AAA TECHNOLOGIES P.LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

CO 280/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4918 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABDUL HAKEEM M
• Keywords: Reopening of assessment; Depreciation; Opportunity of being heard; Principle of natural justice; Additional evidence; Permanent establishment; Question of law; Validity of assessment; Onus to prove; Reason to believe; Reassessment proceedings; TDS
• Section: 143(3); 142(1); 40(a)(ia); 37(1); 143(1); 205; 195; 148; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , HON'BLE ACCOUNTANT MEMBER ITA NO S . 3454 & 3455 /MUM/201 7 (A.Y S : 2009 - 10 & 201 2 - 13) INCOME TAX OFFICER 2(1)(1) 543, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S. AAA TECHNOLOGIES PVT. LTD., 278 - 280, F - WING, SOLARIS - 1 SAKI VIHAR ROAD OPP. L & T GATE NO. 6 POWAI, ANDHERI (E) MUMBAI 400 072 PAN: AADCA 8858 Q ( ASSESSEE ) (RESPONDENT) C.O. NO. 280/ MUM /2018 [ARISING OUT OF ITA NO. 3454 /MUM/2017 (A.Y: 2009 - 10)] M/S. AAA TECHNOLOGIES PVT. LTD., 278 - 280, F - WING, SOLARIS - 1 SAKI VIHAR ROAD OPP. L & T GATE NO. 6 POWAI, ANDHERI (E) MUMBAI 400 072 PAN: AADCA 8858 Q V. INCOME TAX OFFICER 2(1)(1) 543, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 ( ASSESSEE ) (RESPONDENT) ASSESSEE BY : SHRI VIPUL JOSHI DEPARTMENT BY : SHRI ABDUL HAKEEM M. DATE OF HEARING : 02 .05.2019 DATE OF PRONOUNCEMENT : 17 .0 5.2019 2 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., O R D E R PER C. N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE FOR THE A.YS. 2009 - 10 AND 2012 - 13 AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 3, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 10.02.2017. 2. FIRST WE TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE FOR THE A.Y. 2009 - 10 WHERE THE VALIDITY OF REASSESSMENT IS CHALLENGED BY THE ASSESSEE ON THE GROUND THAT THE REAS ONS FOR REOPENING OF ASSESSMENT WERE NEVER PROVIDED TO THE ASSESSEE. 3. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THAT AFTER RECEIVING NOTICE U/S. 148 OF THE ACT BY THE ASSESSEE, THE ASSESSEE BY LETTER DATED 15.04.2014 REQUESTED TO PROVIDE THE REASONS FOR REOPENING. THIS FACT WAS ALSO RECORDED BY THE ASSESSING OFFICER IN THE ORDER SHEET STATING THAT ASSESSEE ON 16.04.2014 FILED A LETTER IN TAPAL SEEKING REASONS FOR REOPENING. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, THOUGH THE ASSESSEE REQUESTED FOR REASONS THE ASSESSING OFFICER DID NOT PROVIDE ANY REASONS AND THEREFORE, THE ASSESSMENT MADE U/S. 148 OF THE ACT IS BAD IN LAW. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS. A. PCIT V. V. RAMAIAH [103 TAXMANN.COM 202 (SC)] B. CIT V. VIDESH SANCHAR NIGAM LTD [340 ITR 66 (BOM)] 3 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., C. CIT V. TREND ELECTRONICS [379 ITR 456 (BOM.)] D. CIT V. IDBI LTD. [(2016) 76 TAXMANN.COM 227 (BOM.)] 4. LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRING TO THE ORDER OF THE LD.CIT(A) SUBMITS THAT, THE LD. C IT(A) DID NOT DISPUT E THE FACT THAT THE ASSESSING OFFICER NEVER PROVIDED TO THE ASSESSEE THE REASONS FOR REOPENING THE ASSESSMENT. HOWEVER, HE DISMISSED THE CONTENTIONS OF THE ASSESSEE OBSERVING THAT IF REASONS WERE NOT SUPPLIED THE ASSESSEE OUGHT TO HAVE SOUGHT SUITABLE REMEDY AT THAT STAGE BY FILING A WRIT PETITION BEFORE THE HONBLE BOMBAY HIGH COURT. HE ALSO OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY OBJECTIONS AND ATTENDED FOR THE PROCEEDINGS. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND EVIDENCES PRODUCED BEFORE US. THE ASSESSEE ON RECEIPT OF NOTICE U/S. 148 OF THE ACT FILED LETTER DATED 15.04.2014 BEFORE THE ASSESSING OFFICER ON 16.04.2014 REQ UESTING TO PROVIDE REASONS TO BELIEVE THAT ITS INCOME CHARGE ABLE TO TAX FOR THE A.Y. 2009 - 10 HAD ESCAPED ASSESSMENT. WE NOTICE THAT THIS FACT WAS ALSO RECORDED BY THE ASSESSING OFFICER IN THE ORDER SHEET. HOWEVER, THE ASSESSING OFFICER WITHOUT PROVIDING THE REASONS FOR REOPENING THE ASSESSMENT COMPLETED THE REASSESSMENT ON 23.03.2015 U/S. 143(3) R.W.S 147 OF THE ACT BY MAKING ADDITION OF .80,60,000/ - ON ACCOUNT OF SHARE PREMIUM RECEIVED BY THE 4 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., ASSESSEE AND BY MAKING DISALLOWANCE OF EXPENSES OF .3,00,70, 000/ - TOWARDS PROFESSIONAL FEE . ON A PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THERE IS NO REFERENCE TO ANY REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT. NOWHERE IN THE REASSESSMENT ORDER THE ASSESSING OFFICER MENTIONED OR D ISCUSSED THE REASONS FOR WHICH THE REOPENING WAS MADE. THE ASSESSING OFFICER COMPLETED THE REASSESSMENT REJECTING THE CONTENTIONS OF THE ASSESSEE ON MERITS BUT DID NOT DISCUSS AS TO WHY THE ASSESSMENT WAS REOPENED. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING ON AS TO WHY HE HAS REASON TO BELIEVE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE LD. CIT(A) REJECTED GROUND RAISED BY THE ASSESSEE ON VALIDITY OF ASSESSMENT BY MERELY OBSERVING THAT THE ASSESSEE OUGHT TO HAVE SOUGHT SUITABLE REMEDY AT THA T STAGE BY FILING WRIT PETITION BEFORE THE HONBLE BOMBAY HIGH COURT. THE LD. CIT(A) UPHELD THE REASSESSMENT ON THE GROUND THAT THE ASSESSEE ATTENDED FOR THE HEARING AND NOT OBJECTED FOR REOPENING. EVEN BEFORE US THE REVENUE COULD NOT PRODUCE ANY REASONS RECORDED FOR REOPENING OF ASSESSMENT THOUGH OPPORTUNITY WAS GIVEN. IN THE LIGHT OF THESE FACTS , NOW LET US EXAMINE THE DECISIONS RELIED ON BY THE ASSESSEE CHALLENGING THE REOPENING ON THE GROUND THAT IN THE ABSENCE OF REASONS , THE REASSESSMENT ORDER IS B AD IN LAW. 5 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., 7. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. VIDESH SANCHAR NIGAM LTD (SUPRA) CONSIDERED A SITUATION WHERE REASONS RECORDED FOR REOPENING OF ASSESSMENT WERE FURNISHED ONLY AFTER COMPLETION OF ASSESSMENT AND THEIR LORDSHIPS HELD THAT IN SU CH SITUATION REASSESSMENT ORDER CANNOT BE UPHELD WITH THE FOLLOWING OBSERVATIONS: 2. THE FINDING OF FACT RECORDED BY THE INCOME TAX APPELLATE TRIBUNAL IS THAT IN THE PRESENT CASE THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT THOUGH REPEATEDLY ASKED BY THE ASSESSEE WERE FURNISHED ONLY AFTER COMPLETION OF THE ASSESSMENT. THE TRIBU NAL FOLLOWING THE JUDGMENT OF THIS COURT IN THE CASE OF CIT V/S. FOMENTO RESORTS & HOTELS LIMITED, INCOME TAX APPEAL NO.71 OF 2006 DECIDED ON 27TH NOVEMBER 2006 HAS HELD THAT THOUGH THE REOPENING OF THE ASSESSMENT IS WITHIN THREE YEARS FROM THE END OF RELE VANT ASSESSMENT YEAR, SINCE THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT WERE NOT FURNISHED TO THE ASSESSEE TILL THE COMPLETION OF ASSESSMENT, THE REASSESSMENT ORDER CANNOT BE UPHELD. MOREOVER, SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST TH E DECISION OF THIS COURT IN THE CASE OF FOMENTO RESORTS & HOTELS LIMITED HAS BEEN DISMISSED BY THE APEX COURT VIDE ORDER DATED 16TH JULY 2007. 8. IN THE CASE OF CIT V. TREND ELECTRONICS (SUPRA) THE ASSESSEE FILED RETURN OF INCOME WHICH WAS PROCESSED U/S. 143 (1) OF THE ACT. SUBSEQUENTLY ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS BY ISSUE OF NOTICE U/S. 148 OF THE ACT. ASSESSEE SOUGHT COPY OF REASONS FOR REOPENING. WITHOUT FURNISHING REASONS RECORDED, THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO F ILE RETURN OF INCOME. ASSESSEE INFORMED THAT ORIGINAL RETURN OF INCOME FILED BE TREATED AS RETURN OF INCOME CONSEQUENT TO NOTICE U/S.148 OF THE ACT. THEREAFTER, ASSESSING OFFICER COMPLETED ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT. ON THESE FACTS, TH E HONBLE BOMBAY HIGH COURT HELD THAT THE REVENUE CANNOT BE ALLOWED TO JUSTIFY 6 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., FAILURE TO FURNISH THE REASONS FOR REOPENING ASSESSMENT ON PLEA THAT ASSESSEE HAD ASKED FOR REASONS RECORDED ONLY ONCE. IT WAS ALSO HELD THAT FAILURE TO FURNISH RECORDED REASON S FOR ISSUE OF REOPENING NOTICES TO ASSESSEE BEFORE COMPLETION OF ASSESSMENT WOULD MAKE THE REASSESSMENT ORDER PASSED IN PURSUANCE OF SUCH NOTICE IS BAD IN LAW . IN HOLDING SO THE HONBLE BOMBAY HIGH COURT HELD AS UNDER: - 2. FOLLOWING QUESTIONS OF LAW AR E URGED BY REVENUE FOR OUR CONSIDERATION: 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS CORRECT IN APPLYING THE RATIO OF THE APEX COURT IN GNK DRIVESHAFTS (INDIA) LTD. VS. ITO 259 ITR 19 (SC) WHEN THE FACTS ARE CONTRARY TO THE FACTS OF THE INSTANT CASE? 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL HAD IGNORED THE FACT THAT IN THE PROCEEDINGS BEFORE THE AO IN SUBSEQUENT HEARINGS PRIOR TO ASSESSMENT, THE FIRM HAD NEITHER SO UGHT FOR THE REASONS RECORDED, SINCE BY INTERFERENCE, THEY WERE ALREADY AWARE OF THE SAME? 3. THE RESPONDENT - ASSESSEE FILED IT'S RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 09 DECLARING TOTAL INCOME OF RS.7.67 LAKHS. THIS RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ACCEPTING THE RETURNED INCOME. 4. ON 26 MARCH 2010, THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT SEEKING TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2008 09. ON RECEIPT OF NOTICE, THE RESPONDENT - ASSESSEE BY LETTER DATED 28 APRIL 2010 SOUGHT COPY OF RECORDED REASONS FOR REOPENING OF ASSESSMENT IN RESPECT OF NOTICE DATED 26 MARCH 2010 UNDER SECTION 148 OF THE ACT. THE ASSESSING OFFICER BY LETTER DATED 29 APRIL 20 10 DIRECTED THE RESPONDENT - ASSESSEE TO FILE IT'S RETURN OF INCOME AND ALSO INFORMED THE RESPONDENT - ASSESSEE THAT THE REASONS WOULD BE FURNISHED AFTER THE RETURN OF INCOME IS FILED. THE RESPONDENT ASSESSEE THEREAFTER BY LETTER DATED 7 MAY 2010 INFORMED THE ASSESSING OFFICER THAT RETURN OF INCOME FILED ON 29 SEPTEMBER 2008 UNDER SECTION 139 OF THE ACT BE TREATED AS THE RETURN OF INCOME CONSEQUENT TO NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSING OFFICER THEREAFTER COMPLETED THE REASSESSMENT PROCEEDINGS ON 30 DECEMBER 2010 UNDER SECTION 143(3) R/W 147 OF THE ACT WITHOUT HAVING GIVEN A COPY OF THE REASONS RECORDED FOR ISSUE OF REOPENING NOTICE DATED 26 MARCH 2010 TO THE RESPONDENT - ASSESSE. 5. BEING AGGRIEVED, THE RESPONDENT - ASSESSEE PREFERRED AN APPEAL TO C OMMISSIONER OF INCOME TAX (APPEALS) (THE 'CIT(A)'). HOWEVER, THE APPEAL 7 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., WAS NOT ENTERTAINED BY THE CIT(A) WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND ORDER DATED 30 DECEMBER 2010. 6. A FURTHER APPEAL WAS PREFERRED BY THE RESPONDENT TO THE TRIBUN AL. THE IMPUGNED ORDER OF THE TRIBUNAL RECORDS THE UNDISPUTED FACT THAT THE RESPONDENT - ASSESSEE HAD SOUGHT FOR REASONS FOR REOPENING NOTICE DATED 26 MARCH 2010 FROM THE ASSESSING OFFICER. THE REASONS WERE ADMITTEDLY NOT FURNISHED TO THE RESPONDENT - ASSESSEE BEFORE THE COMPLETION OF THE REASSESSMENT PROCEEDINGS. THE IMPUGNED ORDER PLACES RELIANCE UPON THE DECISION OF APEX COURT IN GNK DRIVESHAFTS (INDIA) LTD. VS. ITO 1 WHEREIN IT HAS BEEN SPECIFICALLY PROVIDED THAT THE ASSESSING OFFICER IS BOUND TO FURNISH REA SONS FOR ISSUANCE OF REOPENING OF NOTICE WHEN SOUGHT FOR BY THE ASSESSEE. FURTHER, RELIANCE WAS PLACED UPON THE DECISION OF THIS COURT IN CIT VS. VIDESH SANCHAR NIGAM LTD. 2 WHEREIN THIS COURT HAS HELD THAT FAILURE TO FURNISH THE RECORDED REASONS FOR ISSUE OF REOPENING NOTICES TO THE ASSESSEE BEFORE COMPLETION OF THE ASSESSMENT PROCEEDINGS WOULD MAKE THE REASSESSMENT ORDER PASSED IN PURSUANCE OF SUCH A NOTICE BAD IN LAW. IN THE ABOVE CIRCUMSTANCES, THE APPEAL OF THE RESPONDENT - ASSESSEE WAS ALLOWED BY THE TRI BUNAL. 7. MR. PINTO, THE LEARNED COUNSEL FOR THE REVENUE SUBMITS THAT THE RESPONDENT - ASSESSEE HAD ONLY ASKED FOR REASONS ONCE AND DID NOT FURTHER ASK FOR REASONS. FURTHER HE SUBMITS THAT AS THE RESPONDENT - ASSESSEE HAD PARTICIPATED IN THE PROCEEDINGS BEFORE THE ASSESSING OFFICER, IT MUST BE IMPLIED THAT REASONS WERE FURNISHED. 8. WE FIND THAT THE IMPUGNED ORDER MERELY APPLIES THE DECISION OF THE APEX COURT IN GNK DRIVESHAFTS (INDIA) LTD. (SUPRA). FURTHER IT ALSO FOLLOWS THE DECISION OF THIS COURT IN VIDESH SANCHANR NIGAM LTD. (SUPRA) IN HOLDING THAT AN ORDER PASSED IN REASSESSMENT PROCEEDINGS ARE BAD IN LAW IN THE ABSENCE OF REASONS RECORDED FOR ISSUING A REOPENING NOTICE UNDER SECTION 148 OF THE ACT BEING FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR. IT IS AXI OMATIC THAT POWER TO REOPEN A COMPLETED ASSESSMENT UNDER THE ACT IS AN EXCEPTIONAL POWER AND WHENEVER REVENUE SEEKS TO EXERCISE SUCH POWER, THEY MUST STRICTLY COMPLY WITH THE PREREQUISITE CONDITIONS VIZ. REOPENING OF REASONS TO INDICATE THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH WOULD WARRANT THE REOPENING OF AN ASSESSMENT. THESE RECORDED REASONS AS LAID DOWN BY THE APEX COURT MUST BE FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR SO AS TO ENABLE T HE ASSESSEE TO OBJECT TO THE SAME BEFORE THE ASSESSING OFFICER. THUS IN THE ABSENCE OF REASONS BEING FURNISHED, WHEN SOUGHT FOR WOULD MAKE AN ORDER PASSED ON REASSESSMENT BAD IN LAW. THE RECORDING OF REASONS (WHICH HAS BEEN DONE IN THIS CASE) AND FURNISHIN G OF THE SAME HAS TO BE STRICTLY COMPLIED WITH AS IT IS A JURISDICTIONAL ISSUE. THIS REQUIREMENT IS VERY SALUTARY AS IT NOT ONLY ENSURES REOPENING NOTICES ARE NOT LIGHTLY ISSUED. BESIDES IN CASE THE SAME HAVE BEEN ISSUED ON SOME MISUNDERSTANDING/MISCONCEPT ION, THE ASSESSEE IS GIVEN AN OPPORTUNITY TO POINT OUT THAT THE REASONS TO BELIEVE AS RECORDED IN THE REASONS DO NOT WARRANT REOPENING BEFORE THE REASSESSMENT PROCEEDINGS ARE COMMENCED. THE ASSESSING OFFICER DISPOSES OF THESE OBJECTIONS AND IF SATISFIED WI TH THE OBJECTIONS, THEN THE IMPUGNED REOPENING NOTICE UNDER SECTION 148 OF THE ACT IS DROPPED/WITHDRAWN OTHERWISE IT IS PROCEEDED WITH FURTHER. IN ISSUES SUCH AS 8 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., THIS, I.E. WHERE JURISDICTIONAL ISSUE IS INVOLVED THE SAME MUST BE STRICTLY COMPLIED WITH BY T HE AUTHORITY CONCERNED AND NO QUESTION OF KNOWLEDGE BEING ATTRIBUTED ON THE BASIS OF IMPLICATION CAN ARISE. WE ALSO DO NOT APPRECIATE THE STAND OF THE REVENUE, THAT THE RESPONDENT ASSESSEE HAD ASKED FOR REASONS RECORDED ONLY ONCE AND THEREFORE SEEKING TO J USTIFY NON - FURNISHING OF REASONS. WE EXPECT THE STATE TO ACT MORE RESPONSIBLY. 9. IN VIEW OF THE FACT THAT THE ORDER OF THE TRIBUNAL HAS ONLY APPLIED THE SETTLED POSITION OF LAW IN ALLOWING THE RESPONDENT ASSESSEE'S APPEAL. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. 9. IN THE CASE OF CIT V. IDBI LIMITED (SUPRA) THE ASSE SSING OFFICER PASSED REASSESSMENT ORDER WITHOUT SUPPLYING COPY OF REASONS RECORDED AND COMPLETED THE REASSESSMENT DISALLOWING DEPRECIATION ON ASSETS LEASED OUT BY THE ASSESSEE. THE LD. CIT(A) AFFIRMED ORDER OF THE ASSESSING OFFICER AND THE TRIBUNAL HELD T HAT NON - SUPPLY OF REASONS IN SUPPORT OF THE RE - OPENING OF ASSESSMENT WOULD MAKE THE ORDER PASSED THEREON BAD IN LAW. THE HONBLE HIGH COURT HELD AS UNDER: - 2. THE REVENUE HAS URGED THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERATION: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS RIGHT IN QUASHING THE REASSESSMENT PROCEEDINGS EVEN THOUGH THE ASSESSEE WAS AWARE OF THE REASONS OF REOPENING AND ALSO PARTICIPATED IN THE ASSESSMENT PROCEEDINGS? (B) WHETHER ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS RIGHT IN DELETING THE DEPRECIATION DISALLOWED BY THE ASSESSING OFFICER ON THE 'LEASED' ASSETS? 3. RE.: QUESTION (A) (I) FOR THE ASSESSMENT YEAR 1993 94, THE REGULAR ASSESSMENT WAS COMPLETED BY AN ORDER DATED 26 MARCH 1996 U/S. 143(3) OF THE ACT. THEREAFTER, ON 9 DECEMBER 1996, THE ASSESSING OFFICER ISSUED A NOTICE U/S. 147 READ WITH SECTION 148 OF THE ACT, SEEKING TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1993 94. ON RECEIPT OF NOTICE, THE RESPONDENT - ASSESSEE SOUGHT FROM THE ASSESSING OFFICER A COPY OF REASONS RECORDED FOR ISSUING REOPENING NOTICE DATED 9 DECEMBER 1996. HOWEVER, THE SAME WAS NOT SUPPLIED. THE ASSESSING OFFICER, IN FACT PASSED AN ASSESSMENT ORDER ON 26 MARCH 19 99 CONSEQUENT TO THE IMPUGNED NOTICE FOR RE - ASSESSMENT DATED 9 DECEMBER 1996 WITHOUT SUPPLYING THE COPY OF THE REASONS RECORDED. 9 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., (II) BEING AGGRIEVED, THE RESPONDENT ASSESSEE CARRIED THE ISSUE IN APPEAL TO THE COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)) . IN ITS APPEAL, THE RESPONDENT - ASSESSEE INTER ALIA CHALLENGED THE JURISDICTION OF THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT ON A REOPENING NOTICE UNDER SECTION 148 OF THE ACT WITHOUT HAVING SUPPLIED THE COPY OF THE REASONS IN SUPPORT OF THE IMPUGNE D NOTICE TO THE APPELLANT AND ALSO ON MERITS I.E. DEPRECIATION ON LEASED ASSETS. BY AN ORDER DATED 19 DECEMBER 2003, THE CIT(A) DISMISSED THE RESPONDENT ASSESSEE'S APPEAL TO THE EXTENT IT RELATED TO THE LACK OF JURISDICTION WITH THE ASSESSING OFFICER TO CO MPLETE THE ASSESSMENT ON A REOPENING NOTICE WITHOUT HAVING FURNISHED A COPY OF THE REASONS IN SUPPORT THEREOF TO THE ASSESSEE. (III) BEING AGGRIEVED, THE RESPONDENT CARRIED THE ISSUE IN APPEAL TO THE TRIBUNAL. THE TRIBUNAL IN THE IMPUGNED ORDER RECORDS THE FACT THAT IT IS AN UNDISPUTED POSITION THAT IN SPITE OF REPEATED REQUESTS MADE BY THE RESPONDENT ASSESSEE, THE ASSESSING OFFICER DID NOT SUPPLY ITS REASONS IN SUPPORT OF THE REOPENING NOTICE UNDER SECTION 148 OF THE ACT. ON THE AFORESAID FACTS, THE IMPUGNED ORDER OF THE TRIBUNAL BY PLACING RELIANCE UPON THE DECISIONS OF THIS COURT IN SIESTA STEEL CONSTRUCTION (P.) LTD. VS. K.K. SHIKARE 1 , CIT VS. FOMENTO RESORTS AND HOTELS LTD. 2 AND UPON THE DECISION OF ITS CO - ORDINATE BENCH IN CASE OF TATA INTERNATIONAL LTD. VS. DCIT 3 CONCLUDED THAT THE NON - SUPPLY OF REASONS IN SUPPORT OF THE REOPENING NOTICE WOULD MAKE THE ORDER PASSED THEREON BAD IN LAW. CONSEQUENTLY, THE IMPUGNED ORDER ALLOWED THE APPEAL ON ISSUE OF JURISDICTION AND IN THAT VIEW THE ISSUE ON MERITS BECAME ACADEMIC. (IV) MR. MALHOTRA, COUNSEL FOR THE REVENUE, SUBMITS THAT THE RESPONDENT ASSESSEE WAS AWARE OF THE REASONS FOR THE REASSE SSMENTS. THUS, THERE WAS NO VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. IN THE ABOVE VIEW, IT IS SUBMITTED THAT THE QUESTION AS FRAMED BE ADMITTED FOR CONSIDERATION. (V) WE FIND THAT THE QUESTION AS FRAMED PROCEEDS ON THE BASIS THAT THE RESPONDENT ASSE SSEE WAS AWARE OF THE REASONS FOR RE - ASSESSMENT. THE ONLY BASIS FOR THE AFORESAID SUBMISSION IS THE SUBMISSION MADE BY THE REVENUE BEFORE THE TRIBUNAL THAT THE RESPONDENT ASSESSEE IS A PUBLIC SECTOR INSTITUTION WHO WAS AWARE THAT SEARCH ACTION HAS BEEN INI TIATED ON CERTAIN LESSEES IN RESPECT OF TRANSACTIONS WITH IDBI I.E. RESPONDENT - ASSESSEE. ON THE BASIS OF THE ABOVE, IT IS TO BE INFERRED THAT THE REASON FOR RE - ASSESSMENT WAS KNOWN TO THE RESPONDENT ASSESSEE. THE SUPPLY OF REASON IN SUPPORT OF THE NOTICE F OR REOPENING OF AN ASSESSMENT IS A JURISDICTIONAL REQUIREMENT. THE REASONS RECORDED FORM THE BASIS TO EXAMINE WHETHER THE ASSESSING OFFICER HAD AT ALL APPLIED HIS MIND TO THE FACTS AND HAD REASONS TO BELIEVE THAT TAXABLE INCOME HAS ESCAPED REASSESSMENT. IT IS THESE REASONS, WHICH HAVE TO BE MADE AVAILABLE TO THE ASSESSEE AND IT COULD GIVE RISE TO A CHALLENGE TO THE REOPENING NOTICE. IT IS UNDISPUTED THAT THE REASONS RECORDED FOR ISSUING REOPENING NOTICE WERE NEVER COMMUNICATED TO THE RESPONDENT ASSESSEE IN SPITE OF ITS REPEATED REQUESTS. THUS, THE GRIEVANCE OF THE REVENUE ON THE ABOVE COUNT IS UNSUSTAINABLE. (VI) AN ALTERNATIVE SUBMISSION IS MADE ON BEHALF OF THE REVENUE THAT THE OBLIGATION TO SUPPLY REASONS ON THE ASSESSING OFFICER WAS CONSEQUENT TO THE DEC ISION OF THE APEX COURT THAT GKN DRIVESHAFTS (INDIA) LTD. VS. INCOME - TAX OFFICER 4 RENDERED IN 2003 WHILE, IN THE PRESENT CASE, THE REOPENING NOTICE IS DATED 9 DECEMBER 1996. THUS IT SUBMITTED AT THE TIME WHEN THE NOTICE UNDER SECTION 148 OF THE ACT WAS ISS UED AND THE TIME WHEN ASSESSMENT WAS COMPLETED, THERE WAS NO SUCH REQUIREMENT TO FURNISH TO THE ASSESSEE A COPY OF THE REASONS RECORDED. THIS SUBMISSION IS NOT CORRECT. WE FIND THAT THE IMPUGNED ORDER RELIES UPON THE DECISION OF THIS COURT IN SEISTA STEEL CONSTRUCTION (P.) LTD. (SUPRA) WHEN IT IS HELD THAT IN THE ABSENCE OF SUPPLY OF REASONS RECORDED FOR ISSUE OF REOPENING NOTICE THE ASSESSMENT ORDER WOULD BE WITHOUT JURISDICTION AND NEEDS TO BE QUASHED. THE ABOVE VIEW AS TAKEN BY THE TRIBUNAL HAS ALSO BEEN TAKEN BY THIS COURT IN CIT VS. VIDESH SANCHAR NIGAM LTD.5 VIZ. NON - SUPPLY OF REASONS RECORDED TO ISSUE A 10 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., REOPENING NOTICE WOULD MAKE THE ORDER OF ASSESSMENT PASSED THEREON BAD AS BEING WITHOUT JURISDICTION. (VII) IN THE ABOVE VIEW, THE QUESTION (A) AS FRAMED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED. 10. IN THE CASE OF PCIT V. V. RAMAIAH [103 TAXMAN.COM 201] THE FOLLOWING QUESTION HAS BEEN RAISED BEFORE THE HONBLE KARNATAKA HIGH COURT AND THE HIGH COURT ANSWERED THE QUEST ION AS UNDER : - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN SETTING ASIDE THE REASSESSMENT ORDER BY HOLDING THAT THE ASSESSING AUTHORITY HAD NOT SUPPLIED THE REASONS FOR RE - ASSESSMENT EVEN THOUGH THE ASS ESSEE WAS MADE AWARE OF THE CRUX OF THE CASE AND ASSESSEE WAS PROVIDED SUFFICIENT OPPORTUNITY OF HEARING AND ASSESSEE HAD ACTIVELY CONTESTED THE CASE BEFORE ASSESSING AUTHORITY? 5. HAVING HEARD THE LEARNED COUNSELS FOR THE PARTIES, WE ARE SATISFIED TH AT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT APPEAL FILED BY THE REVENUE IN AS MUCH AS THE RECORDING OF REASONS FOR REASSESSMENT UNDER SECTION 147/148 OF THE INCOME TAX ACT OR NON - COMMUNICATION THEREOF TO THE ASSESSEE DOES NOT AMOUNT TO A MERE P ROCEDURAL LAPSE. IN VIEW OF THE AFORESAID SUPREME COURT DECISION IN GKN DRIVESHAFTS CASE, IT GOES TO THE ROOT OF THE MATTER AND RENDERS THE REASSESSMENT ORDER PASSED BY THE ASSESSING AUTHORITY WITHOUT RECORDING SUCH REASONS AND COMMUNICATING THE SAME TO T HE ASSESSEE, AS BEING WITHOUT JURISDICTION. 6. THE CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE REVENUE THAT IN THE ORDER SHEET DATED 04.11.2011 IN THE REASSESSMENT PROCEEDINGS WERE DULY NOTED BY THE AUTHORISED REPRESENTATIVE APPEARING ON BEHALF OF THE ASSESSEE AND THEREFORE, SUCH ASSESSEE SHOULD BE DEEMED TO HAVE BEEN MADE AWARE OF THE REASONS FOR REOPENING DOES NOT IMPRESS US. 7. THE TRIBUNAL HAS CLEARLY NOTED IN ITS ORDER AFTER LOOKING INTO THE RECORD OF THE CASE THAT THE REASONS WHICH WERE PLACED BEFORE THE LEARNED TRIBUNAL ITSELF ONLY FOR THE FIRST TIME WERE NEVER COMMUNICATED TO THE ASSESSEE DURING THE CONTEMPORARY PERIOD. MERE PARTICIPATION OF THE ASSESSEE OR AUTHORIZED REPRESENTATIVE IN THE REASSESSMENT P ROCEEDINGS DOES NOT AMOUNT TO THE ASSESSEE BEING MADE AWARE OR KNOWN OF THE REASONS FOR SUCH REOPENING. THE REASONS NOW QUOTED BY THE LEARNED TRIBUNAL IN THE IMPUGNED ORDER CLEARLY INDICATES THAT THEY ARE PURPORTEDLY DETAILED REASONS AND HAD THE ASSESSING AUTHORITY GIVEN THE SAID REASONS BEFORE HAND, THE ASSESSEE COULD HAVE RAISED OBJECTIONS BEFORE THE ASSESSING AUTHORITY AND THE ASSESSEE COULD HAVE REBUTTED THE MATERIAL ON THE BASIS OF WHICH THE IMPUGNED REASSESSMENT PROCEEDINGS WERE UNDERTAKEN BY THE ASSE SSING AUTHORITY. THE ASSESSEE IN THE PRESENT CASE TWICE MADE A REQUEST TO 11 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., THE ASSESSING AUTHORITY, BUT DESPITE THE SPECIFIC REQUESTS, THE ASSESSING AUTHORITY DID NOT COMPLY WITH THE SAID REQUEST AND SUPPLIED THE REASONS TO THE ASSESSEE. THAT CASTS A DOUBT EVEN ON FACT OF THE RECORDING OF THE REASONS IN THE CONTEMPORARY PERIOD BY THE ASSESSING AUTHORITY. THE FACT THAT SUCH REASONS ARE SUPPLIED BEFORE THE LEARNED TRIBUNAL ONLY FOR THE FIRST TIME WAS ENOUGH FOR BY THE LEARNED TRIBUNAL TO HOLD THAT IN VIEW OF T HE DECISION OF THE HONBLE SUPREME COURT, THE ASSESSING AUTHORITY LACKED THE JURISDICTION IN INVOKING THE REASSESSMENT PROCEEDINGS AND THEREFORE, THE IMPUGNED REASSESSMENT ORDER DESERVES TO BE QUASHED. 8. THE DECISION RELIED UPON BY THE LEARNED COUNSEL FOR THE REVENUE IS DISTINGUISHABLE ON FACTS. THE ORDER WHICH WAS TO BE PASSED BY ASSESSING AUTHORITY AS PRELIMINARY OBJECTION OF ASSESSEE, ONCE THE ASSESSEE HAS RAISED THE OBJECTION TO SUCH REASSESSMENT PROCEEDINGS, THE MEETING OF SUCH OBJECTIONS IN THE MAIN REASSESSMENT ORDER, COULD BE PROCEDURAL ASPECT OF THE MATTER, BUT THE RECORDING OF THE REASONS BEFORE THE INITIATION OF THE REASSESSMENT PROCEEDINGS AND COMMUNICATION THEREOF TO THE ASSESSEE IS SINE QUA NON, AS HELD BY HONBLE SUPREME COURT AND THAT GOES T O THE ROOT OF THE MATTER AND CONFERS OR DEPRIVES THE ASSESSING AUTHORITY OF THE JURISDICTION TO UNDERTAKE SUCH REASSESSMENT PROCEEDINGS, AS THE CASE MAY BE. 9. IN THE PRESENT CASE, ADMITTEDLY, SUCH REASONS WERE NOT SUPPLIED TO THE ASSESSEE DURING THE CONTE MPORARY PERIOD BEFORE GOING AHEAD WITH THE REASSESSMENT PROCEEDINGS. THEREFORE, THE TRIBUNAL IN OUR OPINION WAS PERFECTLY JUSTIFIED IN QUASHING SUCH REASSESSMENT ORDER. 11. THE SPECIAL LEAVE PETITION FILED AGAINST THIS DECISION OF THE HONBLE KARNATAKA HIGH COURT IS DISMISSED BY THE HON'BLE SUPREME COURT IN PCIT V. V. RAMAIAH [103 TAXMANN.COM 202] . 12. IN THE CASE BEFORE US ALSO , WE FIND THAT THE ASSESSING OFFICER NEITHER PROVIDE D REASONS TO THE ASSESSEE BEFORE COMPLETION OF ASSESSMENT NOR HE HAS DISCUSSED THE REASONS IN THE ASSESSMENT ORDER FOR REOPENING THE ASSESSMENT. EVEN BEFORE US THE REVENUE COULD NOT PRODUCE THE REASONS FOR REOPENING THE ASSESSMENT. 13. IN THE CIRCUMSTANCES, R ESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WHICH ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE, WE HOLD THAT THE 12 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., REASSESSMENT MADE U/S. 143(3) R.W.S. 147 OF THE ACT FOR THE A.Y. 2009 - 10 IS NULL AND VOID. THUS, THE REASSESSMENT ORDER IS QUASHED. SINCE THE REASSESSMENT ORDER PASSED U/S. 143(3) R.W.S 147 OF THE ACT IS QUASHED, THE APPEAL FILED BY THE REVENUE FOR THE A.Y. 2009 - 10 WILL NOT SURVIVE AND THE SAME IS DISMISSED AS INFRUCTUOUS. 14. NOW WE TAKE UP THE APPEAL IN ITA.NO. 3455/MUM/2017 FOR THE A.Y. 2012 - 1 3 . THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE ORDER OF THE LD. CIT(A) AND THE FIRST ISSUE IN THE GROUNDS OF APPEAL IS IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF PREMIUM PAID TO KEYMAN INSURANCE POLICY. 15. BRIEFLY STATED THE FACTS ARE THAT, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS TAKEN KEYMAN INSURANCE POLICY FOR THE CHAIRMAN AND ALSO THE MANAGING DIRECTOR WITH HDFC AND PAID PREMIUM OF .2,50,0000/ - FOR EAC H. THE ASSESSING OFFICER NOTICED THAT THE POLICY TAKEN BY THE ASSESSEE WAS PROGROWTH FLEXI PLAN AND THE UNITS ALLOTTED WERE PUT INTO GROWTH FUND. THEREFORE, HE WAS OF THE VIEW THAT SINCE THE KEYMAN INSURANCE POLICY WAS NOT A PURE LIFE INSURANCE POLICY IT DOES NOT FALL UNDER THE DEFINITION OF KEYMAN INSURANCE POLICY AS DEFINED UNDER EXPLANATION TO CLAUSE (C) OF SECTION 10(10D), RELYING ON THE DECISION OF THE AMRITSAR BENCH OF THE 13 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., TRIBUNAL IN THE CASE OF F.S. SONDHI & CO. (INDIA) PVT. LTD., [49 TAXMANN.COM 1 80]. THE ASSESSING OFFICER DISALLOWED INSURANCE POLICY PREMIUM OF .5,00,000/ - CLAIMED BY THE ASSESSEE AS ALLOWABLE DEDUCTION . ON APPEAL THE LD. CIT(A) ON EXAMINING THE POLICIES TAKEN BY THE ASSESSEE AND TAKING NOTE OF THE FACT THAT THE POLICIES WERE ORI GINALLY TAKEN IN THE NAME OF THE EMPLOYEES BUT WAS LATER ASSIGNED TO THE ASSESSEE COMPANY , THE COMPANY IS PAYING THE PREMIUM AND NOT THE EMPLOYEES AND IN CASE EMPLOYEE EXPIRES IT IS THE ASSESSEE COMPANY WHO WILL EARN THE SUM ASSURED , HE DELETED THE DISALLO WANCE. 16. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE STRONGLY PLACED RELIANCE ON THE ORDER OF THE LD.CIT(A). FURTHER, LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS SUBMISSIONS THAT THE PREMIUM PAID ON KEYMAN INSURA NCE POLICY IS AN ALLOWABLE DEDUCTION: A. SHRI NIDHI CORPORATION V. ACIT [151 ITD 470 (BOM)] B. AMBICA OVERSEAS V. ACIT [ ITA.NO. 45/ASR/2010 DATED 31.08.2015. C. SURI SONS V. ACIT [155 ITD 825 (AMRITSAR)]. D. F.C. SONDHI & CO. (INDIA) PVT. LTD., V. DCIT IN ITA.NO. 117 /ASR/2010 DATED 27. 11.2015. 17. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE DECISION OF F.C. SONDHI & CO. (INDIA) (P) LTD RELIED BY THE ASSESSING OFFICER THE TRIBUNAL INITIALLY BY ORDER DATED 21.04.2014 DISPOSED OF THE 14 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., APPEAL DISMISSING THE APPEAL OF THE ASSESSEE AND SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WHICH WAS AFFIRMED BY THE LD. CIT(A) IN RESPECT OF THE PREMIUM PAID TOWARDS COMMISSION INSURANCE POLICY. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TS THAT SUBSEQUENTLY THE TRIBUNAL BY ORDER DATED 31.08.2015 RECALLED ITS ORDER DATED 21.04.2014 AND DISPOSED OF THE APPEAL IN ITA.NO. 117/ASR/2010 BY ORDER DATED 27.11.2015 ALLOWING THE APPEAL OF THE ASSESSEE AND DELETING THE DISALLOWANCE MADE IN RESPECT O F THE PREMIUM PAID TOWARD KEYMAN INSURANCE POLICY. COPY OF THE ORDER DATED 27.11.2015 IS PLACED ON RECORD. 18. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AN D THE CASE LAWS RELIED ON. ON A PERUSAL OF THE DECISION S RELIED ON BY THE ASSESSEE, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE AMRITSAR BENCH OF THE TRIBUNAL AND ALSO THE DECISION OF THE MUMBAI BENCH REFERRED TO ABOVE. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 20. THE LAST ISSUE IN THE APPEAL OF THE REVENUE IS IN RESPECT OF DELETING THE DISALLOWANCE MADE TOWARDS EXPENSES DEBITED BY THE ASSES SEE IN ITS PROFIT AND LOSS ACCOUNT TOWARDS PROFESSIONAL CHARGES. 15 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., 21. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE CLAIMED EXPENSES OF .9.57 CRORES UNDER THE HEAD PROFESSIONAL FEE. ASSESSEE WAS ASKED TO JUSTIFY THE EXPENSES CLAIMED. ASSESSEE FURNISHED THE DETAILS OF PROFESSIONAL FEE RECEIVED AS WELL AS PAID DURING THE CURRENT ASSESSMENT YEAR. ASSESSEE IN ITS SUBMISSIONS MADE, IT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT IT HAD EN TERED INTO MOU WITH VARIOUS PARTIES FOR RENDERING I NFORMATION TECHNOLOGY SYSTEM AUDIT AND INFORMATION SECURITY SERVICE OVERSEAS. AS PER THE MOU IT HAS BEEN AGREED THAT THESE FOREIGN PARTIES COULD USE ASSESSEES NAME TO GET WORK AND EXECUTE THEMSELVES FOR WHICH THEY WILL PAY SMALL FEE UP TO 1% OF THE CONTRACT AS MUTUALLY DECIDED. IT WAS CONTENDED THAT THE FOREIGN PARTIES HAVE GOT THE CONTRACT AND EXECUTED THEMSELVES AND THE ASSESSEE LET THEM TO USE ONLY THE COMPANYS NAME. IT WAS ALSO SUBMITTED THAT INSTE AD OF SHOWING NET AMOUNT RECEIVABLE AS INCOME ASSESSEE HAS SHOWN GROSS AMOUNT OF CONTRACT AS PROFESSIONAL RECEIPT AND AFTER RETAINING ITS SHARE OF FEE OUT OF THE SAID CONTRACTS RECEIPTS THE REMAINING PROFESSIONAL FEE WAS SHOWN AS PAID AND THEREFORE, IT WAS SUBMITTED THAT THE NET INCOME WOULD REMAIN THE SAME AND WOULD NOT AFFECT THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY. IT WAS ALSO EXPLAINED THAT THIS WAS DONE AS PART OF BEST PRACTICE AND TRANSPARENCY AND AS ADVISED BY ITS AUDITORS/CONSULTANTS. 16 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., 22. N OT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVING THAT THE ASSESSEE WAS UNABLE TO EXPLAIN THE EXPENDITURE UNDER THE HEAD PROFESSIONAL FEE , AND SINCE ASSESSEE HIMSELF ADMITTED THE FACT THAT THE CONTRACTS HAVE BEEN EXECUTED B Y THE FOREIGN PARTIES , THE ASSESSEE HAS NOT ACTUALLY INCURRED ANY EXPENDITURE TOWARDS PROFESSIONAL FEE , THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE EXPENDITURE CLAIMED IS INCURRED WHOLLY AND EXCLUSIVELY FOR T HE BUSINESS PURPOSE AND ACCORDINGLY THE SAID EXPENDITURE WAS DISALLOWED AND ADDED BACK TREATING THE SAID EXPENSES AS BOGUS EXPENDITURE. ON APPEAL THE LD.CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE EVIDENCES FURNISHED IN THE COURSE OF THE ASSES SMENT PROCEEDINGS BEFORE HIM AND THE REMAND REPORT OF THE ASSESSING OFFICER DELETED THE DISALLOWANCE. 23. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. REFERRING TO THE ASSESSMENT ORDER THE LD.DR SUBMITS THAT THE ASSESSING OFFICER PROVED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE EXPENDITURE INCURRED BY ASSESSEE AND T HEREFORE THE SAID EXPENDITURE CANNOT BE TREATED AS ALLOWABLE EXPENDITURE BUT IS ONLY A BOGUS EXPENDITURE. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE HIMSELF ADMITTED THAT NO SERVICES WERE RENDERED BY IT BUT ONLY ITS NAME HAS BEEN USED BY 17 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., FOREIGN PARTIES FOR EXECUTION OF THE WORK OVERSEAS AND T HEREFORE SINCE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE THE CLAIM MADE BY THE ASSESSEE FOR EXPENSES WAS RIGHTLY DENIED BY THE ASSESSING OFFICER. 24. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE R EFERRING TO PAGE NO S . 22 2 TO 264 OF THE PAPER BOOK SUBMITTED THAT ASSESSEE IS A REPUTED CONSULTANCY COMPANY, ACCREDITED WITH GOVERNMENT OF INDIA, RENDERING SERVICES IN THE FIELD OF INFORMATION TECHNOLOGY SYSTEM AUDIT AND ALLIED CONSULTANCY SERVICES. HE RE FERRED TO THE FOLLOWING DOCUMENTS (I ) EMPANELMENT LETTER OF MINISTRY OF COMMUNICATIONS AND INFORMATION TECHNOLOGY [223 - 226] (II) TRADE MARKS REGISTRATION [228 - 232] (III) CERTIFICATE OF APPRECIATION FROM ISACA FROM YEAR 2005 TO 2014 [233 - 241] (IV) EMPANELMENT LETTER OF RESERVE BANK OF INDIA [245 - 247] (V) EMPANELMENT LETTER OF MINISTRY OF COMMUNICATION & INFORMATION TECHNOLOGY [248 - 249] (VI) EMPANELMENT LETTER OF NATIONAL HIGHWAY AUTHORITY OF INDIA [250] (VII) EMPANELMENT LETTER OF TELECOM REGULATORY AUTHORITY OF INDIA [251 - 252] (VIII) EMPANELMENT LETTER OF NATIONAL INFORMATICS CENTRE SERVICES INC. [253 - 258] (IX) EMPANELMENT LETTER OF GOVERNMENT OF MAHARASHTRA [259] (X) AGREEMENT BETWEEN SB I AND ASSESSEE FOR CARRYING OUT AUDIT [260 - 263] (XI) CERTIFICATE OF REGISTRATION UNDER ISO 9001:2008 [264] (XII) CERTIFICATE INTERNATIONAL ACHIEVERS AWARD FOR BUSINESS EXCELLENCE, ETC . LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT D UE TO HARD LABOUR, THE COMPANY HAS CREATED A NICHE FOR ITSELF IN THIS FIELD OVER THE PERIOD OF TIME. REFERRING TO PAGE NOS. 38 TO 44 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE COMPANY RECEIVED PROFESSIONAL FEE FROM THE FO LLOWING CLIENTS DURING THE YEAR. (I ) MA N Y PUBLIC SECTOR BANKS LIKE STATE BANK OF INDIA, SIDBI, EXIM BANK, ALLAHABAD BANK, SYNDICATE BANK, PUNJAB NATIONAL BANK, NATIONAL HOUSING BANK, INDIAN OVERSEAS BAN K, CENTRAL BANK OF INDIA, ETC. 18 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., (II) GOVERNMENT UNDERTAKINGS LIKE, ONGC, NTPC, MMTC, BOMBAY PORT TRUST, ETC. (III) GOVERNMENT DEPARTMENTS, LIKE NAVY, ANTI - CORRUPTION BUREAU, DIRECTOR GENERAL OF SHIPPING, ETC. (IV) GOVERNMENT DEPARTMENTS OF STATE OF MAHARASHTRA, STATE OF GUJARAT, LIKE STATE ELECTION C OMMISSION, STATE BOARDS, ETC. 25. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT D UE TO EVER CHANGING BUSINESS DYNAMICS, COMPLEX BUSINESS MODELS AND FIERCE COMPETITIVE ENVIRONMENT, EXPLOITATION OF BUSINESS GOODWILL, INCLUDING IN THE FORM OF NAME, BUSI NESS ADV ANTAGES, ETC. IS ONE OF THE FA IRLY COMMON BUSINESS PRACTICES. HE SUBMITS THAT D URING THE MATERIAL TIME, THERE WAS HARDLY ANY ACCREDITED COMPANY IN GULF REGION, WHICH WAS SPECIALIZED IN INFORMATION SYSTEM AUDIT [ IS AUDIT']. IN VIEW OF THIS, SOME CONCERNS IN GULF REGION, WHO WERE IN THE FIELD OF RENDERING CONSULTANCY SERVICES AND WHO WERE PROSPECTING CLIENTS IN THE AREA OF IS AUDIT, APPROACHED THE ASSESSEE WITH A PROPOSAL TO HAVE SOME TIE UP FOR RENDERING SERVICES IN GULF REGION. ONE OF THE PROPOSALS WAS TO AT LEAST ALLOW SUCH CONCERNS TO USE THE ASSESSEE 'S GOODWILL WHILE PROSPECTING CLIENTS, PROCURING ASSIGNMENTS FROM THEM AND EXECUTING THE ASSIGNMENTS. 26. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT M/S. ARROWTECH COMP UTERS TRADING, LLC CAME FORWARD WITH A PROPOSAL TO USE THE NAME/GOODWILL OF THE ASSESSEE COMPANY. AS PER THE ARRANGEMENT ENTERED INTO WITH IT, THE ASSESSEE WAS TO BE GIVEN ITS ENTITLEMENT AT THE RATE UP TO 1% OF THE VALUE OF THE CONTRACTS PROCURED BY VARIO US CLIENTS 19 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., USING THE ASSESSEE 'S NAME/GOODWILL. HE SUBMITS THAT T HE MOST IMPORTANT ASPECT OF THE ARRANGEMENT WAS THAT THE ASSESSEE 'S ROLE WAS ONLY TO ALLOW THE CONCERN TO USE ITS NAME/ GOODWILL WHILE PROSPECTING CLIENTS AND NOTHING MORE. MORE SPECIFICALLY, THE ASSESSEE WAS NOT AT ALL CONCERNED WITH ACTUAL PROCUREMENT OF THE ASSIGNMENT BY THE SAID CONCERN, MUCH LESS WITH EXECUTION OF THE ASSIGNMENTS. THE ASSESSEE NEITHER WAS INVOLVED DIRECTLY, OR INDIRECTLY, WITH INCOME AND CORRESPONDING EXPENSES CONCERNING T HE ASSIGNMENTS NOR WAS IT EVEN IN KNOWLEDGE OF THE ACTUAL AMOUNT OF INCOME AND EXPENSES. NATURALLY, THEREFORE, THERE WAS NO QUESTION OF THE ASSESSEE RECEIVING ANY PROFESSIONAL FEES ON ACCOUNT OF SUCH ASSIGNMENTS OR WITH THE CORRESPONDING EXPENSES INCURRED WHILE EXECUTING SUCH EXPENSES. THE ASSIGNMENTS WERE PROCURED BY THE CLIENTS ON THEIR OWN AND THE INCOMES WERE RECEIVED AS WELL AS THE EXPENSES WERE INCURRED BY THE CLIENTS DIRECTLY IN THEIR OWN NAME, WITHOUT ANY RECOURSE TO THE ASSESSEE . THE ASSESSEE WAS O NLY PROVIDED WITH THE CALCULATION TO ARRIVE AT THE AMOUNT OF ENTITLEMENT AT 0.50% AND NOTHING MORE. THIS ENTIRE ARRANGEMENT WAS CONFIRMED, AND FULLY CL ARIFIED, BY M/S. ARROWTECH COMPUTERS TRADING, LLC. 27. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT AS ADVISED BY THE COMPANY'S CHARTERED ACCOUNTANTS, IN THE ACCOUNTS, THE ASSESSEE 20 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., COMPANY REFLECTED THE ENTIRE CONTRACT VALUE ON THE RECEIPT SIDE AND, AFTER REDUCING THE ENTITLEMENT AT THE DECIDED RATE OF 0.50% THEREFROM, THE BALANCE AMOUNT OF 99.50% WAS S HOWN AS EXPENSES UNDER THE HEAD 'PROFESSIONAL FEES', AS ONE CONSOLIDATED FIGURE, THEREBY ARRIVING AT THE SAME RESULT OF THE COMMISSION AT THE RATE OF 0.50% AS INCOME. IN OTHER WORDS, THE FIGURE OF THE EXPENSES DEBITED WAS NOTHING BUT A BALANCING FIGURE, J UST TO ALIGN WITH THE ACTUAL AND REAL INCOME ACCRUING TO THE ASSESSEE , THAT IS, AT 0.50% OF THE CONTRACT VALUE. EVEN THIS ASPECT WAS CLARIFIED BY THE CHARTERED ACCOUNTANTS IN THEIR OPINION. AS SUCH, THE ASSESSEE WAS NOT EVEN CONCERNED, OR INVOLVED WITH, E ITHER THE CONTRACT RECEIPT OR THE CONTRACT EXPENSES. THE NAME 'PROFESSIONAL FEES PAID' WAS ASSIGNED TO THE EXPENSES ONLY BY WAY OF THE BALANCING BOOK ENTRY AND, IN NO CASE, REPRESENTED ANY ACTUAL CREDIT OR PAYMENT OF CONTRACT CHARGES TO ANYBODY, EITHER ON FACT OR IN LAW. 28. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE FOLLOWING INFORMATION WAS SUBMITTED BEFORE THE ASSESSING OFFICER: - (I) DETAILS OF PROFESSIONAL FEES RECEIVED [PAGE NO. 38 TO 44 OF PAPER BO OK] (II) DETAILS OF PROFESSIONAL FEES PAID [PAGE NO. 45 TO 46 OF PAPER BOOK] 21 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., (III) CONFIRMATION LETTER TO FOREIGN PARTIES [PAGE NO. 47 TO 51 OF THE PAPER BOOK] (IV) MOUS WITH ALL THE FIVE FOREIGN PARTIES [PAGE NO. 52 TO 61 OF THE PAPER BOOK] (V) NOTE ON PROFESSIONAL FEES [ P AGE NO. 66 TO 67 OF THE PAPER BOOK] (VI) CORRESPONDENCE WITH OVERSEAS CLIENTS CONFIRMING THAT THEY HAVE GOT THE CONTRACTS AND EXECUTED BY THEM OVERSEAS AND ASSESSEE IS ONLY TO RECEIVE A SMALL PORTION OF THE SAID CONTRACT FEE. [PAGE NO. 161 TO 165 OF THE PAPER BOOK] (VII) SHOW CAUSE NOTICE BY ASSESSING OFFICER DATED 03.03.2015 FOR DISALLOWANCE U/S. 40(A)(IA) ON ACCOUNT OF NON - DEDUCTION OF TDS [PAGE NO . 35 & 36 OF THE PAPER BOOK] AND SUBMISSIONS OF ASSESSEE VIDE LETTER DATED 09.03.2015 [PAGE NO. 166 & 167 OF THE PAPER BOOK] 29. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER DATED 03.03.2015 THE ASSESSING OFFICER ONLY PROPOSED TO DISALLOW THE EXPENDITURE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT ASSESSEE HAS NOT DEDUCTED TDS ON THE PROFESSIONAL FEE AND THERE IS NOT EVEN A WHISPER ABOUT THE BOGUS EXPENSES. THEREFORE, DISALLOWING THE SAID EXPENSES TREATING THEM AS BOGUS IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 30. LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT CORRESPONDENCE AND MAIL FROM FOREIGN PARTIES CONFIRMING AMOUNT OF CONTRACT EXECUTED AND AMOUNT OF FEES RECEIVABLE BY THE ASSESSEE ON EXECUTION OF SUCH CONTRACT WERE FURNISHED BEFORE THE ASSESSING OFFICER . LD. COUNSEL FOR THE ASSESSEE 22 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., SUBMITS THAT THEREAFTER, THERE WAS NO QUERY RAISED BY THE ASSESSING OFFICER. N OT A SINGLE NOTICE THEREAFTER WAS ISSUED ASKING ANY EXPLANATION ABOUT THE EXPENSES. THE ASSESSING OFFICER NEVER INDICATED WHETHER AND HOW THE REP LIES FILED BY THE ASSESSEE WERE NOT SUFFICIENT OR PROPER. ALL DETAILS CALLED FOR BY THE ASSESSING OFFICER WERE PROVIDED TO HIM AND ALL THE NOTICES SENT BY THE ASSESSING OFFICER WERE DULY COMPLIED. THE ASSESSING OFFICER DID NOT INVOKE THE PROV ISIONS OF SECT ION 144, 145, 271(1) (B), ETC. THIS MEANS THAT THE ASSESSING OFFICER WAS SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE . IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSING OFFICER DID NOT MAKE ANY INDEPENDENT VERIFICATION OR ENQUIRY OF HIS OWN, BUT SIMPLY MAD E THE DISALLOWANCES PURELY ON CONJUNCTION AND SURMISES AND ON THE BASIS OF VAGUE AND GENERAL AVERMENTS. THE ASSESSING OFFICER DID NOT EVEN BRING ON RECORD ANY MATERIAL EITHER TO DISPROVE OR REBUT THE INFORMATION AND EXPLANATIONS BROUGHT ON RECORD BY THE AS SESSEE OR TO SUPPORT ITS ACTION. 31. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT I N THE COURSE OF THE PROCEEDINGS BEFORE THE LD. CIT(A) THE FO LLOWING SUBMISSIONS WERE MADE: (I) AFFIDAVIT BY M/S. ARROWTECH CONFIRM ING THE ARRANGEMENT [198 - 199] (II) LETTER FROM M/S. ARROWTECH CONFIRMING AMOUNT OF CONTRACT EXECU TED DURING F.Y. 2011 - 2012 [200] 23 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., (III) REGISTRATION DOCUMENTS AND CREDENTIALS OF M/S. ARROWTECH COMPUTERS TRADING LLC [201 - 219] I.E LICENSE COPY, CONTRACT CERTIFICATES, ETC. (IV) INFORMATION TECHNOLOGY (AMENDMENT) ACT, 2008 [220 - 221] (V) VARIOUS APPOINTMENT LETTERS/APPRECIATION LETTERS/ CERTIFICATES FROM VARIOUS INSTITUTIONS [222 - 314] (A) EMPANELMENT LETTER OF MINISTRY OF COMMUNICATIONS AND INFORMATION TECHNOLOGY [223 - 226] (B) TRADE MARKS REGISTRATION [228 - 232] (C) CERTIFICATE OF APPRECIATION FROM, ISACA FROM YEAR 2005 TO 2014 [233 - 241] (D) EMPANELMENT LETTER OF RESERVE BANK OF INDIA [245 - 247] (E) EMPANELMENT LETTER OF MINISTRY OF COMMUNICATION & INFORMATION TECHNOLOGY [248 - 249] (F) EMPANELMENT LETTER OF NATIONAL HIGHWAY AUTHORITY OF INDI A [250] (G) EMPANELMENT LETTER OF TELECOM REGULATORY AUTHORITY OF INDIA [251 - 252] (H) EMPANELMENT LETTER OF NATIONAL INFORMATICS CENTRE SERVICES INC. [253 - 258] (I) EMPANELMENT LETTER OF GOVERNMENT OF MAHARASHTRA [259] (J) AGREEMENT BETWEEN SBI AND ASSESSEE FOR CARRYING OUT AUDIT [260 - 263] (K) CERTIFICATE OF REGISTRATION UNDER ISO 9001:2008 [264] (L) CERTIFICATE INTERNATIONAL ACHIEVERS AWARD FOR BUSINESS EXCELLENCE, ETC . (VI) CHARTERED ACCOUNTANT'S OPINION DATED 21.03.2009 ON RECORDING OF THE TRANSACTIONS IN THE BOOKS [315 - 316]. 32. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT T HE ASSESSEE VIDE LETTER DATED 21.11.2016 FILED THE ABOVE DOCUMENTS SO AS TO ADMIT THE SAME AS ADDITIONAL EVIDENCES AS PER RULE 46 A OF THE RULES, 1962 R.W.S. 246 A OF THE ACT. THE LD.CIT(A) BY LETTER DATED 23.11.2016 REQUIRED THE ASSESSING OFFICER TO FURNISH THE COMMENTS/OBJECTIONS / REPORT REGARDING ADMISSIBILITY OF ADDITIONAL EVIDENCES. FURTHER, THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THE ADDITIONAL EVIDENCE S ON MERITS A ND SUBMIT REPORT U/S. 250(4) OF THE ACT. THE ASSESSING OFFICER FURNISHED REMAND REPORT DATED 13.01.2017. 24 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., 33. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER IN THE REMAND REPORT T O OK NOTE OF CONFIRMATION FILED BY ARROWTECH. NOT DISPUTED/CONTRO VERTED . TOOK NOTE AND ACKNOWLEDGED THE DOCUMENTS EVIDENCING EXISTENCE OF M/S. ARROWTECH AND ITS CREDENTIAL. NOT DISPUTED/CONTROVERTED. IT IS UNDISPUTED THAT THE ASSESSEE HAD NOT RENDERED ANY PROFESSIONAL SERVICES. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS TAKEN TWO CONTRADICTORY VIEWS IN RESPECT OF ITS CLAIM OF EXPENDITURE. AS ALSO, THE OPINION TAKEN OF THE CHARTERED ACCOUNTANT WAS OF A VERY GENERAL NATURE. IN THE CIRCUMSTANCES THE SE EVIDENCES CANNOT BE ADMITTED AS ADDITIONAL EVIDENCES U/R 46 A OF THE IT RULES. ASSESSING OFFICER OBSERVED THAT T HE ARGUMENT REGARDING NO PROPER OPPORTUNITY WAS GRANTED, NOT DISPUTED/CONTROVERTED. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT I T IS VERY IMPORTANT TO NOTE THAT THE ASSESSING OFFICER DID NOT DISPUTE THE E VIDENCES BROUGHT ON RECORD. AS SUCH, HE DID NOT DOUBT THE EXISTENCE AND GENUINENESS OF THE EVIDENCES PLACED BEFORE HIM. 34. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE FILED REPLY TO REMAND CONTENDING THAT T HE ASSESSING OFFICER HAD NOT ISSUED ANY NOTIC E TO THE ASSESSEE , EITHER TO FILE ANY DETAIL OR EXPLANATION OR TO APPEAR BEFORE HIM DURING THE REMAND PROCEEDINGS AND, THUS, DENIED REASONABLE OPPORTUNITY OF BEING HEARD. IN REMAND ORDER, LD.CIT(A) HAD SOUGHT 25 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., REMAND REPORT NOT ONLY REGARDING ADMISSIBILITY OF ADDITIONAL EVIDENCE BUT ALSO ON MERITS OF THE CASE, PARA 5 SHOWS THAT THE ASSESSING OFFICER HAD TOTALLY MISUNDERSTOOD AND MIS - APPRECIATED THE ENTIRE ARRANGEMENT/AGREEMENT BETWEEN THE ASSESSEE AND M/S. ARROWTECH. THE ASSESSEE WAS NOT CONCERNED WITH THE AMOUNT OF INCOME EARNED BY M/S. ARROWTECH NOR WAS IT IN KNOWLEDGE OF ANY SUCH AMOUNT. THE VERY PURPOSE OF REMAND WAS TO GET THE FACTS AND EVIDENCES VERIFIED. THE ASSESSING OFFICER DID NOT ADVERSELY COMMENT UPON THEM AND DID NOT FIND NECESSARY TO CALL FURTH ER DETAIL/EXPLANATION FROM THE ASSESSEE . AT PARA 6 OF REMAND REPORT, THE ASSESSING OFFICER HIMSELF ACKNOWLEDGED THAT THE REST OF THE DOCUMENTS EVIDENCE EXISTENCE OF M/S ARROWTECH AND ITS CREDENTIALS. HE HAS ALSO ACKNOWLEDGED THAT 'IT IS UNDISPUTED THAT THE ASSESSEE HAD NOT RENDERED ANY PROFESSIONAL SERVICES'. THIS SHOWS THAT ASSESSING OFFICER H IMSELF ACCEPTED THAT THE ASSESSEE HAD NOT RENDERED ANY PROFESSIONAL SERVICES. THEREFORE, THE QUESTION OF REVENUE DOES NOT ARISE AT ALL. AS REGARDS THE RELIANCE PLACED BY THE ASSESSING OFFICER ON BOOK ENTRIES, THIS ISSUE ALSO HAS BEEN CLARIFIED SUFFICIENTL Y, FOR WHICH THE ASSESSING OFFICER HAD NO ANSWER. IN ANY CASE, IT IS A VERY WELL SETTLED LEGAL POSITION THAT ENTRIES IN BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE TO DECIDE NATURE OF A TRANSACTION. WHAT IS IMPORTANT AND RELEVANT IS SUBSTANCE OF A 26 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., TRANSACTION AND NOT ITS FORM. RELIANCE, IN THIS REGARDS, IS PLACED ON CERTAIN DECISIONS AS FOLLOWS: (I) KEDARNATH JUTE V/S. CIT - [82 ITR 363, 367 (SC)] (II) SUTLEJ COTTON - [116 ITR 1, 5 (SC)] [FOR INCOME] (III) CIT V/S. INDIA CEMENT - [75 ITR 191,195 (SC)] (IV) CIT V/S. SHOORJIVALLABHDAS - [46 ITR 144 (SC)] (V) CIT V/S. CENTRAL PROVINCES MANGANESE - [112 ITR 734 (BOM)] (VI) ACIT V/S. BUCKAU WOLF - [157 ITR 751 (BOM)] (VII) CIT V/S. CENTURY ENKA LTD. - [239 ITR 804 (CAL)] (VIII) TAMILNADU BRICK & TILE MFG. IND USTRIAL SERVICES CO - OP. SOCIETY LTD. V/S. CIT - [265 IT R 332 (MAD)] (IX) PULLANGODE RUBBER PRODUCE CO. LTD. V/S. STATE OF KERALA [(1973) 91 ITR 18 (SC)] (X) S. ARJUN SINGH V/S. CIT - [(1989) 175 ITR 91 (DEL)] (XI) NIRMALA G. MEHTA V/S. A. BALASUBRAMANIAM - [269 ITR 1 (BOM)]. 35. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN T HE REPLY TO REMAND REPORT ASSESSEE FURTHER CONTENDED THAT ANOTHER WELL - ESTABLISHED PRINCIPLE IS THAT NO ADDITION/DISALLOWANCE CAN BE MADE MERELY ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURE AND RE LIANCE, IN THIS REGARD, WAS PLACED ON FOLLOWING DECISIONS: (I) DHAKESHWARI COTTON MILLS V/S. CIT - [(1954) 26 ITR 775 (SC)] (II) LALCHAND BHAGAT AMBICA RAM V/S. CIT - [(1959) 37 ITR 288 (SC)] (III) BANSIDHAR ONKARMALL V/S. CIT - [(1953) 23 ITR 353 (ORI)] (IV) ACIT V/S. SHAILESH SHAH - [(1997) 63 ITD 153 (MUM)] (V) POOJA BHATT V/S. ACIT - [(2000) 73 ITD 205 (MUM)] 36. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN ITS REPLY TO REMAND CONTENDED THAT E VEN THE ASPECT OF TDS WAS SUFFICIENTLY DEALT WITH BY THE ASSESSEE , NOT ONLY AT THE ASSESSMENT STAGE BUT ALS O AT THE APPELLATE STAGE. THE ASSESSING OFFICER HAD NO COMMENT TO OFFER ON THIS, MEANING THEREBY HE HAD NO DISPUTE WITH THE LEGAL POSITION AS CANVASSED BY THE 27 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., ASSESSEE . AT PARA 7 OF THE REMAND REPORT, THE ASSESSING OFFICER MENTIONS THAT TWO CONTRADICTORY VIEWS IN RESPECT OF THE CLAIM OF EXPENDITURE WERE TAKEN BY THE ASSESSEE . HERE ALSO, THE ASSESSING OFFICER TOTALLY MISUNDERSTOOD/MISAPPROPRIATED NOT ONLY THE ASSESSEE 'S SUBMISSIONS BUT ALSO THE EVIDENCES PLACED ON RECORD BY THE ASSESSEE . THERE WAS ABSOLUTELY NO CONTRADICTION. IT WAS ON LY THAT BY ADOPTING TWO ALTERNATIVE METHODS OF ACCOUNTING, THE SAME RESULT WAS ARRIVED AT. THE OPINION OF CHARTERED ACCOUNTANT HAS BEEN BRUSHED ASIDE MECHANICALLY, IN A MOST CASUAL AND CRYPTIC WAY. THE SAME WAS NOT AT ALL GENERAL IN NATURE, AS ALLEGED. IN ANY CASE, ONLY A CHARTERED ACCOUNTANT IS QUALIFIED TO COMMENT ABOUT THE METHOD OF ACCOUNTING, AS HE IS AN EXPERT OF THE FIELD, ESPECIALLY WHEN THE ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECIFIC DEFECT IN THE OPINION OF THE CHARTERED ACCOUNTANT. 37. LD. CO UNSEL FOR THE ASSESSEE SUBMITS THAT T HE ASSESSING OFFICER HAS NOT DISPUTED THE CONTENTS OF THE APPLICATION UNDER RULE 46A. IT IS VERY IMPORTANT TO NOTE THAT THE ASSESSING OFFICER HAD NO DISPUTE ABOUT MERITS OF THE CASE AND HE HAD ACCEPTED THE FACTS OF THE ASSESSEE 'S CASE, AS EMERGING FROM THE DOCUMENTS AND RECORDS, AS HE HAD NO SEPARATE COMMENTS TO OFFER. THE ASSESSING OFFICER HAD CHOSEN TO ACCEPT AND TAX, ONE LIMB, WHICH WAS THE RECEIPTS BUT REFUSED TO RECOGNIZE THE OTHER LIMB, 28 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., WHICH WAS THE PAYMENT. IT IS A WELL SETTLED LEGAL POSITION THAT THERE CANNOT BE A PART ACCEPTANCE AND A PART REJECTION ARISING FROM THE SAME DOCUMENT/STATEMENT/TRANSACTION. RELIANCE, IN THIS REGARD, WAS PLACED ON CERTAIN DECISIONS AS FOLLOWS: (I) GLASS LINES EQUIPMENTS CO. LTD. V/S. C IT - [(2002) 253 ITR 454 (GUJ)] (II) CHANDER MOHAN MEHTA V/S. ACIT (INVESTIGATION) - [(1999) 71ITD 245 (PUNE)] (III) ACIT V/S. VASANTLAL C. MEHTA - [(2001 ) 77 ITD 76 (RAJKOT)] / [(2001) 72 TTJ (RAJKOT) 93] (IV) ITO V/S. GHANSHYAMBHAI R. THAKKAR - [(1996) 88 TAXMAN (AHD) 6 51 (V) RAMANLAL P. CHORDIA V/S. ACIT - [(2004) 87 TTJ (PUNE) 713] FOLLOWED: CHANDER MOHAN V/S. ACIT - [(1999) 71 ITD 245 (PUNE)] (VI) ACIT V/S. CHANDRESH KUMAR MAHESHWARI - [(2009) 29 SOT 58 (JODH) (URO)] IN OTHER WORDS, AS IN THE INSTANT CASE, THE DEPARTMENT CANNOT BE PERMITTED TO TAX THE ENTIRE INCOME, EVEN IN ABSENCE OF ANY PROOF OF ACCRUAL AND/OR RECEIPT, AND AT THE SAME TIME TO DISALLOW THE CORRESPONDING EXPENSES ON THE GROUND OF NO PROOF OF ACCRUAL/PAYMENT. CONVERSELY, IF THE ENT IRE EXPENSES ARE HELD TO BE NON - GENUINE ON THE GROUND OF NO DETAILS, ON THE SAME LOGIC AND COROLLARY, THE INCOME ALSO SHOULD NOT BE RECOGNIZED, AS THE VERY SAME GROUND/REASON GETS EQUALLY APPLICABLE TO THE RECEIPT AS WELL. IMPORTANTLY, THE ASSESSING OFFICER HIMSELF HAS ACCEPTED AN D RECOGNIZED THE FACT THAT 'IT IS UNDISPUTED THAT THE ASSESSEE HAD NOT RENDERED ANY PROFESSIONAL SERVICE '. 38. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT A S FAR AS THE ISSUE OF TDS WAS CONCERNED, THE ANSWER WAS OBVIOUS AND SELF - EVIDENT FROM THE ABOVE DISCUSSIO N. NEITHER THE ASSESSEE HAD PAID TO ANYBODY ON ACCOUNT OF 29 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., CONSULTANCY CHARGES NOR WERE THEY INVOLVED IN ANY SUCH TRANSACTION. MOST IMPORTANTLY, THERE WAS NO OBLIGATION ON ITS PART TO PAY ANYBODY OR TO GIVE ANYBODY ANY CONSULTANCY CHARGES. IN FACT, THERE WA S NO RELATIONSHIP AS A PAYER AND PAYEE, AS A DEBTOR AND CREDITOR AT ALL. AS SUCH, THE QUESTION OF DEDUCTING TAX AT SOURCE TO SUCH NONEXISTENT ENTITY SIMPLY DOES NOT ARISE. EVEN OTHERWISE, THERE ARISES NO TDS LIABILITY, IF THE PAYEE IS NON - RESIDENT AND NO INCOME ACCRUED IN INDIA AND THE PAYMENTS WERE MADE OUTSIDE INDIA. REF. GE INDI A TECHNOLOGY P. LTD. V. CIT [(2010) 327 ITR 456 (SC)]. 39. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CONSIDERING T HE EVIDENCES FURNISHED BY THE ASSESSEE, THE REMAND REPORT OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESSEE THE LD.CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSEE HAS NOT RENDERED ANY SERVICES TO OVERSEAS PARTIES. THE ASSESSEE HAS SHOWN IN THE BOOKS OF ACCOUNTS BOTH RECEIPTS AND PAYMENTS AND IN FACT THE ASSESSEE WAS ENTITLED TO ONLY A SMALL PORTION OF THE CONTRACT RECEIPTS AS PER THE MOU ENTERED INTO BY THE ASSESSEE WITH OVERSEAS PARTIES FOR UTILIZING THE NAME OF THE ASSESSEE F OR OBTAINING THE CONTRACTS. THUS, LD.CIT(A) DELETED HE DISALLOWANCE MADE BY THE ASSESSING OFFICER TREATING THE EXPENDITURE AS BOGUS. 30 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., 40. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE COMPANY IS IN TO THE INFORMATION TECHNOLOGY SYSTEM AUDIT AND ALLIED CONSULTANCY SERVICES . IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE ACCOUNTED REVENUES FROM FOREIGN PARTIES AND AFTER RETAINING A PORTION CONTRACT RECEIPTS AS FEES/COMMISSION THE ASSESSEE C LAIMED THE PROFESSIONAL FEES AS EXPENSES . ASSESSEE HAS ENTERED INTO MOU WITH THE FOREIGN PARTIES FOR LENDING ITS NAME TO THE FOREIGN PARTIES AND THE FOREIGN PARTIES SHALL OBTAIN CONTRACTS AND EXECUTE THEMSELVES IN THE NAME OF THE ASSESSEE AND THE ASSESSEE AS PER THE MOU ASSESSEE IS ENTITLED FOR ONLY A SMALL PORTION OF 1% OF THE CONTRACT RECEIPTS. 41. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS ON NOTICING THAT THE ASSESSEE HAD BOOKED HUGE EXPENDITURE TOWARDS PROFESSIONAL FEE, HE PROPOSED TO DISALLOWANCE SUCH EXPENDITURE FOR NON - DEDUCTION OF TDS. ASSESSEE EXPLAINED THAT THE FOREIGN PARTIES HAVE NO PERMANENT ESTABLISHMENT IN INDIA AND THE FOREIGN PARTIES HAVE NOT RENDERED ANY SERVICES IN INDIA AND THEREFORE, IN VIEW OF THE DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY P. LTD V. CIT [327 ITR 456], NO TDS IS LIABLE TO BE DEDUCTED AND HENCE THE PROVISIONS OF SECTION 40(A)(I) WOULD NOT BE APPLICABLE. 31 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., 42. THE ASSESSING OFFICER CHOSE TO DISALLOW THE A LLEGED PAYMENTS MADE TO THE NON - RESIDENT BUT CHOSE TO TAX THE RECEIPTS FROM THE SAME PARTIES. THE FACT IS THAT THE ASSESSEE NEITHER PROVIDED N OR RECEIVED ANY SERVICES TO/FROM OVERSEAS PARTIES . IT HA D ONLY LENT HIS NAME TO THE NON - RESIDENT PARTIES, FOR WHICH ASSESSEE HAD TO EARN INC OME BY WAY OF COMMISSION . IT WAS MUTUALLY DECIDED THAT THE ASSESSEE WOULD LEND ITS NAME FOR WHICH IT WAS ENTITLED TO 0.50% COMMISSION. THE FACT THAT NO SE RVICES WERE RENDERED BY THE NON - RESIDENT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN HIS REMAND REP ORT. FROM THE RECORDS IT IS CLEAR THAT NO ACTUAL REMITTANCE WAS DONE TO THE NON - RESIDENT. HOWEVER, FROM ACCOUNTING PURPOSES, THE ASSESSEE HAD MADE DISCLOSURE OF THE ENTIRE INCOME/EXPENDITURE RELATING TO THE NON RESIDENTS AS INCOME/EXPENDITURE IN ITS PROFI T AND LOSS ACCOUNT . ONLY BASED ON SUCH DISCLOSURE, THE ASSESSING OFFICER HAD SOUGHT TO DISALLOW THE ALLEGED EXPENSES. IDEALLY, THE ASSESSEE OUGHT TO HAVE DISCLOSED ONLY THE NET COMMISSION RECEIVABLE @ 0.50%. IF THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE EXPENSE WAS NON - GENUINE, HE OUGHT TO HAVE CONSIDERED THE RECEIPTS TO BE NON - GENUINE AS WELL AND EXCLUDED FROM THE TAX NET. THE ASSESSING OFFICER HAD CHOSEN TO DISALLOW ONLY THE EXPENSES BUT AT THE SAME TIME TAXED THE RECEIPTS. THE ASSESSING OFFICER CAN NOT TAKE CONTRARY STANDS FOR PAYMENTS AND RECEIPTS WHICH RELATE TO THE 32 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., SAME PARTIES. IT IS A WELL SETTLED PRINCIPLE THAT NO INCOME CAN BE EARNED WITHOUT ANY EXPENDITURE. 43. THOUGH ONE MAY TAKE A VIEW THAT THE EXPENSE MAY NOT SATISF Y THE REQUIREMENT OF SECTION 37 (1) OF THE ACT, THE BROADER PICTURE IS THAT THE ASSESSEE HAD NOT EARNED ANY INCOME / INCURRED ANY EXPENSE AT ALL. IT HAD MERELY EARNED A SMALL COMMISSION INCOME FROM THE FOREIGN PARTIES IN LIEU OF ALLOWING IT TO USE ITS NAME. THAT COMMISSION INCOME WAS DU LY OFFERED TO TAX BY THE ASSESSEE IN ITS RETURN OF INCOME, BY WAY OF NETTING THE RECEIPT AND EXPENDITURE INCURRED BY THE NON - RESIDENT S . 44. AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LD. V/S. CIT - [(1997) 227 ITR 172 (SC)] T REATMENT OF INCOME IN BOOKS OF ACCOUNTS CANNOT OVERRIDE THE PROVISIONS OF THE ACT. THUS, AN EXPENSE CANNOT BE DISALLOWED MERELY DUE TO WRONG PRESENTATION IN BOOKS OF ACCOUNTS. 45. IN THE CASE OF GE INDIA TECHNOLOGY P. LTD. V/S. CIT - [(2010) 32 7 ITR 456 (SC)] THE HON'BLE SUPREME COURT HELD THAT IF NO SERVICES WERE RENDERED IN INDIA, NO TDS IS DEDUCTIBLE . 46. WE OBSERVE THAT THE LD. CIT(A) CONSIDERING THE EVIDENCES FURNISHED BY THE ASSESSEE, THE REMAND REPORT OF THE ASSESSING OFFICER AND THE 33 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE OBSERVING AS UNDER: 9.8 . I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE CONTENTIONS OF THE ASSESSEE . THE DISPUTE RELATES TO DISALLOWANCE OF PROFESSIONAL FEES PAID TO NON - RESIDENT PARTIES. IN THIS CASE, THE ASSESSEE HAS FOUND PAID PROFESSIONAL FEES OF RS 9,55,20,000/ - TO SOME NON - RESIDENT PARTIES. AT THE SAME TIME, THE ASSESSEE HAS RECEIVED PROFESSIONAL FEES OF RS. 9.60 CRORES FROM THE SAME PARTIES. THE AO HAS CHOSEN TO DISALLOW ALLEGED PAYMENT MADE TO THE NON - RESIDENT PARTIES BUT HAS CHOSEN TO TAX THE RECEIPTS FROM THE S AME PARTIES. 9.9 THE FACT IS THAT THE ASSESSEE HAS NOT PROVIDED OR RECEIVED ANY SERVICES. IT HAS ONLY LENT ITS NAME TO THE NON - RESIDENT PARTIES, FOR WHICH IT HAS TO EARN COMMISSION/ROYALTY. IT WAS MUTUALLY DECIDED THAT THE ASSESSEE HAS LENT ITS NAME FOR WH ICH IT WAS ENTITLED TO 0.5% COMMISSION. THE FACT THAT NO SERVICES WERE RENDERED BY THE NON - RESIDENTS HAS BEEN ACCEPTED BY THE AO IN HIS REMAND PROCEEDINGS. FROM THE RECORDS, IT APPEARS THAT NO ACTUAL REMITTANCE WAS DONE TO THE NON - RESIDENT. HOWEVER, FROM A N ACCOUNTING STANDPOINT, THE ASSESSEE HAS MADE DISCLOSURE OF ENTIRE INCOME/EXPENDITURE RELATING TO THE NON - RESIDENTS. BASED ON THIS DISCLOSURE, THE AO HAS SOUGHT TO DISALLOW THE ALLEGED 'BOGUS EXPENSES'. 9.10 I AM NOT IN AGREEMENT WITH THE STAND OF THE AO. IN FACT, THE ASSESSEE HAS DISCLOSED SIGNIFICANT RECEIPTS AND PAYMENTS IN ITS PROFIT & LOSS ACCOUNT. HOWEVER, IDEALLY, THE ASSESSEE OUGHT TO HAVE DISCLOSED ONLY THE NET COMMISSION RECEIVABLE @0.5%. IF THE AO WAS OF THE VIEW THAT THE EXPENSES WERE NON - GENUI NE, THE AO OUGHT TO HAVE CONSIDERED THE RECEIPTS TO BE NON - GENUINE AS WELL AND EXCLUDED THEM FROM THE TAX NET. THE AO HAS CHOSEN TO DISALLOW ONLY THE EXPENSES BUT AT THE SAME TIME TO TAX THE RECEIPTS. THE AO CANNOT TAKE CONTRARY STANDS FOR PAYMENTS AND REC EIPTS WHICH RELATE TO THE SAME PARTIES. IT IS A WELL ESTABLISHED PRINCIPLE THAT INCOME CAN BE EARNED WITHOUT ANY EXPENDITURE. 9.11 THOUGH ONE MAY TAKE A VIEW THAT TECHNICALLY THE EXPENSES MAY NOT SATISFY THE REQUIREMENT OF SECTION 37(1) OF THE I T ACT. HOW EVER, THE BROADER PICTURE IS THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENSES AT ALL. IT HAS MERELY EARNED A SMALL COMMISSION INCOME FROM THE FOREIGN PARTIES IN LIEU OF USING ITS NAME. THAT COMMISSION INCOME HAS BEEN DULY OFFERED TO TAX BY THE ASSESSEE IN I TS RETURN OF INCOME BY WAY OF NETTING THE RECEIPT AND EXPENDITURE INCURRED BY THE NON - RESIDENT BUSINESSMAN. 9.12 THE MAIN REASON FOR THE AO DISALLOWING THE EXPENSES WAS DUE TO THE WRONG DISCLOSURE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS ON THE ADVICE OF TAX PROFESSIONAL. THE HON'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V CIT [1997] 227 ITR 172 (SC) HAS HELD THAT THE TREATMENT OF AN INCOME IN THE BOOKS OF ACCOUNTS CANNOT OVERR IDE THE PROVISIONS OF THE INCOME TAX 1961. THUS, THE EXPENSES CANNOT BE DISALLOWED MERELY DUE TO WRONG PRESENTATION IN ITS BOOKS OF ACCOUNTS. 9.13 AS PER SECTION 195 OF THE I T ACT, TDS IS ONLY DEDUCTIBLE WHERE THE INCOME IS CHARGEABLE TO TAX IN INDIA. IN THIS CASE, NO SERVICES WERE RENDERED AND THUS THE TDS IS NOT DEDUCTIBLE U/S 195 OF THE I T ACT IN VIEW OF THE SUPREME COURT DECISION 34 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., OF GE INDIA TECHNOLOGY P LTD V CIT (2010) 327 ITR 456 (SC). IT WAS ONLY DUE TO CA ADVICE THAT THE ASSESSEE HAS PRESENTED IT S FINANCIALS IN SUCH A MANNER. FACT IS THAT THE ASSESSEE HAS PASSED THE JOURNAL ENTRY ONLY ON THE ADVISE OF TAX ADVISOR AND NO ACTUAL PAYMENT WAS MADE TO THE NON - RESIDENTS. THUS, I AM OF THE VIEW THAT SUCH EXPENSES ARE NOT TO BE DISALLOWED U/S 4O(A)(I) OF THE IT ACT. 9.14 THE AO HAS ALSO DISALLOWED THE PAYMENT ON THE GROUND THAT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN OF PROOF. ON A PERUSAL OF THE SCRUTINY RECORDS, IT APPEARS THAT THE AO HAS NOT ASKED THE ASSESSEE ON ANY OCCASION TO PROVED THE GENUINENE SS OF THE EXPENSES. EVEN IN THE NOTICE U/S 142(1) OF THE IT ACT, 1961, THE AO HAS ASKED THE. ASSESSEE TO SHOW CAUSE AS WHY THE AMOUNTS SHOULD NOT BE DISALLOWED U/S 4O(A)(I) OF THE I T ACT. WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO PROVE THE GENUINENESS OF THE EXPENSES, THE AO HAS PROCEEDED TO STRAIGHT AWAY DISALLOW THE SAME. THE AO HAS PROPOSED TO TAX THE RECEIPTS BUT AT THE SAME TIME DISALLOW THE EXPENSES INCURRED IN RESPECT OF THE SAME PARTIES. IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE ID AO IS NOT CALLED FOR. AT BEST, WHAT CAN BE TAXED IS THE COMMISSION INCOME OF RS 4,80,000/ - WHICH HAS ALREADY BEEN OFFERED TO TAX BY THE ASSESSEE . THUS, THE DISALLOWANCE OF PROFESSIONAL FEES OF RS. RS. 9,56,74,000/ IS HEREBY DELETED. IN VIEW OF THE ABOVE, GROU NDS NO 4 AND 5 ARE ALLOWED. 47. NONE OF THESE FINDINGS HAVE BEEN REBUTTED WITH EVIDENCES BY THE REVENUE. THERE IS CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE ASSESSEE AND WE ARE IN COMPLETE AGREEMENT WITH THE FINDINGS AND THE DECISION OF THE LD. CIT(A) IN H OLDING THAT THE PROFESSIONAL FEE DEBITED BY THE ASSESSEE CANNOT BE TREATED AS BOGUS EXPENSES, ESPECIALLY WHEN THE ASSESSING OFFICER AGREES THAT THE ASSESSEE HAS NOT RENDERED ANY SERVICES AND HAS ACCEPTED THE RECEIPTS SHOWN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. HAVING ACCEPTED THE RECEIPTS SHOWN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER SHOULD NOT HAVE DISALLOWED THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT. FACTS GOES TO SHOW THAT THE ASSESSEE WAS ONLY RENDERIN G ITS NAME FOR THE FOREIGN PARTIES FOR EXECUTION OF CONTRACTS AT OVERSEAS BY THE FOREIGN PARTIES FOR A SMALL 35 ITA NOS. 3454 & 3455/MUM/2017 C.O. NO. 280/MUM/2018 M/S. AAA TECHNOLOGIES PVT. LTD., CONSIDERATION. THEREFORE, AT THE MOST WHAT CAN BE TAXED IS THE COMMISSION INCOME WHICH THE ASSESSEE HAD ALREADY OFFERED TO TAX IN THE RETURN OF IN COME. IN THE CIRCUMSTANCES, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THUS WE UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 48. TO SUM UP , CROSS OBJECTION FILED BY THE ASSESSEE FOR THE A.Y. 2009 - 10 IS ALLOWED AS INDICATED ABOVE AND THE APPEAL S FILED BY THE REVENUE FOR THE A.Y. 2009 - 10 AND A.Y. 2012 - 13 ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THE 1 7 TH MAY, 2019 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 17 / 0 5/2019 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM