ACIT 12(2)(2), MUMBAI V. I & E TRADE CONSULTANTS P.LTD, MUMBAI

ITA 798/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8374 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2008-2009
• Appeal Filed On: 05-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAIDR
• Assessee Lawyers: NIKITA AGARWAL
• Keywords: Reopening of assessment; Income from undisclosed sources; Search and seizure; Principle of natural justice; Opportunity of cross examination; Corroborative evidences; Accommodation entries; Reassessment proceedings
• Section: 143(3); 37(1); 131; 148; 37

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.798/ MUM/2015 ( / ASSESSMENT YEAR : 2008-09) ACIT -12(2)(2), ROOM NO. 363, 3 RD FLOOR,, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / V. M/S I&E TRADE CONSULTANTS PVT. LTD., 10 TH FLOOR, SHREE PURI TOWER, SONIWADI SHIMPOLI ROAD, BORIVALI (WEST), MUMBAI 400092. ./ PAN : AABCT9239N ( / APPELLANT ) .. ( / RESPONDENT ) CO NO.140/MUM/2016 (ARISING FROM APPEAL NO ITA 798/MUM/2015) ( / ASSESSMENT YEAR : 2008-09) M/S I&E TRADE CONSULTANTS PVT. LTD., 10 TH FLOOR, SHREE PURI TOWER, SONIWADI SHIMPOLI ROAD, BORIVALI (WEST), MUMBAI 400092. / V. ACIT -12(2)(2), ROOM NO. 363, 3 RD FLOOR,, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AABCT9239N CROSS OBJECTOR .. ( / RESPONDENT ) REVENUE BY : SHRI SAURABHKUMAR RAI,DR ASSESSEE BY : MS. NIKITA AGARWAL / DATE OF HEARING : 02-01-2017 / DATE OF PRONOUNCEMENT : 24-02-2017 ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 2 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON(HEREINAFTER CALLED THE C.O. ) FILED BY THE ASSESSEE COMPANY ARE DIRECTED AGAINST THE APPELLATE ORDERS OF THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS)-20, MUMBAI (HEREINAFTER CALLED THE CIT(A)) DATED 05-1 1-2014 PERTAINING TO THE ASSESSMENT YEAR 2008-09, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) HAD ARISEN OUT OF THE ASSESSMENT ORDER DATED 18-09- 2013 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO ) U/ S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961(HEREINAFTER CALLED THE ACT) . THE AFORE-STATED REVENUE APPEAL AND THE C.O. FILED BY THE ASSESSEE WERE HEAR D TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE RE VENUE 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 O F 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 CO NSULTANCY PRIVATE LIMITED BY IGNORING THE EVIDENTIARY VALUE O F THE STATEMENT OF ITS DIRECTOR RECORDED U/S 131 OF THE ACT WHEREIN HE HAD UNEQUIVOCALLY ADMITTED TO HIS INABILITY TO SUBSTANT IATE THE TRANSACTIONS WITH AKON MANAGEMENT CONSULTANCY PRIVA TE 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 CO NSULTANCY 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 ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 3 CROSS-EXAMINE WITNESS IS NOT AN INVARIABLE ATTRIBUT E OF REQUIREMENT OF 'AUDI ALTERAM PARTEM' AND THAT WHEN THE STATEMENT OF WITNESS IS ONLY SECONDARY EVIDENCE, TH ERE IS NO DENIAL OF JUSTICE IF WITNESSES WERE NOT ALLOWED TO BE CROSS- EXAMINED BY THE ASSESSEE? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN CO NO. 140/MUM/2016 FILED BY THE ASSESSEE WITH THE TRIBUNAL: 1.1 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-20, MUMBAI [ THE LD. CIT(A)] ERRED IN CONFIRMING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME-TAX, WARD-12(2 )(2) [ THE AO] IN INITIATING REASSESSMENT PROCEEDINGS AN D FRAMING ASSESSMENT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 19 61[ THE ACT]. 1.2 THE ASSESSEE PRAYS THAT ON THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW THE REASSESSMENT PROCEEDING BE HELD TO BE BAD AND ILLEGAL AS THE NECESSARY PRECONDITIONS F OR INITIATING REASSESSMENT PROCEEDINGS AS WELL COMPLET ION THEREOF WERE NOT COMPLIED WITH. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS CONSULTANCY TO COMPA NIES WHO ARE OPERATING IN THE INTERNATIONAL TRADE. THE ASSESSEE COMPANY HA S E-FILED RETURN OF INCOME ON 22 ND SEPTEMBER, 2008 DECLARING TOTAL INCOME OF RS. 83,1 2,104/- WHICH WAS PROCESSED BY REVENUE U/S 143(1) OF THE ACT. THE SC RUTINY ASSESSMENT WAS LATER FRAMED BY REVENUE VIDE ASSESSMENT ORDER DATED 29-07-2010 PASSED U/S 143(3) OF THE ACT. NOTICE U/S 148 OF THE ACT WAS IS SUED TO THE ASSESSEE ON 30 TH MARCH, 2013. NOTICE U/S 143(2) OF THE ACT WAS ISSU ED BY THE AO ON 12 TH AUGUST, 2013 WHICH WAS DULY SERVED UPON THE ASSESSE E COMPANY. IN RESPONSE TO THE NOTICES ISSUED, THE ASSESSEE REQUES TED FOR COPY OF REASONS ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 4 RECORDED FOR RE-OPENING OF THE ASSESSMENT U/S 147/1 48 OF THE ACT VIDE THEIR LETTER DATED 25 TH APRIL, 2013. THE AO DULY PROVIDED THE REASONS RECO RDED FOR RE-OPENING OF THE ASSESSMENT VIDE LETTER DATED 12.0 8.2013. INFORMATION WAS RECEIVED BY THE AO FROM THE INVESTI GATION WING OF THE INCOME TAX DEPARTMENT,MUMBAI AND BASED UPON THE SAME, THE A.O. INFERRED THAT THE ASSESSEE COMPANY HAS CLAIMED EXPENSES WHICH WER E IN FACT NOT INCURRED BY THE ASSESSEE COMPANY AND THE SAID EXPENSES DOES NOT HAVE ANY CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY. A STATEMENT ON OATH 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, AN D 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 CONF RONTED 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 CONSULTAN CY PVT. LTD. WERE AS PER CONTRACT ENTERED AND PAYMENTS WERE BY ACCOUNT P AYEE CHEQUES WHICH WERE DULY ACCOUNTED. THE A.O. REJECTED THE CONTENT IONS 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 P ARTY VIZ. AKON MANAGEMENT CONSULTANCY PVT. LTD. WAS ONE OF TH E ENTITIES WHICH WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRI ES 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 HAV E BEEN CARRIED OUT UNDER THE GARB OF 'EXPENSES' ALLEGED TO HAVE BE EN EXECUTED BY THOSE PARTIES AND THE SAME ARE SHOWN UNDER THE GARB OF 'EXPENSES' BY THE BENEFICIARIES (INCLUDING THE PRES ENT ASSESSEE) IN THEIR RESPECTIVE BOOKS OF ACCOUNTS. ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 5 II) DURING THE COURSE OF STATEMENT RECORDED U/S 131 OF THE ACT, SHRI SHARAT CHANDRA SATPATHY, DIRECTOR OF ASSE SSEE COMPANY HAS SUBMITTED THAT HE IS UNABLE TO SUBSTANTIATE THE TRANSACTION WITH EVIDENCE AND ACCORDINGLY HELD THAT EXPENSES AM OUNTING TO RS.58,62,940/- MAY BE DISALLOWED. III) THE ASSESSEE COMPANY VIDE LETTER DATED 03.09. 2013 SUBMITTED THE DETAILS TO PROVE THE TRANSACTIONS MAD E WITH M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. HOWEVER THE DOCUMENTARY EVIDENCES FILED WERE NOT PROVING THE GE NUINENESS OF THE TRANSACTION, HENCE NOT FUND TENABLE. IV) THE ASSESSEE COULD NOT PROVE THE NATURE OF EXPE NDITURE SAID TO HAVE BEEN INCURRED BY THE ASSESSEE COMPANY FROM THE AFORESAID PARTY. THE ASSESSEE ALSO COULD NOT BRING ON RECORD THE REQUISITE DOCUMENTS PURPORTED TO HAVE BEEN EXPENDED TOWARDS THE AFOREMENTIONED PARTY. V. IN FACT, SELF-INTEREST TALKS IN ALL SORTS OF TON GUES AND PLAYS ALL SORTS OF ROLES. THE INDIFFERENCE OF NOT PRODUCI NG THE PARTY WHICH ISSUED THE BILL(S) IS INDICATIVE OF THE TRUTH . THE REVENUE IS NOT DOUBTING ALL THE EXPENDITURE BUT DOUBTING ONLY THOSE EXPENDITURE FOR WHICH THE GENUINENESS COULD NOT BE PROVED. ONE CANNOT LOSE SIGHT OF THE FACT THAT DARK DEEDS ARE P ERFORMED UNDER THE COVER OF DARKNESS AND DIRECT EVIDENCE CAN NEVER BE AVAILABLE. SOMETIMES, THE FACTS SPEAK LOUD AND CLEAR. VI) AFTER CAREFULLY GOING THROUGH THE SUBMISSIONS O F THE ASSESSEE AS WELL AS THE DATA/DETAILS/DOCUMENTS AVAI LABLE ON RECORD, IT BECOMES CRYSTAL CLEAR THAT ; (A) THE PRIMARY ONUS IS ON THE ASSESSEE TO ESTABLIS H THE GENUINENESS OF THE PURCHASES CLAIMED BY IT. (B) SINCE THE PRIMARY FACTS ARE IN THE KNOWLEDGE OF ' THE ASSESSEE, IT IS THE DUTY OF THE ASSESSEE TO PROVIDE THE NATURE OF EXPENDITURE INCURRED; (C) IF THE INVESTIGATION DONE BY THE DEPARTMENT LEA DS TO DOUBT REGARDING THE GENUINENESS OF THE EXPENDITURE, IT IS INCUMBENT ON THE ASSESSEE TO PRODUCE THE PARTIES AL ONG ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 6 WITH THE NECESSARY DOCUMENTS TO ESTABLISH THE GENUI NENESS OF THE TRANSACTION AND (D) PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACRO SANCT. HENCE, THE ASSESSEES CLAIM OF EXPENDITURE WITH RES PECT TO THE PAYMENT MADE TO AKON MANAGEMENT CONSULTANCY PVT. LTD. AMOUNTING TO RS. 58,62,940/- WAS DISALLOWED BY THE AO BY TREATING THE SAME AS UN EXPLAINED 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 18-09-2 013 PASSED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE PREF ERRED 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 BEFOR E 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 WITH OUT CONFRONTING THE SAME TO THE ASSESSEE, THEREFORE, SUCH MATERIAL BECOMES I MPERMISSIBLE AS EVIDENCE IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KISHAN CHAND CHELARAM V. CIT, REPORTED IN 125 ITR 713 (SC). THU S, IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE STATEMENT OF ONE SH. RAJENDRA BHIMRAJKA RECORDED BY THE REVENUE AT THE BACK OF THE ASSESSEE CANNOT BE RELIED UPON BECAUSE NO OPPORTUNITY HAD BEEN GIVEN TO THE ASSESS EE FOR REBUTTAL. IT WAS ALSO SUBMITTED THAT THE REASONS RECORDED BY THE A.O . WERE SUPPLIED AT THE FAG END OF THE YEAR, HENCE, REASSESSMENT IS BAD IN LAW. THE ASSESSEE ALSO CONTENDED THAT RE-ASSESSMENT IS BAD IN LAW AS THE O BJECTIONS WERE NOT DISPOSED BY THE AO . ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 7 THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE FACTS A ND CIRCUMSTANCES OF THE CASE OBSERVED THAT AFTER COMPLETION OF THE ASSESSMENT U/ S 143(3) OF THE ACT VIDE ORDERS DATED 29 TH MARCH, 2010, NEW INFORMATION HAD COME TO THE KNOWL EDGE OF THE A.O. FROM THE INVESTIGATION WING OF THE INCO ME TAX DEPARTMENT THAT SOME EXPENDITURE CLAIMED BY THE ASSESSEE WAS NOT GE NUINE BECAUSE THE CONCERNED PERSON OF M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. HAD ADMITTED THAT THIS PARTY M/S AKON MANAGEMENT CONSUL TANCY PVT. LTD. WAS INVOLVED IN ISSUING ACCOMMODATION ENTRIES. THE A.O . ALSO OBSERVED THAT THE DIRECTOR OF THE ASSESSEE COMPANY WAS NOT ABLE TO SU BSTANTIATE THE EXPENDITURE SHOWN IN THE NAME OF M/S AKON MANAGEMEN T CONSULTANCY PVT. LTD., HENCE, THE A.O. HAD RECEIVED SOME NEW INFORMA TION , THERE-BY HAVING A GROUND FOR REASONS TO BELIEVE THAT THERE WAS ESCAPE MENT OF ASSESSMENT. THE LD. CIT(A) RELIED ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF ITO V. SELECTED DALURBANDH COAL COMPANY PVT. LTD. (1996 ) 217 ITR 597 (SC) WHEREIN IT WAS HELD THAT AT THE STAGE OF ISSUE OF N OTICE U/S 148 OF THE ACT, THE ONLY QUESTION WHETHER THERE IS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORM AN REQUISITE BELIEF THAT INC OME HAS ESCAPED ASSESSMENT IS RELEVANT AND SUFFICIENCY OF MATERIAL IS NOT TO BE LOOKED INTO AT THE STAGE OF INITIATION OF RE-ASSESSMENT PROCEEDING S. THUS, THE INITIATION OF REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT WAS HELD TO BE VALID BY LD. CIT(A). ON MERITS, THE ASSESSEE SUBMITTED BEFORE LEARNED CI T(A) THAT THE REASSESSMENT HAD BEEN MADE BY DISALLOWING GENUINE E XPENDITURE OF RS. 58,62,940/- WITHOUT ANY VALID GROUND AND THE AO DIS ALLOWED SUCH EXPENDITURE ON THE BASIS OF BASELESS STATEMENT GIVE N BY THIRD PARTY. IT WAS SUBMITTED THAT THERE IS NO CONTRARY EVIDENCE IN POS SESSION OF THE AO WHICH COULD PROVE IN-GENUINENESS OF SUCH EXPENDITURE. THE ASSESSEE RELIED ON THE FOLLOWING CASE LAWS:- ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 8 1) UNITED ELECTRICAL COMPANY V. CIT (2002) 258 ITR 317 (DEL.) 2) SARTHAK SECURITIES COMPANY PVT. LTD. V. ITO (201 0) 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 (AS R) (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 SUBM ISSIONS FILED DURING COURSE OF THE ORIGINAL ASSESSMENT PROCEEDING . AS IT WILL BE CLEAR FROM PERUSAL OF THE SAME, THE ASSESSEE HAD FI LED EXHAUSTIVE DETAILS AS CALLED BY THE AO FROM TIME TO TIME. THIS INCLUDED, AMONG OTHERS, THE DETAILS REGARDING M/S. AKON MANAG EMENT CONSULTANCY P. LTD. IT WAS ONLY AFTER MAKING FULL A ND PROPER VERIFICATION AND INQUIRY THAT THE A.O. FRAMED THE A SSESSMENT. NEITHER THERE WAS ANY LAPSE.' DEFICIENCY ON THE PAR T OF THE A.O. WHILE FRAMING THE ASSESSMENT NOR IS THERE EVEN SUCH ALLEGATION. AS FAR AS THE REASSESSMENT IS CONCERNED, IT IS CLEA R THAT THE INITIATION OF THE REASSESSMENT ITSELF WAS BAD IN LA W. AS IT WILL BE CLEAR FROM THE REASONS RECORDED, RELIANCE IS PLACED ON ONLY TWO MATERIALS FOR THE INITIATION, NAMELY: (A) THE ALLEGED STATEMENT OF ONE MR. RAJENDRA BHIMR AJKA; AND (B) THE STATEMENT OF A DIRECTOR OF THE ASSESSEE. NOW, AS FAR AS THE FIRST STATEMENT IS CONCERNED, TH E SAME IS REQUIRED AND LIABLE TO BE REJECTED/IGNORED ALL TOGE THER, ON FACT AS WELL AS IN LAW. THIS IS BECAUSE THE STATEMENT IS NO T CONFRONTED TO THE ASSESSEE AT ANY STAGE, EVEN TILL TODAY. THIS WA S IN SPITE OF ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 9 REPEATED REQUESTS BY THE ASSESSEE. IN FACT, EVEN IN COURSE OF THE INSPECTION OF THE ASSESSEE'S RECORD, NEITHER A COPY THEREOF WAS MADE AVAILABLE TO THE ASSESSEE NOR WAS FOUND IN THE RECORDS. AS SUCH , NO RELIANCE CAN BE PLACE ON SUCH NON-EXISTEN T MATERIAL. SECONDLY, IN ANY CASE, UNDER THE LAW ALSO, SUCH STA TEMENT HAS NO EVIDENTIARY VALUE AND IS REQUIRED TO BE IGNORED ALL TOGETHER IN TERMS OF THE DECISION OF THE APEX COURT IN THE CASE OF KISHINCHAND CHELLARAM V/S CIT [1980[125 ITR 713 (SC )] AND NUMEROUS SUBSEQUENT DECISIONS. THIRDLY, IT IS NOT K NOWN WHO IS MR. RAJENDRA, WHAT WAS HIS CONNECTION WITH M/S. AKO N, WHAT HE HAS STATED, IN WHAT CONTEXT HE GAVE ANSWERS, ETC. A S SUCH, WITHOUT KNOWING CONTENTS OF THE STATEMENT NO RELIAN CE CAN BE PLACED ON SUCH A STATEMENT. FOURTHLY, EVEN OTHERWIS E, NO RELIANCE CAN BE PLACED ON THE STATEMENT GIVEN BY A THIRD PAR TY WITHOUT ANY CORROBORATING EVIDENCE. THIS IS BECAUSE A PERSO NAL MOTIVE TO SAVE ONES OWN SKIN CANNOT BE RULED OUT. FIFTHLY, I N ANY CASE NO RELIANCE CAN BE PLACED ON THE STATEMENT GIVEN BY A THIRD PARTY, UNLESS AN OPPORTUNITY OF CROSS EXAMINATION IS GRANT ED TO THE ASSESSEE. THE LAW IN THIS REGARD IS TOO WELL SETTLED TO NECE SSITATE REFERENCE TO ANY PARTICULAR CASE LAW. SOME OF THE L EGAL PRECEDENTS ARE ALREADY REFERRED IN THE LEGAL NOTE EARLIER SUBM ITTED. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE STAT EMENT OF MR. RAJENDRA HAS NO EVIDENTIARY VALUE. AS REGARDS THE OTHER STATEMENT OF THE DIRECTOR OF T HE ASSESSEE, THIS ALSO COULD NOT BE SOLELY RELIED UPON WITHOUT ANY CORROBORATING EVIDENCE. IN FACT, ON A BARE PERUSAL OF THE STATEMENT, IT IS EVIDENT THAT THE DIRECTOR HAD CLEA RLY AVERRED THAT THE TRANSACTION WAS DULY ACCOUNTED AND RECORDED, ME ANING THEREBY, THE TRANSACTION WAS GENUINE. NOWHERE IN TH E STATEMENT THE DIRECTOR HAD EVER STATED THAT THE TRANSACTION W AS BOGUS OR THAT IT REPRESENTED ANY UNACCOUNTED INCOME OF THE A SSESSEE. THERE IS ABSOLUTELY NO WHISPER ABOUT ANY WRONG DOIN G. IT WAS ONLY THAT THE DIRECTOR DID NOT HAVE SUPPORTI NG EVIDENCE AT THE TIME WHEN HIS STATEMENT WAS BEING T AKEN BY THE ADDITIONAL DIRECTOR OF INVESTIGATION OF SCINDIA HOU SE AND HE WAS ASKED TO PROVE THE TRANSACTION WITH SUPPORTIVE EVID ENCE THERE AND THEN ONLY. IT SHOULD BE APPRECIATED THAT EVEN AT THE TIME OF THE STATEMENT , HE WAS NOT CONFRONTED WITH ANY ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 10 STATEMENT/MATERIAL CONCERNING M/S AKON. AS SUCH, T HE 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 AV ERRED THAT THE TRANSACTION WITH M/S AKON WAS GENUINE, THEREBY DISP UTING & RETRACTING THE ALLEGED DISCLOSURE MADE BY THE DIREC TOR. ASSUMING, BUT NOT ADMITTING, THAT SUCH STATEMENT HAD ANY EVID ENTIARY VALUE, IT CAN NEVER BE THE SOLE BASIS, ESPECIALLY W HEN IT IS RETRACTED/CLARIFIED/DISPUTED. THIS IS MORE SO, WHEN THE ASSESSEE PLACES ON RECORD NUMEROUS EVIDENCES IN SUPPORT OF T HE TRANSACTION AND THE A.O. DOES NOT DENY/DISPUTE/CONT ROVERT SUCH PLETHORA OF MATERIAL EVIDENCE. NEITHER THE ACT NOR ANY JUDICIAL PRECEDENT SUPPORTS OR ALLOWS SUCH ACTION ON THE PAR T OF THE A.O. EVEN SECTION 132 {4} - WHICH REFERS TO THE STATEMEN T GIVEN IN COURSE OF A SEARCH - FALLS SHORT OF THIS. AS SUCH, AS THE STATEMENT GIVEN AT THE TIME OF SEARCH HAS NOT BEEN 'GIVEN SUC H CONCLUSIVE EVIDENTIARY VALUE UNDER THE ACT, THERE IS NO QUESTI ON OF ACCORDING SUCH STATUS TO A STATEMENT GIVEN U/S 131. IF THE ST ATEMENT GIVEN BY AN ASSESSEE, THAT TOO, GIVEN U/S. 131 OF THE ACT , IS TO BE REGARDED AS THE CONCLUSIVE AND SOLE BASIS FOR MAKIN G AN ADDITION, THAN NOTHING PREVENTED THE LEGISLATURE TO CLEARLY P ROVIDE SO, DIRECTLY OR EVEN INDIRECTLY. IN FACT, IF THE STAND OF THE A.O. IS TO BE ACCEPTED, THIS WOULD MAKE THE ENTIRE PROVISIONS REG ARDING ASSESSMENT PROCEEDING REDUNDANT AND MEANINGLESS. BY NO STRETCH OF IMAGINATION, SUCH INTERPRETATION IS POSS IBLE. IN FACT, THE LAW IN THIS REGARD ALSO VERY WELL SETT LED, COVERING THE VERY SAME ISSUE. THE APEX COURT HAS TI ME AND AGAIN HELD IN NUMEROUS CASES THAT A SOLE STATEMENT GIVEN BY AN ASSESSEE HAS NO EVIDENTIARY VALUE ESPECIALLY WHEN I T IS DISPUTED BY THE ASSESSEE LATER ON AND THERE IS NO CORROBORAT IVE EVIDENCE IN SUPPORT OF THE CONCLUSION SOUGHT TO BE ARRIVED ON T HE BASIS OF THE STATEMENT. SOME OF THE CASE LAWS ARE REFERRED IN TH E LEGAL NOTE FILED EARLIER. THE RULING OF THE APEX COURT IN THE CASE OF VINOD SOLANKI (REFERRED IN THE LEGAL NOTE) HAS ANALYZED T HE LAW IN THIS REGARD. THE MOST IMPORTANT ASPECT IS THAT THE ACTION OF THE A.O. IS DIRECTLY CONTRARY TO THE INSTRUCTION ISSUED BY THE CBDT ITSELF. FOR READY REFERENCE, THIS INSTRUCTION IS REPRODUCED HER EIN BELOW: ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 11 CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATION INSTANCES H AVE COME TO THE NOTICE OF THE BOARD WHERE ASSESSEES HAVE CLAIME D THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH & SEIZURE AND SURVEY OPERATION S. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, A RE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING R ETURNS OF INCOME. IN THESE CIRCUMSTANCES, SUCH CONFESSIONS DU RING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE O F INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME-TAX DEPART MENT. SIMILARLY, WHILE RECORDING STATEMENT DURING THE COU RSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS NO ATTEMPT SHOULD B E MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDIN GS ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDE NCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATI ONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT OR DERS. 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 I N LAW. AS REGARDS THE MERITS OF THE CASE, THE CASE OF THE ASSESSEE IS IMPECCABLE. THE ASSESSEE PLACED ON RECORD HOST O F MATERIAL TO PROVE NOT ONLY THE IDENTITY BUT ALSO THE GENUINENES S OF THE TRANSACTION. THE CONCERN, M/S AKON IS REGISTERED UN DER THE COMPANIES ACT, INCOME TAX ACT, SALES TAX LAWS AS WE LL AS SERVICE TAX LAWS. IN FACT, THE INCOME TAX DEPARTMENT ITSELF HAD ISSUED A CERTIFICATE FOR LOWER DEDUCTION OF TAX U/S 197 OF T HE ACT. THE CONCERN HAS ALSO FILED RETURN OF INCOME FOR THIS VE RY YEAR AND HAS OFFERED THIS RECEIPT FROM THE ASSESSEE HAS ITS INCO ME. THE PAYMENTS FOR THE PROFESSIONAL SERVICES WERE MADE UN DER WRITTEN CONTRACTS AND FOR WHICH REGULAR BILLS WERE ISSUED. THE ENTIRE ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 12 PAYMENTS WERE BY ACCOUNT PAYEE CHEQUES. ALL DOCUMEN TARY EVIDENCE IN SUPPORT OF THESE WERE SUBMITTED BEFORE THE A.O. AS SUCH, THE ASSESSEE HAD MORE THAN ADEQUATELY DISCHAR GED ITS PRELIMINARY ONUS TO SUPPORT ITS CLAIM OF DEDUCTION OF SUCH EXPENDITURE. AS AGAINST THIS, THE A.O. MISERABLY FAILED TO DISCH ARGE HIS ONUS TO SUPPORT THE DISALLOWANCE. IN FACT, HE ABDIC ATED HIS QUASI- JUDICIAL DUTY TO MAKE FAIR AND JUDICIOUS ASSESSMENT , IN AS MUCH AS HE DID NOT MAKE ANY INQUIRY /VERIFICATION WORTH A NAME. HE DID NOT EVEN REFER, MUCH LESS DEAL WITH, THE PLETHO RA OF MATERIAL BROUGHT ON RECORD BY THE ASSESSEE IN ITS SUPPORT. THESE EVIDENCES ARE NOT DOUBTED CONTROVERTED/DISPUTED. T HE DISALLOWANCE IS MADE IN A MOST CRYPTIC AND MECHANIC AL MANNER. UNDER THE CIRCUMSTANCES, IT IS SUBMITTED THAT EVEN ON MERIT THE DISALLOWANCE IS BAD AND ILLEGAL ON FACT AS WELL AS IN LAW. THE ASSESSEE MADE FURTHER SUBMISSIONS BEFORE LEARNE D CIT(A) VIDE LETTER DATED 3 RD SEPTEMBER, 2013 WHICH IS REPRODUCED AS UNDER:- 'WE ARE IN RECEIPT OF YOUR NOTICE U/S 143(2) OF TH E INCOME TAX ACT, 1961 ALONG WITH REASONS FOR RE-OPENING OF ASSE SSMENT FOR THE AY. 2008-09. IN THIS RESPECT WE WOULD LIKE TO DRAW YOUR KIND ATT ENTION TO OUR LETTER DATED 25/04/2013 FILED WITH YOUR OFFICE WHER EIN WE HAVE SUBMITTED THAT THE ASSUMPTION OF JURISDICTION BY YO U UNDER SECTION 148 OF THE ACT IS ILLEGAL AND BAD IN LAW. WITHOUT PREJUDICE TO THE ABOVE, WE WOULD LIKE TO SU BMIT AS UNDER: 1. WE HAVE AVAILED OF THE SERVICES FROM M/S AKON MA NAGEMENT CONSULTANCY PRIVATE LIMITED AS PER THE CONTRACTS DA TED 1ST NOV, 5 TH NOV., 10 TH NOV., 1ST DEC., 10 TH DEC. 2007 ENTERED WITH THEM WHERE WE HAVE PAID AN AMOUNT OF RS. 58,62,940/-. 2. IN THE STATEMENT OF OUR DIRECTOR REORDERED ON 14 /10/2011 UNDER SECTION 131 OF THE ACT,1961 HE HAS STATED AS UNDER: ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 13 'Q5. ON THE BASIS OF INFORMATION IS POSSESSION. I H AVE EVIDENCE THAT THE CONCERN M/S AKON MANAGEMENT CONSULTANCY PR IVATE LIMITED IS A PAPER ENTITY AND DOESN'T DO ANY BUSINE SS 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 A CT, 1961.' SIR, THE TRANSACTIONS WITH M/S AKON MANAGEMENT CON SULTANCY 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 SU BSTANTIATE THE TRANSACTION. THE ISSUE HAS A POTENTIAL OF PROTR ACTED LITIGATION. IN ORDER TO BUY PEACE OF MIND, COVER UP THE DISCREP ANCIES AND TO AVOID PENAL CONSEQUENCES, I SUBMIT THAT THE EXPENSE S CLAIMED FOR A. Y. 2008-09 OF RS. 58,62,940/- IN CONNECTION WIT H THE ABOVE MENTIONED COMPANY MAY BE DISALLOWED. I SHALL PAY TH E 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 BHI MRAJKA AND (II) MR. SHARAT CHANDRA SATPATHY (ASSESSEE'S DIRECT OR). THE STATEMENT OF MR. RAJENDRA BHIMRAJKA HAS NOT BEEN GI VEN TO US. IN SO FAR AS THE STATEMENT OF MR. SATPATHY IS CONCERNE D, RECORDED IN THE SAID STATEMENT ,HE HAS PROCEEDED ON THE ASSUMPT ION THAT THE ASSESSEE MAY NOT BE ABLE TO SUBSTANTIATE THE TRANSA CTION. HOWEVER, WE HAVE THE FOLLOWING DETAILS IN RESPECT O F THE SAID TRANSACTION: IN THIS RESPECT, WE WOULD LIKE TO SUBM IT AS UNDER TO SUBSTANTIATE THE TRANSACTION MADE BY US : (I) M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED IS A REGISTERED COMPANY WITH ROC, MAHARASHTRA. CERTIFICA TE OF REGISTRATION IS ENCLOSED HEREWITH FOR YOUR READY RE FERENCE. (II) THE MAIN OBJECT OF M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED IS TO RENDER MANAGEMENT CONSULTANCY SERVICES. (III) M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED IS ALSO HAVING PAN NO. ITS PAN CARD COPY IS ENCLOSED HEREWI TH FOR YOUR READY REFERENCE. (IV) OUR COMPANY HAS AVAILED THE SERVICES FROM THEM AS P ER THE CONTRACTS DATED 1 ST NOV., 10 TH NOV, IST DEC., 10 TH DEC. 2007 ENTERED WITH THEM FOR LIASONING WORK SERVICES. THE COPY OF CONTRACTS IS ENCLOSED FOR YOUR READY REFERE NCE. ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 14 (V) FROM TIME TO TIME, M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED HAS RAISED THE BILL FOR SERVICES RE NDERED BY THEM. (VI) M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED HAS ALSO PRODUCED /SUBMITTED CERTIFICATE U/S 197(1) OF THE INCOME TAX ACT, 1961 OBTAINED BY THEM FROM INCOME T AX OFFICER (TDS) 1 (1) RELATING TO LOWER DEDUCTION OF TAX FROM PROFESSIONAL FEES PAYABLE TO THEM. PHOTOCOPY OF WHI CH IS ENCLOSED HEREWITH FOR YOUR READY REFERENCE. (VII) M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED IS REGISTERED WITH THE SERVICE TAX DEPARTMENT. (VIII) WE HAVE PAID FOR THE PROFESSIONAL FEES BILLS BY PAY ORDER THROUGH BANKING CHANNEL ONLY. THE COPY OF BANK STATEMENTS MARKING PAYMENTS TO THEM IS ENCLOSED HER EWITH FOR YOUR READY REFERENCE. (IX) M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED BEI NG A 'PRIVATE LIMITED' COMPANY HAS RECEIVED THE PROFES SIONAL FEES FROM US IS WHICH BEING ACCOUNTED BY THEM IN TH EIR BOOKS OF ACCOUNT AND THEIR ACCOUNTS ALSO BEING AUDI TED BY INDEPENDENT CHARTERED ACCOUNTANT FIRM. IT CAN BE OBSERVED FROM THE ABOVE AUDITED ACCOUNTS THAT THE PROFESSIONAL FEES PAID BY US IS ACCOUNTED BY TH EM AS INCOME. M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED HAS ALSO E-FILED THE RETURN OF INCOME. THE COPY OF AUDI TED ANNUAL ACCOUNT, ACKNOWLEDGEMENT OF RETURN OF INCOME E- FILED AND COMPUTATION OF INCOME IS ENCLOSED HEREWIT H FOR YOUR READY REFERENCE. (X) IT CAN BE OBSERVED FROM THE ABOVE THAT THE TRANSACT IONS ARE ACCORDING TO NORMAL BUSINESS PARLANCE. (XI) FURTHER, IN THE CASE OF ORIGINAL ASSESSMENT PROCEED INGS U/S 143(3) OF THE ACT. OUR CASE WAS SELECTED FOR SCRUTINY AS PER NOTICE UN DER SECTION 142 (1) OF THE INCOME TAX ACT, 1961 VIDE NO TICE DATED 14/01/2010 ALONG WITH ANNEXURE WHEREIN AS PER QUEST ION NO 14 ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 15 'FURNISH PARTY WISE DETAILS OF ALL MAJOR EXPENSES E XCEEDING 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 DA TED 29/7/2010 AND ALLOWED THE EXPENSES UNDER SECTION 37 (1) OF THE INCOME TAX ACT, 1961 AS WHOLLY AND EXCLUSIVELY INCU RRED FOR THE PURPOSE OF THE BUSINESS/PROFESSION. IN VIEW OF THE ABOVE, WE SUBMIT THAT PROFESSIONAL F EES PAID BY US AMOUNTING TO RS. 58,62,940/- TO M/S AKON MANAGEMENT CONSULTANCY SERVICES PRIVATE LIMITED SHOULD BE ALLOWED AS WHOL LY 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 ASSE SSEE SUBMITTED A CHART, WHICH IS EXHIBITED IN THE APPELLATE ORDER FROM PAGE S 8 TO 11, WHEREIN THE ASSESSEE SUBMITTED NATURE OF WORK DONE BY AKON MANA GEMENT CONSULTANCY PRIVATE LIMITED IN BRIEF. THE LEARNED CIT(A) OBSER VED THAT THE ASSESSEE HAS CO-RELATED RENDERING OF SERVICES BY AKON MANAGEMENT SERVICES PRIVATE LIMITED WITH VARIOUS CONSULTANCIES GIVEN BY THE ASSESSEE TO ITS CLIENTS. THE PAYMENTS HAD BEEN MADE BY ASSESSEE BY ACCOUNT PAYEE CHEQUES THROUGH BANKING CHANNEL AND NATURE OF SERVICES RENDERED BY AKON MAN AGEMENT CONSULTANCY PRIVATE LIMITED TO THE ASSESSEE ALSO STOOD EXPLAINE D. THE LEARNED CIT(A) OBSERVED THAT THE AO DOES NOT HAVE CONTRARY EVIDENC E TO DISPROVE THE CONTENTION OF THE ASSESSEE. IT WAS OBSERVED BY THE LEARNED CIT(A) THAT DURING ASSESSMENT PROCEEDINGS, STATEMENT OF SHRI RAJENDRA BHIMRAJKA ON BEHALF OF AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED WAS NOT GIVEN TO THE ASSESSEE NOR WAS THE ASSESSEE CONFRONTED. CROSS EXAMINATION OF SAID SHRI RAJENDRA BHIMRAJKA WAS ALSO NOT PROVIDED TO THE ASSESSEE WA S THE OBSERVATION OF THE LEARNED CIT(A). THE LEARNED CIT(A) OBSERVED THAT T HERE IS A GROSS BREACH OF ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 16 PRINCIPLES OF NATURAL JUSTICE AND THE ASSESSMENT BA SED ON SAID GROSS BREACH OF PRINCIPLES OF NATURAL JUSTICE IS BAD IN LAW AND CANNOT BE SUSTAINED. THE LD. CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSE SSEE AND OBSERVED THAT THE GP AND NP RATIO HAS INCREASED AS COMPARED TO THE IM MEDIATELY PRECEDING YEARS. THE DETAILS OF G.P. AND N.P. RATIO WAS EXTR ACTED BY THE LEARNED CIT(A) AS UNDER:- A.Y. GROSS RECEIPT NET PROFIT % OF NP TO GR REMARKS 2005-06 3779704.00 803504.64 21.26 - 2006 - 07 7492551.00 2063952.00 27.55 - 2007 - 08 9741605.32 2483273.24 25.49 - 2008 - 09 25218198.10 8248017.76 32.71 SCRUTINY IT WAS ALSO OBSERVED BY LEARNED CIT(A) THAT THE PAY MENT OF RS. 58,62,940/- WAS MADE BY THE ASSESSEE TO M/S AKON MANAGEMENT CON SULTANCY PVT. LTD. AND APPARENTLY IT IS NOT THE CASE OF INFLATION OF E XPENSES BY THE ASSESSEE. FURTHER IT WAS OBSERVED BY LEARNED CIT(A) THAT M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. HAS OBTAINED AND SUBMITTED TO THE ASSESSEE A CERTIFICATE OF ITO (TDS) 1(1) U/S 197 (1) OF THE ACT FOR LOWER DEDUCTION OF TAX AT SOURCE FROM PROFESSIONAL FEES PAYABLE TO IT WHIC H SUBSTANTIATE THE CONTENTION OF THE ASSESSEE THAT M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. IS A GENUINE PARTY. FURTHER IT WAS OBSERVED BY LEA RNED CIT(A) THAT M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. HAS FILED REGULAR RETURN OF INCOME AND HAS SHOWN SUCH FEES OF RS. 58,62,940/-AS INCOME IN ITS RETURN OF INCOME FILED WITH REVENUE. IT WAS 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 SER VICES AS MENTIONED IN TAX INVOICE/BILLS RAISED BY IT AND PAYMENTS WERE MADE T HROUGH A/C PAYEE CHEQUE. IN NUTSHELL, THE LD. CIT(A) HELD THAT THE A.O. HAS DISALLOWED THE EXPENDITURE ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 17 WITHOUT ANY CONTRARY EVIDENCE AND WITHOUT REFUTING THE VERIFIABLE EVIDENCES SUBMITTED BY THE ASSESSEE AND ACCORDINGLY LEARNED C IT(A) DELETED THE DISALLOWANCE OF EXPENDITURE OF RS. 58,62,940/- TOWA RDS CONSULTANCY SERVICES , AS MADE BY THE AO , VIDE APPELLATE ORDER DATED 05-1 1-2014 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 WHI LE THE ASSESSEE HAS FILED ITS C.O. . THE REVENUE HAS CHALLENGED THE DELETION OF D ISALLOWANCE OF EXPENDITURE OF RS. 58,62,940/- PAID TO AKON MANAGEMENT CONSULTA NCY PRIVATE LIMITED BY THE ASSESSEE, WHILE THE ASSESSEE FILED C.O. CHALLEN GING THE INVOCATION OF PROVISIONS OF SECTION 147/148 OF THE ACT FOR REOPEN ING OF THE ASSESSMENT. 6. THE LD. D.R. SUBMITTED THAT INFORMATION WAS RECE IVED BY AO FROM INVESTIGATION WING OF THE I.T. DEPARTMENT THAT M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. IS ENGAGED IN PROVIDING ACCOM MODATIONS ENTRIES. THE STATEMENT OF SHRI RAJENDRA BHIMRAJKA WHO IS CONTROL LING M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. WAS RECORDED BY RE VENUE WHEREBY HE STATED THAT THIS PARTY M/S AKON MANAGEMENT CONSULTA NCY PVT. LTD. WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. THE D IRECTOR OF THE ASSESSEE COMPANY SHRI SHARAD CHANDRA SATPATHY HAS ALSO SUBMI TTED IN THE STATEMENT RECORDED THAT HE IS UNABLE TO SUBSTANTIATE WITH EVI DENCE THE TRANSACTION OF THE ASSESSEE WITH M/S AKON MANAGEMENT CONSULTANCY P RIVATE LIMITED . THE LD. D.R. DREW OUR ATTENTION TO PAPER BOOK PAGE 300 TO 302 WHEREIN THE STATEMENT DATED 14.10.2011 RECORDED U/S 131 OF THE ACT OF THE DIRECTOR OF THE ASSESSEE COMPANY NAMELY SH. SHARAT CHANDRA SATPATHY IS PLACED , WHEREIN IN REPLY TO QUESTION NO. 5 & 6 , HE STATED AS UNDER , WHICH ARE REPRODUCED BELOW:- ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 18 Q5. ON THE BASIS OF INFORMATION IN POSSESSION, I H AVE EVIDENCE THAT THE CONCERN M/S AKON MANAGEMENT CONSULTANCY PR IVATE LIMITED IS A PAPER ENTITY AND DOESN'T DO ANY BUSINE SS ACTIVITY. YOU ARE REQUIRED TO EXPLAIN THE GENUINENESS OF THE TRANSACTION, SUBSTANTIATE IT WITH CORROBORATIVE EVIDENCES AND EX PLAIN THE ALLOWABILITY OF THE EXPENSES UNDER THE INCOME-TAX A CT, 1961. ANS. SIR, THE TRANSACTIONS WITH M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED WERE AS PER THE CONTRAC T ENTERED BY THE COMPANY. THE PAYMENTS WERE BY ACCOUNT PAYEE CHE QUES AND WERE DULY ACCOUNTED. HOWEVER, I SUBMIT THAT I AM UN ABLE TO SUBSTANTIATE THE TRANSACTION. THE ISSUE HAS A POTEN TIAL OF PROTRACTED LITIGATION. IN ORDER TO BUY PEACE OF MIN D, COVER UP THE DISCREPANCIES AND TO AVOID PENAL CONSEQUENCES, I SU BMIT AT THE EXPENSES CLAIMED FOR AY 2008-2009 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. Q6. YOU ARE BEING SHOWN THE INVOICES HAVING NO.27/M AR/07- 08/29, 24/JAN/07-O8/02, 29/JAN/07-08/03, 04/FEB/07- 08/04, 14/FEB/07~08/05 AND 18/FEB/07-08/06 OF VALU E RS. 11,23,600/-: RS. 12,00,000/-, RS. 12,00,000/-, RS.1 2,00,000/-, RS. 12,00,000/- AND RS. 6,00,000/- AGGREGATING TO R S. 65,23,600/- . KINDLY EXPLAIN THE TREATMENT THEREOF AS THEY ARE NOT REFLECTED IN THE BOOKS SUBMITTED BY YOU. ANS. SIR, I SUBMIT THAT THERE HAD BEEN NO TRANSACTI ONS 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 M ENTIONED NOR IT IS REFLECTED IN THE SUNDRY CREDITORS. I SUBMIT T HAT THESE TRANSACTIONS HAD NEVER BEEN ENTERED INTO AND THE CO MPANY HAS NEVER CLAIMED THESE AMOUNTS AS EXPENSES OR UNDER AN Y 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 ASS ESSEE COMPANY WHILE RECORDING STATEMENT ON OATH U/S 131 OF THE ACT. TH E LEARNED DR FURTHER RELIED UPON THE ORDER OF THE A.O.. ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 19 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-O PENING OF THE ASSESSMENT WAS DONE WITHIN FOUR YEARS FROM THE END OF THE AS SESSMENT YEAR BY ISSUE OF NOTICE U/S 148 DATED 30 TH MARCH, 2013. BASED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE INCOME TAX DEPAR TMENT, THE REVENUE HAS MADE THE DISALLOWANCE ON THE GROUND THAT M/S AKON M ANAGEMENT CONSULTANCY PVT. LTD. WERE PAPER ENTITY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT, VIDE ASSESSMENT ORDER DATED 29-03-2010. THE LD. COUNSEL DREW OUR ATTENTION TO THE PAPER BOOK PAGE 308 AND 309 WHEREIN ARE THE REA SONS RECORDED FOR REASSESSMENT WHICH ARE REPRODUCED BELOW:- OFFICE OF THE DY. COMMISSIONER OF INCOME TAX 9(2) ROOM N;O. 218, 2ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 20 TELEFAX NO. 22074303, EXTN. 2218 NO.DCIT. 9(2)/REOPENING OF ASSTT/2013-2014 DATED 12.08.2013 THE PRINCIPAL OFFICER, M/S I & E TRADE CONSULTANTS PVT LTD. 1002, 10TH FLOOR, SHRIPURI TOWERS, SONIWADI, SHIMPOLI ROAD, BORIVALI(W), MUMBAI 400 092. SUB: REASONS FOR REOPENING OF ASSESSMENT IN THE CAS E OF M/S I & E TRADE CONSULTANTS PVT LTD FOR A.Y.2008-09 . REF: YOUR OFFICE LETTER DT. 25.04.2013. PLEASE REFER TO THE ABOVE. ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 20 THE NOTICE U/S 148 OF THE I T ACT, FOR THE A.Y.2006 -07 WAS ISSUED ON 30.03.2013 AND DULY SERVED UPON YOU ON 03.04.2013 A FTER RECORDING THE REASONS FOR REOPENING THE ASSESSMENT. THE REASONS R ECORDED ARE AS UNDER :-. IN THIS CASE INFORMATION IS RECEIVED FROM THE 0/O T HE DY. DIRECTOR OF INCOME TAX (INV.)-UNIT V(3)~ MUMBAI, WHEREIN IT HAS BEEN STATED THAT 'DURING THE INVESTIGATION IN CASE OF ONE JIGNESH PA TEL, A GROUP OF CONCERNS WERE IDENTIFIED WHICH WERE INVOLVED IN PROVIDING AC COMMODATION ENTRIES. THE STATEMENT OF THE RAJENDRA BHIMRAJKA, WHO WAS CO NTROLLER OF THE ABOVE MENTIONED GROUP OF CONCERNS, WAS RECORDED U/S 131 OF THE INCOME TAX ACT, 1961 (HEREINAFTER, THE ACT'). HE DEPOSED ON O ATH THAT HE HAD PROVIDED ACCOMMODATION ENTRIES THROUGH THE ABOVE MENTIONED G ROUP OF CONCERNS TO M/S I&E TRADE CONSULTANTS PRIVATE LIMITED (HEREINAFTER, I&E) IN VIEW OF THIS, NOTICE U/S 131 OF THE ACT WAS ISSU ED TO THE PRINCIPAL OFFICER OF I&E AND STATEMENT OF SHRI SHARAT CHANDRA SATPATHY, DIRECTOR OF I&E WAS RECORDED ON OATH U/S 131 OF THE ACT ON 14.10.20 11. THE STATEMENT OF SHRI SHARAT CHANDRA SATPATHY, DIRE CTOR OF I&E WAS RECORDED ON OATH UNDER SECTION 131 OF THE ACT AND H E DEPOSED THAT OUT OF THE ABOVE MENTIONED CONCERNS THE I&E HAD HAD TRANSACTIO NS WITH FOLLOWING CONCERNS AS FOLLOWS:- SL NO. NAME F.Y. AMOUNT 1 AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED 2007-08 RS. 58,62,940/- IN QUESTION NO. 5, OF THE ABOVE MENTIONED STATEMENT , SHRI SHARAT CHANDRA SATPATHY WAS ASKED Q5. ON THE BASIS OF INFORMATION IS POSSESSION I H AVE EVIDENCE THAT THE CONCERN M/S AKON MANAGEMENT CONSULTANCY PRIVATE LIM ITED IS A PAPER ENTITY AND DOESN'T DO ANY BUSINESS ACTIVITY. YOU ARE REQUI RED TO EXPLAIN THE GENUINENESS OF THE TRANSACTION, SUBSTANTIATE THEM W ITH 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 CON SULTANCY PRIVATE LIMITED WERE AS PER THE CONTRACT ENTERED BY THE COM PANY. THE PAYMENTS WERE BY ACCOUNT PAYEE CHEQUES AND WERE DULY ACCOUNT ED. HOWEVER, I SUBMIT THAT I AM UNABLE TO SUBSTANTIATE THE TRANSAC TION. THE ISSUE HAS A ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 21 POTENTIAL OF PROTRACTED LITIGATION. IN ORDER TO BU Y 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 S HALL PAY THE TAX ALONG WITH INTEREST AT THE EARLIEST. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEV E THAT INCOME OF RS. 58,62,940/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T BY REASON OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS WITH THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. THE REASONS ARE PROVIDED AS PER THE ASSESSEES REQ UEST VIDE ABOVE REFERRED LETTER DATED 25.04.2013. SD/- (HARKAMAL SOHI SANDHU) DY. COMMISSIONER OF INCOME TAX 9(2) MUMBAI. THE LD. COUNSEL SUBMITTED THAT THE DIRECTOR OF THE COMPANY MR. SHARAT CHANDRA SATPATHY RETRACTED THE STATEMENT AFTERWARDS . OUR ATTENTION WAS DRAWN TO PAPER BOOK /PAGE 339-358 WHEREIN CONTRACT ENTERED INTO BY THE ASSESSEE WITH AKON MANAGEMENT CONSULTANCY PRIVATE L IMITED ARE PLACED ALONG WITH INVOICES RAISED BY SAID AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED. 8. THE LD. D.R., IN THE REJOINDER, SUBMITTED THAT T HE GENUINENESS OF THE TRANSACTION ENTERED INTO BY THE ASSESSEE WITH AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED COULD NOT BE PROVED BY THE ASSESSEE . 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING CASE LAWS RELIED UPON . WE HAVE OBSERVED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS CONSULTANCY SERVICES TO COMPANIES WHO ARE OPERATING IN INTERNATIONAL TRADE. THE ASSESSEE HAS BOOKED AN EXPENDITURE OF RS. 58,62 ,940/- TOWARDS AVAILING CONSULTANCY SERVICES FROM M/S AKON MANAGEMENT CONSU LTANCY PVT. LTD. ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 22 WHICH ARE STATED TO BE RENDERED BY AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED TO ASSESSEES VARIOUS CLIENTS ON BEHALF OF ASSESSEE. INFORMATION WAS RECEIVED BY THE AO FROM THE INVESTIGATION WING OF T HE INCOME TAX DEPARTMENT AND BASED UPON THE SAME, THE A.O. INFERRED THAT THE ASSESSEE COMPANY HAS CLAIMED EXPENSES WHICH WERE IN FACT NOT INCURRED AN D DOES NOT HAVE ANY CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESS EE COMPANY. THE INFORMATION SO RECEIVED BY THE AO FROM INVESTIGATIO N WING OF THE I T DEPARTMENT WAS BASED ON THE STATEMENT RECORDED BY R EVENUE OF ONE MR RAJENDRA BHIMRAJKA STATED TO BE CONTROLLER OF M/S A KON MANAGEMENT CONSULTANCY PVT. LTD. WHEREIN HE STATED THAT M/S A KON MANAGEMENT CONSULTANCY PVT. LTD. IS A PAPER ENTITY WHICH DOES NOT DO ANY BUSINESS AND IS MERELY AN ACCOMMODATION ENTRY PROVIDER . THE ASS ESSEE HAD DEALING WITH SAID AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED TO THE TUNE OF RS. 58,62,940/- DURING PREVIOUS YEAR RELEVANT TO THE I MPUGNED ASSESSMENT YEAR. THE STATEMENT OF SHRI SHARAT CHANDRA SATPATHY, DIRE CTOR 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 AS SESSEE COMPANY HAD TRANSACTIONS BUT WAS UNABLE TO SUBSTANTIATE THE SAM E, AND THE SAME WAS SURRENDERED BY SAID DIRECTOR AS INCOME OF THE ASSES SEE. THE CASE WAS REOPENED BY AO U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT, DATED 30 TH MARCH, 2013 WHICH WAS WITHIN A PERIOD OF FOUR YEAR FROM THE END OF ASSESSMENT YEAR. THE REASONS RECORDED FOR RE-OPENI NG WERE SUPPLIED BY THE AO TO THE ASSESSEE ON 12 TH AUGUST, 2013 WHICH WAS STATED BY THE ASSESSEE TO HAVE BEEN SUPPLIED AT THE FAG END WHEN THE ASSESSME NT WAS GETTING TIME BARRED. THE CASE WAS REOPENED U/S 147/148 OF THE A CT 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 BHI MRAJKA STATED TO BE CONTROLLER OF M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. HAD DEPOSED THAT ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 23 M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. IS A PAP ER ENTITY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND IT DID NOT DO A NY BUSINESS BUT WAS A MERELY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. THE ASSESSEE HAD TRANSACTION OF RS. 58,62,940/- WITH SAID AKON MANAG EMENT CONSULTANCY PRIVATE LIMITED WHICH WAS ADMITTED BY SH. RAJENDRA BHIMRAJKA TO BE AN ACCOMMODATION ENTRY. HOWEVER , THE STATEMENT OF SH. RAJENDRA BHIMRAJKA WAS NOT FURNISHED BY THE AO TO THE ASSESSEE NOR CRO SS EXAMINATION WAS ALLOWED. IT IS THE AVERMENT OF THE ASSESSEE THAT RE ASONS WERE SUPPLIED TO THE ASSESSEE AT THE FAG END OF THE ASSESSMENT WHEN THE ASSESSMENT WAS GETTING TIME BARRED AND ALSO OBJECTIONS RAISED BY THE ASSES SEE WERE NOT DISPOSED OF BY THE AO. THE ASSESSEE HAS FILED CROSS OBJECTIONS BEFORE TRIBUNAL CHALLENGING RE-OPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF T HE ACT AND THE SAID OBJECTIONS WERE STATED BY THE ASSESSEE TO BE NOT DI SPOSED OFF BY THE REVENUE. THE LD. DR COULD NOT CONTROVERT THAT THE AO DID NOT DISPOSE OF THE OBJECTIONS FILED BY THE ASSESSEE. HENCE, KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE INCLINED TO SET ASIDE AND RESTORE THE ISSUE OF CHALLENGE TO RE- OPENING OF THE CONCLUDED ASSESSMENT BY THE ASSESSEE TO THE FILE OF THE AO FOR DE-NOVO DETERMINATION OF THE ISSUE ON MERITS IN ACC ORDANCE WITH LAW. THE AO SHALL DISPOSE OF THE OBJECTIONS RAISED BY THE ASSES SEE FOR RE-OPENING OF CONCLUDED ASSESSMENT IN ACCORDANCE WITH LAW. THE A .O. SHALL PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LA W. THE AO SHALL ALLOW ASSESSEE TO FILE ALL NECESSARY AND RELEVANT EVIDENC ES AND EXPLANATION TO SUPPORT ITS CONTENTIONS IN ITS DEFENSE. WE ORDER AC CORDINGLY. FURTHER , IT IS OBSERVED WHEN ASKED BY BENCH FROM L EARNED COUNSEL OF ASSESSEE IN THE COURSE OF HEARING TO DEMONSTRATE AN D ESTABLISH THE NATURE OF WORK DONE BY AKON MANAGEMENT CONSULTANCY PRIVATE LI MITED FOR THE ASSESSEE WITH COGENT EVIDENCES AS WELL EXPLANATIONS , OUR ATTENTION WAS DRAWN BY LEARNED COUNSEL OF THE ASSESSEE TO PAPER B OOK PAGES 339-358 ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 24 WHEREIN CONTRACT WITH AKON MANAGEMENT PRIVATE CONSU LTANCY LIMITED AND INVOICES RAISED BY AKON MANAGEMENT CONSULTANCY PRIV ATE LIMITED IS PLACED BUT ADEQUATE CO-RELATION WITH COGENT EVIDENCES OF R ENDERING OF ACTUAL SERVICES BY AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED COUL D NOT BE ADEQUATELY DEMONSTRATED CO-RELATING WITH CONTRACTS OF ASSESSEE WITH CLIENTS AND BACK TO BACK ARRANGEMENT WITH AKON MANAGEMENT CONSULTANCY P RIVATE LIMITED AND ACTUAL RENDERING OF SERVICES BY AKON MANAGEMENT CON SULTANCY PRIVATE LIMITED FOR THE ASSESSEES CLIENTS ON BEHALF OF THE ASSESSEE. IT IS INCUMBENT ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSA CTIONS ENTERED INTO WITH M/S AKON MANAGEMENT CONSULTANCY PVT. LTD. AS MERELY FILING OF CONTRACT, INVOICES AND PAYMENTS THROUGH BANKING CHANNEL ARE N OT SUFFICIENT TO DEMONSTRATE THE GENUINENESS OF THE TRANSACTION. TH E ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE TRANSACTION BEFORE THE AO . THE LEARNED CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE MERELY BAS ED ON CONTRACTS AND INVOICES ETC. WHICH IS NOT SUFFICIENT AS THE ASSESS EE HAS TO DEMONSTRATE ACTUAL RENDERING OF SERVICES BY AKON MANAGEMENT CONSULTANC Y PRIVATE LIMITED TO THE ASSESSEE CLIENTS ON BEHALF OF THE ASSESSEE SUPPORTE D BY COGENT EVIDENCES AND EXPLANATIONS EVIDENCING INVOLVEMENT OF AKON MANAGEM ENT 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 H EAVY ON ASSESSEE TO PROVE THE GENUINENESS OF THE AFORE-STATED TRANSACTI ON WITH AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED. IT IS ALSO OBSERVED TH AT THE STATEMENT OF SAID MR. RAJENDRA BHIMRAJKA WAS NOT PROVIDED BY REVENUE TO THE ASSESSEE AND NO CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE IN OR DER TO ENABLE THE ASSESSEE TO REBUT THE ALLEGATIONS MADE BY SAID MR RAJENDRA B HIMRAJKA OF AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED. IN OUR CON SIDERED VIEW, THIS MATTER OF ADDITIONS MADE ON MERITS BY THE AO ALSO N EEDS TO BE SET ASIDE AND RESTORE TO THE FILE OF AO FOR DE-NOVO DETERMINATION OF THE ISSUE ON MERITS BY THE A.O. AND ACCORDINGLY WE SET ASIDE THIS MATTER B ACK TO THE FILE OF THE A.O. ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 25 FOR DE NOVO DETERMINATION OF THE ISSUE AFRESH ON ME RITS BY THE AO WHEREBY THE REVENUE WILL ALSO PROVIDE STATEMENT OF SAID MR. RAJ ENDRA BHIMRAJKA TO THE ASSESSEE AND ALLOW CROSS EXAMINATION OF SAID MR RAJ ENDRA BHIMRAJKA , IF THE REVENUE WANTS TO USE THE SAID STATEMENT AGAINST THE ASSESSEE TO THE PREJUDICE OF THE ASSESSEE. THE ASSESSEE IS DIRECTE D TO SUBMIT COGENT EVIDENCES AND EXPLANATIONS TO PROVE THE ACTUAL REND ERING OF SERVICES BY AKON MANAGEMENT CONSULTANCY PRIVATE LIMITED TO THE ASSES SEES CLIENT ON BEHALF OF ASSESSEE TO ESTABLISH GENUINENESS OF THE SAID TRAN SACTIONS WITH REGARD TO THE SERVICES AVAILED BY THE ASSESSEE FROM M/S AKON MANA GEMENT CONSULTANCY PVT. LTD. THE A.O. SHALL PROVIDE SUFFICIENT OPPORT UNITY TO THE ASSESSEE OF BEING HEARD IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUST ICE IN ACCORDANCE WITH LAW. THE AO SHALL ALLOW THE ASSESSEE TO FILE ALL NECESSA RY AND RELEVANT EVIDENCES AND EXPLANATION TO SUPPORT ITS CONTENTIONS IN ITS D EFENSE. WE ORDER ACCORDINGLY. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IN I TA NO. 798/MUM/2015 FOR ASSESSMENT YEAR 2008-09 IS ALLOWED FOR STATISTI CAL PURPOSES AND THE C.O. NO. 140/MUM/2016 OF THE ASSESSE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY, 2017. # $% &' 24-02-2014 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 24-02-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 798/MUM/2015 & C.O. NO. 140/MUM/2016 26 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI I BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI