Sanjay D. Sonawani and put blame on the Assessing Officer who has perfectly made arrangement for his cross-examination as per provisions of law. So the plea regarding not allowing cross-examination of Sh. Sanjay D. Sonawani is summarily rejected as it is the fault of the representatives of the assessee-society to not to avail opportunity provided to them for cross-examination. I am also of the opinion that the asses see-society has vehemently failed to produce original CD of the Software or hard disc of computer where it has been installed although it was specifically aske....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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 statement of Shri Sanjay D. Sonawani as has been alleged by the learned authorised representative of the assessee-society but assessment framed by the Assessing Officer is supported by the statement of various employees of the assessee group, findings of survey operation, non- deduction of original CD or hard disc of computer where the software has been installed, failure on the part of the representatives of the assessee-society to cross-examine Shri Sanjay D. Sonawani and many more reasons as discussed in the assessment order. The judicial pronouncements relied upon by the assessee-society are also distinguishable on facts. Moreover, the learned authorised representative of the assessee-society absolutely failed to demonstrate that as to how the facts of the judicial pronouncements relied upon by him are similar to that of the facts of the case of the assessee-society. 6.9 In view of the above stated facts and in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....na 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 453 (Ker). 12. CIT v. Muthoottu Charitable Trust [1997] 227 ITR 203 (Ker). 13. CIT v. 21st Society of Immaculate Conception [2000] 241 ITR 193 (Mad). 14. CIT v. Gurukul Ghatkeswar Trust [2011] 332 ITR 611 (AP). 15. Action for Welfare and Awakening in Rural Environment (AWARE). 6.11 In view of the various judicial pronouncements as mentioned above, I am of the considered opinion that the Assessing Officer is fully justified in disallowing whole of the exemption claimed by the assessee-society under sections 11 and 12 of the Act by invoking provisions of section 13(1)(c)/13(3) of the Act. Moreover, the learned authorised representative of the assessee-society has not found any fault with the working of the Assessing Officer which has been done for working out the income to be taxed under the normal provisions of sections 28 to 44 of the Act. The addition of Rs. 33,85,12,530 made by the Assessing Officer on account of disallowance of deduction claimed by the assessee-society under sections 11 an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... various premises of the Group, no evidence regarding purchase of software was produced. (v) Mere providing of some print-outs, statedly from the software allegedly purchased would not amount, in the absence of the original software, to prove the actual purchase thereof. (vi) Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries. (vii) The statements of key employees of the assessee prove the entries to be just accommodation entries. (viii) The representatives of the assessee never stated that the Software stood installed in the central server in the head office of the assessee. (ix) The authorised representative of the assessee could not offer any satisfactory explanation, when asked as to whether either the original CD, or the hard-disc was available with the assessee. (x) The assessment order was not based merely on the statement of Shri Sanjay D. Sonawani. (xi) The case law cited by the assessee were distinguishable on facts. (xii) The assessee's alternative plea that only the amount allegedly misappropriated and corresponding depreciation expenses claimed ought to be taxed at the maximum marginal rate, was without force." 18. No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oup, which was handled by them, whereas the chart reproduced by the Assessing Officer, of sales made by M/s. Washington Software Ltd., at page 88 of the appeal papers for 2006-07, shows that the sales are much more than the purchases made by the Apeejay Group. This shows that the statement of Sh. Sanjay D. Sonawani is incorrect. (v) The Income-tax Appellate Tribunal, in its order dated May 8, 2014, while allowing registration under section 12AA, at pages 664- 665 of the paper book, noted the fact that the statements of Sh. Sanjay D. Sonawani were recorded under threat that there would arise liability of Rs. Hundred crores on him. (vi) All the instances clearly show that the statement of Sh. Sanjay D. Sonawani cannot be relied on and it has no evidentiary value. Reliance is placed on 'CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (CLC 80-83). (vii) There is no search on Sh. Sanjay D. Sonawani (viii) A chart showing the contradiction in the statements of Sh. Sanjay D. Sonawani is being filed separately. Not only there are glaring contradictions, but there are retractions also. Detailed sub missions were filed before the Commissioner of Income-tax (Appeals....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 16.03.2011 was based on a misunderstanding and misinformation. In fact Mr. Parag Mehta did not approach me as stated in my answer. I was misinformed and there was a misunderstanding between me and Shri Mehta. I took Mr. Parag Mehta's name thinking that he being a charted accountant would be able to help me in this case. As I told in my statement dated 16.03.2011, Shri Parag Mehta, charted accountant used to handle all the transactions with outside parties. In first statement Mr. Sanjay put onus of dealing on Parag Mehta. In his second and third statement he retracted from the same. In his fourth statement he again shifted onus of having dealing transaction with Mr. Parag Mehta. Page number-329 Question number-5 Page number Question number Page numbers-343 and 344 Question numbers-4 and 8 Page number Question number Remark Page 61 of appeal paper of 2010-11 (Paragraph B) Till 2003 this company was actually developing various kind of software such as . . . . In the year 2003 there were some financial and legal problems on account of which I was not in position to pay attention to day-to-day affairs of the company. All the other directors of the company namely (i)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the billing parties. 21. The crux of the argument of the assessee is that since Sh. Sanjay D. Sonawani has taken mutually contradictory stands in his four statements, reliance on such statements by the authorities below is unsustainable in law. For this proposition, the assessee has sought to place reliance on CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (copy placed at case law PB 80-83). For ready reference, all the said four statements of Sh. Sanjay D. Sonawani are being reproduced hereunder : (i) Statement dated March 16, 2011 (APB 328 to 332) 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 March 16, 2011 at the office of Deputy Director of Income-tax (Inv.), Aayakar Bhavan, 12 Sadhu Vaswani Chowk, Pune-411001. oath administered by oath taken by (Abhinay Kumbhar) (Sanjay D. Sonawani) DDIT (Inv)-Unit 1(1), Pune Q. 1 Please identify yourself Ans. I am Sanjay D. Sonawani son of Shri Devidas Sonawani 'aged 46 years occupation, businessman', resident of L-5 Mantri Park, Kothr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffice premises was also attached. Thus, virtually there is no physical activity of any . . . . software development" after, financial year 2003- 04. The company since financial year 2003-04 is neither having the necessary set up for developing any software nor the man power and expertise required. As on date the company is virtually defunct with no activity since last seven years. Q.6 Your authorised representative before undersigned on March 2, 2011 and March 11, 2011 had furnished the details of sales made by M/s. Washington Software Ltd. (WSL) from financial year 2003-04 up to current financial year. The details of such sales made are given below in a tabular manner. Sl. Financial year Sales made 1. 2003-04 16,18,25,345 2. 2004-05 6,36,30,300 3. 2005-06 7,86,30,300 4. 2006-07 5,94,35,001 5. 2007-08 1,06,00,000 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 Kindly refer to your reply to question No. 5 above whereby you have mentioned that there was no software development activity after financial year 2003-04. In that case please explain as to how the sales of this volume were made, by your company ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich parties these cheques were given or issued by Mr. Parag Mehta. In 2005 this account was closed and a new account was opened at Axis Bank, Kothrud Branch, Pune and in this case also the cheque book of this account in which all the cheques were signed by me, was kept in personal custody of Shri Parag Mehta and accordingly he used to transact with this. However, during the period of 2004-05, I was in prison for some time, the bills and invoices issued in this period are not in my knowledge and nor the company has received any money for that. Q.8 After going through the balance-sheet of your company for various financial years, it seems that you have debited software development related expenses. Please offer your comments in this regard. Ans. Yes, I agree that in the balance-sheet of WSL for various financial years there are debits related to software development expenses. I confirm these expenses are non-genuine (bogus expenses). As already stated above there was no any actual activity with regard to development of software. As such the figures debited are adjusted figures to match up with the sales. Though the books of account are audited, the books of account were never ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne Arts 40. Apeejay School of Marketing 41. Apeejay International School 42. Apeejay Education Society 43. Apeejay International School 44. Council for Educational and Professional 45. Rajeshwari Sangeet Academy I once again confirm that only sales bill has been raised in respect of these sales and no actual sale has taken place. Q.11 What is the total amount of commission M/s. Washington Software Ltd. has received from Mr. Parag Mehta during this period, i.e., financial year 2003-04 to current financial year ? Also explain the mode of receipt of such amount. Ans. The company has so far received commission of Rs. 32 lakhs during the abovementioned period from time to time in cash from Shri Parag Mehta. Over the turnover of Rs. 52 crores company was due for getting a commission of Rs. 52 lakhs but Shri Mehta duped for Rs. 20 lakhs and the company so far has got only Rs. 32 lakhs. This commission of Rs. 32 lakhs has not been recorded in M/s. Washing ton Software Ltd. regular books of account and therefore I on behalf of M/s. Washington Software Ltd. voluntarily disclose unaccounted income of Rs. 32 lakhs for various assessment years, the year-wise break up of this w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssuing these cheques to sales parties from the accounts of M/s. WSL for the last seven years. From the above I can also conclude that you and Shri Parag Mehta have been issuing cheques to sales parties without any genuine transactions/sales. Please give your detailed comment on the same. Ans. I would like to state that up till financial year 2003-04 the company was actually developing various softwares as stated in my answer to Q. No. 5 to Q. No. 11 in my statement recorded at Pune on March 16, 2011. I would further like to state that the answer to Q. No.7 in my statement recorded at Pune on March 16, 2011 was based on a misunderstanding and misinformation. In fact Mr. Parag Mehta did not approach me as stated in my answer. It was Mr. Rohidas Kumbharkar director of the company, who was approached, by a financial journalist Mr. Anil Roy who approached me with this proposal of bogus billing. Since I was in prison during this time, i.e., March 4 till June 2004 and my company was going through tough times as all our capital and reserves were locked up for the long-term investments, I had no option but to accept Mr. Anil Roy who approached me with this proposal to bogus billing. Since....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lard Pier, Mumbai-400 038. "I swear in the name of God that whatever I speak, I will speak only truth and nothing but the truth" Sd. Sd. Oath administered by Oath taken by Sonia Kumar Sanjay D. Sonawani DDIT (Inv.) unit VI(4) Mumbai. Q.1. Please justify yourself ? Ans I am Sanjay D. Sonawani, son of Shri Devidas Sonawani aged 46 years occupation businessman, resident-L/5, Mantri Park Kothrud, Pune. My educational qualification is M.Com (Master of Commerce). Q. 2. Please confirm that oath has been administered 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 by you. Kindly refer to answer No. 3 given by you on April 12, 2011 under oath before me, wherein you have said that the cheque books and slip books, kept with his (Parag V. Mehta) employees. Please keep the cheque books slips ? Ans. The cheque books and slip books were kept with Mr. who is the employee Mr. who is the employee Mr. Parag Mehta Q4. How often did you come and sit in the office of Mr. Parag Mehta in order to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was misinformed and there was a misunderstanding between me and Shri Mehta. I took Mr. Parag Mehta's name thinking that he being a charted accountant would be able to help me in this case. Q 8. Who brought the clients or interested parties to you ? Ans. As stated earlier up to 2007, Mr. Rohidas Kumbarkar were all the parties and to the best of my knowledge. Mr. Rohidas Kumbarkar was, responsible for getting the parties. After 2007 only one party was there, i.e., Apeejay Group who was handled by me. Q 9. Please tell me the name of the contact persons of the parties who used to collect these bills from you ? Ans. I do not remember the exact names of the persons but the bills were collected by one of the employer of the Apeejay Group. Q 10. Did you give these bills after talking to any important persons of the interested companies ? Ans. Since we were already giving bills to Apeejay Group prior to 2007, the requirement was never there. Q 11. How were the cheques in respect of accommodation bills collected by you ? Ans. Cheques RTGS were directly deposited by Apeejay Group in our bank. Q12. How do you know Mr. Rohidas Kumbarkar ? And where did you meet him ? An....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l me. What did you discuss with him so frequently ? Ans. I again state that Mr. Parag Mehta has not master minded the entire project. He was not involved in any of the billing transactions of the company. I was mis-informed that he was involved and hence I have clarified the facts. I used to discuss my investments and future plans on mobile. Q. 22. Which of the statements can I rely upon ? i.e. whether you are stating the truth in your statement before Pune Deputy Director of Income-tax (Inv.) on March 16, 2011 or before me (DDIT Inv. Mumbai) on April 12, 2011 ? Ans. My statement given to you on April 12, 2011 is correct and it clarifies some misunderstanding which I had about Mr. Parag Mehta This statement dated April 12, 2011, should be taken final. Q. 23. I am making you aware of the provision under section 277 of the Income-tax Act, 1961 (false statement in verification) and also provision of CRPC and CPC. Which I am reading to you right now. Why it should not be construed that you are making a false statement and prosecution may be launched against you ? Ans. I have not made false statement in Pune on March 16, 2011. In fact at that time I was told that, I would have....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hreat, coercion and the above information is true to the best of my knowledge." (iv) Statement dated December 30, 2011 (APB 347-349) "Statement recorded under oath under section 131 of the Income- tax Act Statement of Shri. Sanjay D. Sonawani, son of Shri Devidas Sonawani, aged 47 years, occupation businessman, resident of L-5, Mantri Park, Kothrud Pune, recorded under section 131 of the Income-tax Act, 1961, on oath on December 30, 2011 at the office of Deputy Director of Income-tax (Inv), Aayakar Bhavan, 12 Sadhu Vaswani Chowk, Pune-411001. I, Sanjay Sonawani, solemnly affirm on oath that in answers to the questions being asked hereunder, I shall speak the truth, nothing but truth and the only truth. Oath administered Oath taken Q. 1 Please identify yourself. Ans. I am Sanjay D. Sonawani son of Shri Devidas Sonawani aged 47 years, occupation businessman, resident of L-5, Mantri Park, Kothrud, Pune. My educational qualification is M.Com (Master of Commerce). Q. 2. Please confirm that oath has been administered 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 an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any operated by Shri. Parag Mehta himself), M/s. Aashumi Chemicals P. Ltd. (company operated by the relative of Parag Mehta) etc. and handed over to the outside parties to whom we had earlier issued the bills. I must once again reiterate that no services against the issue of bills have ever been provided by M/s. Washington Software Limited since financial year 2003-04. In fact, no records of the same were maintained by me. Q. 7 If it is to be believed that you do not posses any documents pertaining to the transactions with the outside parties, how come the details of sales made by M/s. Washington Software Limited to Appejay Education Society were filed by you vide your letter dated December 20, 2011 ? Ans. Sir, in this regard, I contacted the office of Shri Parag Mehta, who sent me the requisite details by e-mail. I can show you my e- mail account to confirm this fact. (As claimed by the assessee and as further requested by him, the 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. Sanj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he purpose, but it was Sh. Anil Roy, a financial journalist, who approached not him, i.e., the deponent, but Sh. Rohidas Kumbharkar, director, with the proposal of providing accommodation entries and that Sh. Parag Mehta, chartered accountant, a friend, let them use table space in his office in Mumbai. He also stated in his second statement that Sh. Parag Mehta was not involved in any of the bogus billing transactions of the company. 28. In his third statement, in answer to question No. 3, Sh. Sanjay D. Sonawani stated as follows : "The cheque books and slip books were kept with Mr. who is the employee of Sh. Parag Mehta." (stress supplied by us) 29. From the above, it is evident that all the four statements of Sh. Sanjay D. Sonawani are riddled with discrepancies. There are assertions and retractions and re-assertions and re-retractions, not only on one point, but with regard to numerous issues. The deponent, i.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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess denied or controverted by the Assessing Officer. 33. Accordingly, the learned Commissioner of Income-tax (Appeals)'s observation accepting the statement of Sh. Sanjay D. Sonawani is ill founded and the same is struck down. 34. The learned Commissioner of Income-tax (Appeals) has further observed that "the representatives of the assessee-society have also denied cross-examination of Sh. Sanjay D. Sonawani on one pretext or the other". It was the learned Commissioner of Income-tax (Appeals)'s opinion that the representatives of the assessee-society did not want to cross-examine Sh. Sanjay D. Sonawani, as they knew the truth ; that the Assessing Officer had made proper arrangement for cross-examination at Pune, but the representative of the assessee-society insisted on his presence at Jalandhar on the ground that he was the witness of the Department and he ought to be produced at a place where the 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. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat there should be airport in every town and city but what is required that it caters to that area. 6. Moreover the Order 16, rule 19 is applicable to the examination of witness and not to the requirement of cross-examination. Whereas the witness was examined by different officer at Pune/Mumbai and the assessee is being assessed at Jalandhar and adjudicating authority is also at Jalandhar. 7. The Revenue cannot ask the assessee to travel to Pune, when the Assessing Officer who has to adjudicate is at Jalandhar and statement is not recorded by him. The assessee has the right in asking right of cross-examination. The denial of cross-examination goes to the root of matter can such statement cannot be made basis for making addition/disallowance. Reliance is placed on the following decisions : a) Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (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 find....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 (Delhi). (xii) CIT v. D. M. Joshi [1999] 239 ITR 315 (Guj). (xiii) Amarjit Singh Bakshi (HUF) v. Asst. CIT [2003] 263 ITR (AT) 75, 151 (Delhi) (TM). (xiv) Mahes Gulabrai Joshi v. CIT (Appeals) [2005] 95 ITD 300 (Mum). (xv) Monga Metals (P) Ltd. v. Asst. CIT [2000] 67 TTJ (All) 247. (xvi) Sarita Devi Kajaria v. ITO [2005] 276 ITR (AT) 34 (Kol) ; [2004] 89 ITD 109 (Kol) (TM). (xvii) ITO v. Pukhraj N. Jain [2005] 95 ITD 281 (Mum). The honourable Delhi High Court in CIT v. Dharam Pal Prem Chand Ltd. [2007] 295 ITR 105 (Delhi) has held that (headnote) : ". . . the Assessing Officer had based his assessment order on the report obtained from the 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ommissioner of Income-tax (Appeals), it was the assessee who did not, in fact, want to cross-examine Sh. Sanjay D. Sonawani at all, as this suited the assessee's nefarious designs. The learned Commissioner of Income-tax (Appeals) has harboured the view that the assessee actually wanted to do away with and forego the genuine opportunities provided to it by the Assessing Officer to cross-examine Sh. Sanjay D. Sonawani, on one pretext or the other. Is it so ? 41. The impasse which ensued was that whereas the assessee wanted to cross-examine Sh. Sanjay D. Sonawani before the Assessing Officer at Jalandhar, the Assessing Officer at 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usiness or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area." 45. From the above provision, it is evident that the Assessing Officer of an area has jurisdiction over the persons either carrying on business or profession within such area, or residing therein. Such Assessing Officer, as the designation itself suggests, assess the income of the residents of his area. Therefore, he is the adjudicating authority of his area. For such adjudication, 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 h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ruction of the relevant provisions of law, as above. 50. In furtherance of the assessee's request to cross-examine Sh. Sanjay D. Sonawani at Jalandhar, the assessee had duly deposited travel expenses/ diet money amounting to Rs. 15,000. Then, the assessee has sought to place reliance on the provisions of Order XVI, rule 19 of the Code of Civil Procedure, contending that even the law applicable provides for a situation where the witness to be examined is located far away from the court. Order XVI, rule 19 of the C.P.C. provides as under : Order 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wever, the court has discretion to examine any person on commission, which includes a party also, when they are to appear as witnesses. Herein, as a matter of fact, Sh. Sanjay D. Sonawani is not a party to the assessment of the assessee. 54. The observation of the learned Commissioner of Income-tax (Appeals) is that it was the fault of the assessee, who repeatedly avoided the cross- examination of Sh. Sanjay D. Sonawani at Pune. In this regard, it remains undisputed that the statements of Sh. Sanjay D. Sonawani 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that the rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been purchased, in the absence of the original software CD and the hard-disc of the computer where it had been installed ; that moreover, Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries and everything was done on his direction ; that the statement of various key employees/ persons employed by the assessee-Group unambiguously proved without any doubt that the entries reflected in the books of account of the assessee were just accommodation entries 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 explanat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere are many persons in the management and I am providing a list of the same. Q. 5 How many schools/institutions are there in India/abroad ? Ans. I am giving a list of schools/institutions in India/abroad. Q.6 Do you use any software for use of this school ? Ans. Yes. Q.7 What are the different softwares that you use, please explain ? Ans. 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tember 16, 2006, February 11, 2006 and March 9, 2004 are not installed at your school. In this regard, I am 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 Del....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. Satya Paul I do not have any evidence that the software is s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....our 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 no such software were ever installed in their systems. Please submit the comments on the above. Ans. The ATSE software would certainly be present in the school systems. Though we could not show the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 softwares purportedly procured from M/s. Washington Software Ltd., but therein, the name of M/s. Washington Software Ltd. did not appear, whereas the name of Apeejay Education Society appeared. Sh. Amitava Misra was asked if he could show any evidence that the software had been developed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, stood statedly impounded by the survey team during the survey proceedings conducted on March 29, 2011, at the head office of the assessee-society, located at Apeejay Satya House, 14 Commercial Complex, GK-II, New Delhi. The server having been impounded by the survey team and not returned, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty, 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 reports were based on various modules of the softwares and there were thousands of papers of these reports from 2004 to 2011, which were produced before the Assessing Officer. It has been stated that though the name of M/s. Washington Software Ltd. does not appear on the screen of the software, as objec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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 Office. (2) The software installed at the Apeejay Education Society premises comprised the following modules and relates functionalities: Admission module Student admission Fee bill generation Providing facilities Generating receipts Receipts posting Discontinuing students Issuing TC Multiple reports Student development m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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. Even we have provided a certificate from an independent agency as desired by you to certify that the software of WSL is installed. We presume that this is more than enough to prove that the software in question is duly installed in server of the central office in Delhi and purchase is genuine and why WSL is denying is best known to it and cannot be taken as evidence against us being devoid of any documentary evidence. Still to meet the ends of justice and to satisfy you, we would request you to depute some expert from your Department to visit our central office and verify the software. In case any financial implication is there we are ready to bear th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elhi/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 (concerning ITA No. 713/Asr/2014), as reproduced in para 6 above, the Assessing Officer has observed as follows : "(1) During the course of assessment proceedings, it was seen that the assessee-society has paid money through cheques/bank drafts which have been credited in the Axis Bank account No. 104010200005128 of WSL (copy of bank statement is placed on record). The fact as narrated by Sh. Sonawani in his statement that his company WSL was actually not developing any software and was issuing only bogus sale bills is further corroborated from the fact that after credit of amount in the said account from the assessee, the cheques were immediately issued to following parti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation 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 assessee by the learned Commissioner of Income-tax (Appeals) and the evidence brought on record by the assessee having erroneously been ignored by him, it is seen from the record that registration was granted to the assessee on the very same facts by the learned Commissioner of Income-tax on March 25, 2013. A copy of his order has been appended at APB 569 to 603. The Tribunal, in its order dated January 28, 2011, held that the registration was wrongly withdrawn/cancelled. The Department sought redressal from the hon'ble High Court against the said Tribunal order and their Lordships, vide their order dated March 10, 2015, observed, inter alia, as follows, upholding the Tribunal order : "Thus, it cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions 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 registration of the trust or institution in the prescribed form and manner to the relevant authority and within the time stipulated therein or any extension thereof as may be granted. There are other conditions in section 12A with which we are not concerned in this reference. Compliance with section 12A does not entitle an assessee to the benefit of section 11, ipso facto. Non- compliance with section 12A bars an assessee from being granted the benefit of sections 11 and 12. 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. It would be entitled to be granted the benefit only if it complies with the other requirements of these sections. An assessee that has complied with the provisions of section12A mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 amount referred to in item 3 above, accumulated or set apart for specified purposes under section 11(2) Total of (3+4) 26,281,771.85 Net income Nil Tax due Nil Tax paid (TDS) 495,741.82 Refund due 495,741.82 Apeejay Education Society New Jawahar Nagar Bhagwan Mahavir Marg Jalandhar City Status : Society PAN : AAATA3534F Year ended : 31.03.2010 Assessment year : 2010-11 Ward : Range-III, Jalandhar Computation of income 1. Receipts : (Amount in Rs.) Revenue receipt 1,262,014,0738.13 Capital receipt 314,486,456.00 1,576,500,534.13 2. Amt. incurred for educational purposes Revenue expenses 1,054,192,938.68 Capital expenses 197,019,771.24 Depreciation 107,285,494.97 1,358,498,204.89 Surplus during the year, a....