TaxTMI 
TaxTMI 
2017 (3) TMI 186
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....ollowing grounds have been raised by the Revenue in memo of appeal filed with the Income-Tax Appellate Tribunal (Hereinafter called "the tribunal) in their appeal in ITA no. 798/Mum/2015:- "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in deleting the addition of Rs. 58,62,940/- made to the income of the assessee company in respect of its transactions with Akon Management Consultancy Private Limited by ignoring the evidentiary value of the statement of its director recorded u/s 131 of the Act wherein he had unequivocally admitted to his inability to substantiate the transactions with Akon Management Consultancy Private Limited and offered the said amount to tax ?" 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in deleting the addition of Rs. 58,62,940/- made to the income of the assessee company in respect of its transactions with Akon Management Consultancy Private Limited by ignoring the decision of the Hon'ble ITAT Mumbai in the case of GTC industries Ltd. V . ACIT [ITAT (Mum] 65 ITO 380] in which the Tribunal had held that the right to cross-examine witness is not an....
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....ath u/s 131 of the Act was recorded of the Director of the assessee company Shri Sharat Chandra Satpathy by the AO on 14.10.2011, and it was found by the AO that the assessee had transactions with M/s Akon Management Consultancy Pvt. Ltd. amounting to Rs. 58,62,940/- which were found to be un-substantive transactions. The assessee was confronted with the same by the AO and asked to furnish all details along with relevant evidences to substantiate the said transaction. The assessee in response submitted that the transactions with M/s Akon Management Consultancy Pvt. Ltd. were as per contract entered and payments were by account payee cheques which were duly accounted. The A.O. rejected the contentions of the assessee for the following reasons:- "i. It is a matter of record that the Investigation Wing has passed on the information that the abovementioned party viz. Akon Management Consultancy Pvt. Ltd. was one of the entities which was involved in providing accommodation entries and issued the bills /invoices to various parties, one of which is the present assessee company, who is said to be one of the beneficiaries of such transactions purported to have been carried out under the g....
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....o Rs. 58,62,940/- was disallowed by the AO by treating the same as unexplained expenditure which was added to the income of the assessee under the head 'income from other sources' and no deduction was allowed against it as per provisions of the Act by the AO vide assessment order dated 18-09-2013 passed by the AO u/s 143(3) r.w.s. 147 of the Act. 4. Aggrieved by the assessment order dated 18-09-2013 passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, the assessee preferred an appeal before the ld. CIT(A) . The assessee challenged the reopening of the assessment u/s 147 of the Act. The assessee in appeal contended before the learned CIT(A) that the reassessment proceedings started by the A.O. by issue of notice u/s 148 of the Act were not legal because the A.O. has not supplied a copy of such communication which was made basis for initiation of the reassessment proceedings. The A.O. relied upon the material without confronting the same to the assessee, therefore, such material becomes impermissible as evidence in view of the decision of Hon'ble Supreme Court in the case of Kishan Chand Chelaram v. CIT, reported in 125 ITR 713 (SC). Thus, it was further submitted by the assessee th....
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....002) 258 ITR 317 (Del.) 2) Sarthak Securities Company Pvt. Ltd. v. ITO (2010) 329 ITR110 (De!) 3) Assam Tea Company v. ITO (2005) 92 ITD 85 (Asr) (SB) . 4) Durga Prashad Goyal v. ITO (2006) 98 ITD 227 (Asr) (SB) 5) Smt. Kusumlata Bansal v. DClT (2008) 10 DTR (Ahd.)(Trib.)82 6) Virendra Kumar Agrawal v. ITO (2011) 132 ITD 140 (Mum) 7) ITO vs. Permanand 25 SOT 11 ITAT, Jodhpur The assessee also submitted written submissions as under:- ""We submit herewith a file containing all our submissions filed during course of the original assessment proceeding. As it will be clear from perusal of the same, the assessee had filed exhaustive details as called by the AO from time to time. This included, among others, the details regarding M/s. Akon Management Consultancy P. Ltd. It was only after making full and proper verification and inquiry that the A.O. framed the assessment. Neither there was any lapse.' deficiency on the part of the A.O. while framing the assessment nor is there even such allegation. As far as the reassessment is concerned, it is clear that the initiation of the reassessment itself was bad in law. As it will be clear from the reasons recorded, reliance is placed....
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....s only that the director did not have supporting evidence at the time when his statement was being taken by the Additional Director of Investigation of Scindia House and he was asked to prove the transaction with supportive evidence there and then only. It should be appreciated that even at the time of the statement , he was not confronted with any statement/material concerning M/s Akon. As such, the statement of director so given under duress and in ignorance of fact and of law cannot be binding to the assessee, much less, can be the sole basis for making such huge addition. In any case and most importantly , in course of the assessment proceeding , the assessee had clearly averred that the transaction with M/s Akon was genuine, thereby disputing & retracting the alleged disclosure made by the director. Assuming, but not admitting, that such statement had any evidentiary value, it can never be the sole basis, especially when it is retracted/clarified/disputed. This is more so, when the assessee places on record numerous evidences in support of the transaction and the A.O. does not deny/dispute/controvert such plethora of material evidence. Neither the Act nor any judicial precede....
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....hile recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. "Instruction: F. No. 286/212003-IT (Inv. 11), dated 10-3- 2003." In fact, on the basis of this Instruction only, in numerous cases, the action of the A.O. in making addition on the basis of statement of the assessee has been held to be bad in law. As regards the merits of the case, the case of the assessee is impeccable. The assessee placed on record host of material to prove not only the identity but also the genuineness of the transaction. The concern, M/s Akon is registered under the Companies Act, Income tax Act, Sales tax laws as well as service tax laws. In fact, the Income tax Department itself had issued a certificate for lower deduction of tax u/s 197 of the Act. The concern has also filed return of income for this very year a....
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....h M/s Akon Management Consultancy Private Limited were as per the contract entered by the company. The payments were by account payee cheques and were duly accounted. However, I submit that I am unable to substantiate the transaction. The issue has a potential of protracted litigation. In order to buy peace of mind, cover up the discrepancies and to avoid penal consequences, I submit that the expenses claimed for A. Y. 2008-09 of Rs. 58,62,940/- in connection with the above mentioned company may be disallowed. I shall pay the tax along with interest at the earliest." 3. The assessment for the year under consideration has been reopened based on statement of (i) Mr. Rajendra Bhimrajka and (ii) Mr. Sharat Chandra Satpathy (Assessee's Director). The statement of Mr. Rajendra Bhimrajka has not been given to us. In so far as the statement of Mr. Satpathy is concerned, recorded in the said statement ,he has proceeded on the assumption that the assessee may not be able to substantiate the transaction. However, we have the following details in respect of the said transaction: In this respect, we would like to submit as under to substantiate the transaction made by us : (i) M/s Akon Ma....
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....ion no 14 "Furnish party wise details of all major expenses exceeding Rs. 1,00,000/- debited under each head of the P&L A/c .Party wise details include name and address" We have submitted all the details called for during the course of assessment proceedings and the assessment order is passed under section 143(3) of the Income Tax Act, 1961 dated 29/7/2010 and allowed the expenses under section 37(1) of the Income tax Act, 1961 as wholly and exclusively incurred for the purpose of the business/profession. In view of the above, we submit that Professional fees paid by us amounting to Rs. 58,62,940/- to M/s Akon Management Consultancy Services Private Limited should be allowed as wholly and exclusively incurred for the purpose of the Business/profession under section 37(1) of the Income Tax Act, 1961." During appellate proceedings before learned CIT(A), the assessee was asked to clarify types of services which were rendered by M/s Akon Management Consultancy Services Pvt. Ltd. . In reply, the assessee submitted a chart, which is exhibited in the appellate order from pages 8 to 11, wherein the assessee submitted nature of work done by Akon Management Consultancy Private Limited in....
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....as also observed by the ld. CIT(A) that the assessee has produced all the necessary evidences in support of its claim that the expenses incurred in respect of various services rendered by M/s Akon Management Consultancy Pvt. Ltd. has actually rendered the services as mentioned in tax invoice/bills raised by it and payments were made through A/c payee cheque. In nutshell, the ld. CIT(A) held that the A.O. has disallowed the expenditure without any contrary evidence and without refuting the verifiable evidences submitted by the assessee and accordingly learned CIT(A) deleted the disallowance of expenditure of Rs. 58,62,940/- towards consultancy services , as made by the AO , vide appellate order dated 05-11-2014 passed by learned CIT(A). 5.Aggrieved by the appellate order dated 05-11-2014 passed by the ld. CIT(A), the Revenue filed an appeal before the tribunal while the assessee has filed its C.O. . The Revenue has challenged the deletion of disallowance of expenditure of Rs. 58,62,940/- paid to Akon Management Consultancy Private Limited by the assessee, while the assessee filed C.O. challenging the invocation of provisions of section 147/148 of the Act for reopening of the assess....
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....bmit that there had been no transactions with M/s Akon Management Consultancy Private Limited of abovementioned amounts aggregating to Rs. 65,23,600/-. There are no entries in the bank statements of the sums mentioned nor it is reflected in the sundry creditors. I submit that these transactions had never been entered into and the company has never claimed these amounts as expenses or under any other head. The company does not have bank account other than HDFC Bank (A/c 00472000012249, A/c 05382000000428, A/c 02272000001933) and 8BI (A/c 30462465059)." The ld. D.R. submitted that the amount of Rs. 58,62,940/- has been surrendered by the afore-stated director of the assessee company while recording statement on oath u/s 131 of the Act. The learned DR further relied upon the order of the A.O.. 7. The ld. Counsel for the assessee submitted that the ld. CIT (A) upheld the re-opening of the assessment u/s 147/148 of the Act , vide appellate orders dated 05-11-2014. It was submitted that re-opening of the assessment was done within four years from the end of the assessment year by issue of notice u/s 148 dated 30th March, 2013. Based upon the information received from the Investigation ....
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....940/- In question no. 5, of the above mentioned statement, Shri Sharat Chandra Satpathy was asked "Q5. On the basis of information is possession I have evidence that the Concern M/s Akon Management Consultancy Private Limited is a paper entity and doesn't do any business activity. You are required to explain the genuineness of the transaction, substantiate them with corroborative evidences and explain the allowability of the expenses under the Income Tax Act, 1961." In reply, he submitted, "Sir, the transactions with M/s Akon Management Consultancy Private Limited were as per the contract entered by the company. The payments were by account payee cheques and were duly accounted. However, I submit that I am unable to substantiate the transaction. The issue has a potential of protracted litigation. In order to buy peace of mind, cover up the discrepancies and to avoid penal consequences, I submit that the expenses claimed for A.Y. 2008-09 of Rs. 58,62,940/- in connection with the above mentioned company may be disallowed. I shall pay the tax along with interest at the earliest." In view of the above facts, I have reason to believe that income of Rs. 58,62,940/- ch....
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....Satpathy, Director of the assessee company was recorded on oath under section 131 of the Act by the AO on 14.10.2011 wherein he deposed that with respect to above mentioned concern M/s Akon Management Consultancy Pvt. Ltd. , the assessee company had transactions but was unable to substantiate the same, and the same was surrendered by said Director as income of the assessee. The case was reopened by AO u/s 147 of the Act by issuing notice u/s 148 of the Act, dated 30th March, 2013 which was within a period of four year from the end of assessment year. The reasons recorded for re-opening were supplied by the AO to the assessee on 12th August, 2013 which was stated by the assessee to have been supplied at the fag end when the assessment was getting time barred. The case was reopened u/s 147/148 of the Act within four years from the end of the assessment year. Thus, a fresh and tangible incriminating material was stated to have come into possession of the AO from the investigation wing wherein Mr Rajendra Bhimrajka stated to be controller of M/s Akon Management Consultancy Pvt. Ltd. had deposed that M/s Akon Management Consultancy Pvt. Ltd. is a paper entity engaged in providing accomm....
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....ngement with Akon Management Consultancy Private Limited and actual rendering of services by Akon Management Consultancy Private Limited for the assessee's clients on behalf of the assessee. It is incumbent on the assessee to prove the genuineness of the transactions entered into with M/s Akon Management Consultancy Pvt. Ltd. as merely filing of contract, invoices and payments through banking channel are not sufficient to demonstrate the genuineness of the transaction. The assessee could not prove the genuineness of the transaction before the AO . The learned CIT(A) accepted the contentions of the assessee merely based on contracts and invoices etc. which is not sufficient as the assessee has to demonstrate actual rendering of services by Akon Management Consultancy Private Limited to the assessee clients on behalf of the assessee supported by cogent evidences and explanations evidencing involvement of Akon Management Consultancy Private Limited in actual rendering of the services. The Director of the assessee vide statement recorded u/s 131 of the Act on 14.10.2011 has surrendered the said amount and hence the onus is heavy on assessee to prove the genuineness of the afore-stated ....