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TMI Blog2017 (3) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... before tribunal challenging re-opening of the concluded assessment u/s 147 of the Act and the said objections were stated by the assessee to be not disposed 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 reopening of the concluded assessment by the assessee to the file of the AO for de-novo determination of the issue on merits in accordance with law. - I .T.A. No.798/Mum/2015, CO No.140/Mum/2016 - - - Dated:- 24-2-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri Saurabhkumar Rai,DR For The Assessee : Ms. Nikita Agarwal ORDER PER RAMIT KOCHAR, Accountant Member This appeal filed by the Revenue and Cross objection(hereinafter called the C.O. ) filed by the assessee company are directed against the appellate orders of the learned Commissioner of Income Tax(Appeals)-20, Mumbai (Hereinafter called the CIT(A) ) dated 05-11-2014 pertaining to the assessment year 2008-09, the appellate proceedings befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the Income Tax Act, 1961[ the Act ]. 1.2 The assessee prays that on the facts and circumstances of the case and in law the reassessment proceeding be held to be bad and illegal as the necessary preconditions for initiating reassessment proceedings as well completion thereof were not complied with. 3. Brief facts of the case are that the assessee company is engaged in the business of providing business consultancy to companies who are operating in the international trade. The assessee company has e-filed return of income on 22nd September, 2008 declaring total income of ₹ 83,12,104/- which was processed by Revenue u/s 143(1) of the Act. The scrutiny 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 issued to the assessee on 30th March, 2013. Notice u/s 143(2) of the Act was issued by the AO on 12th August, 2013 which was duly served upon the assessee company. In response to the notices issued, the assessee requested for copy of reasons recorded for re-opening of the assessment u/s 147/148 of the Act vide their letter dated 25th April, 2013. The AO duly provided the reasons reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction, hence not fund tenable. iv) The assessee could not prove the nature of expenditure 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 tongues and plays all sorts of roles. The indifference of not producing 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 performed 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 of the assessee as well as the data/details/documents available on record, it becomes crystal clear that ; (a) The primary onus is on the assessee to establish 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 expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that some expenditure claimed by the assessee was not genuine because the concerned person of M/s Akon Management Consultancy Pvt. Ltd. had admitted that this party M/s Akon Management Consultancy Pvt. Ltd. was involved in issuing accommodation entries. The A.O. also observed that the director of the assessee company was not able to substantiate the expenditure shown in the name of M/s Akon Management Consultancy Pvt. Ltd., hence, the A.O. had received some new information , there-by having a ground for reasons to believe that there was escapement of assessment. The ld. CIT(A) relied on the decision of Hon ble Supreme 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 notice 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 income has escaped assessment is relevant and sufficiency of material is not to be looked into at the stage of initiation of re-assessment proceedings. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y case, under the law also, such statement 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 known who is Mr. Rajendra, what was his connection with M/s. Akon, what he has stated, in what context he gave answers, etc. As such, without knowing contents of the statement no reliance can be placed on such a statement. Fourthly, even otherwise, no reliance can be placed on the statement given by a third party without any corroborating evidence. This is because a personal motive to save one s own skin cannot be ruled out. Fifthly, in any case no reliance can be placed on the statement given by a third party, unless an opportunity of cross examination is granted to the assessee. The law in this regard is too well settled to necessitate reference to any particular case law. Some of the legal precedents are already referred in the Legal Note earlier submitted. In view of the above, it is submitted that the statement of Mr. Rajendra has no evidentiary value. As regards the other statement of the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions regarding assessment proceeding redundant and meaningless. By no stretch of imagination, such interpretation is possible. In fact, the law in this regard also very well settled, covering the very same issue. The Apex Court has time and again held in numerous cases that a sole statement given by an assessee has no evidentiary value especially when it is disputed by the assessee later on and there is no corroborative evidence in support of the conclusion sought to be arrived on the basis of the statement. Some of the case laws are referred in the legal note filed earlier. The ruling of the Apex court in the case of Vinod Solanki (referred in the legal note) has analyzed the 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 herein below: Confession of additional income during the course of search and seizure and survey operation Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search seizure and survey operations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orth a name. He did not even refer, much less deal with, the plethora of material brought on record by the assessee in its support. These evidences are not doubted controverted/disputed. The disallowance is made in a most cryptic and mechanical 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 learned CIT(A) vide letter dated 3rd September, 2013 which is reproduced as under:- 'We are in receipt of your notice u/s 143(2) of the Income Tax Act, 1961 along with reasons for re-opening of assessment for the AY. 2008-09. In this respect we would like to draw your kind attention to our letter dated 25/04/2013 filed with your office wherein we have submitted that the assumption of Jurisdiction by you under section 148 of the Act is illegal and bad in law. Without prejudice to the above, we would like to submit as under: 1. We have availed of the services from M/s Akon Management Consultancy Private Limited as per the contracts dated 1st Nov, 5th Nov., 10th Nov., 1st Dec., 10th Dec. 2007 entered with them where we have paid an amount of ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference. (v) From time to time, M/s Akon Management Consultancy Private Limited has raised the bill for services rendered 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 Tax officer (TDS) 1 (1) relating to lower deduction of tax from professional fees payable to them. Photocopy of which 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 herewith for your ready reference. (ix) M/s Akon Management Consultancy Private Limited being a 'Private Limited' Company has received the professional fees from us is which being accounted by them in their Books of Account and their Accounts also being audited by Independent Chartered Accountant Firm. It can be observed from the above Audited Accounts that the Professional Fees paid by us is accounted by them as Income. M/s Akon Management Consul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was the observation of the learned CIT(A). The learned CIT(A) observed that there is a gross breach of principles of natural justice and the assessment based 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 assessee and observed that the GP and NP ratio has increased as compared to the immediately preceding years. The details of G.P. and N.P. ratio was extracted 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 25.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g accommodations entries. The statement of Shri Rajendra Bhimrajka who is controlling M/s Akon Management Consultancy Pvt. Ltd. was recorded by Revenue whereby he stated that this party M/s Akon Management Consultancy Pvt. Ltd. was involved in providing accommodation entries. The director of the assessee company Shri Sharad Chandra Satpathy has also submitted in the statement recorded that he is unable to substantiate with evidence the transaction of the assessee with M/s Akon Management Consultancy Private 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:- Q5. On the basis of information in possession, I have evidence that the concern M/s Akon Management Consultancy Private Limited is a paper entity and doesn't do any business activity. You are required to explain the genuineness of the transaction, substantiate it with corroborative evidences and explain the allowability of the expenses under the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reasons 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 case 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. 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 after recording the reasons for reopening the assessment. The reasons recorded are as under :-. In this case information is received from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st at the earliest. In view of the above facts, I have reason to believe that income of ₹ 58,62,940/- chargeable to tax has escaped assessment by reason of failure on the part of assessee to disclose fully and truly all material facts with the meaning of section 147 of the I.T. Act, 1961. The reasons are provided as per the assessee s request 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 Limited are placed along with invoices raised by said Akon Management Consultancy Private Limited. 8. The ld. D.R., in the rejoinder, submitted that the 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 perused the material available on record including case laws relied upon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of M/s Akon Management Consultancy Pvt. Ltd. had deposed that M/s Akon Management Consultancy Pvt. Ltd. is a paper entity engaged in providing accommodation entries and it did not do any business but was a merely engaged in providing accommodation entries. The assessee had transaction of ₹ 58,62,940/- with said Akon Management 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 cross examination was allowed. It is the averment of the assessee that reasons 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 assessee 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 the Act and the said objections were stated by the assessee to be not disposed 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded u/s 131 of the Act on 14.10.2011 has surrendered the said amount and hence the onus is heavy on assessee to prove the genuineness of the afore-stated transaction with Akon Management Consultancy Private Limited. It is also observed that 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 order to enable the assessee to rebut the allegations made by said Mr Rajendra Bhimrajka of Akon Management Consultancy Private Limited. In our considered view, this matter of additions made on merits by the AO also needs 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 back to the file of the A.O. for de novo determination of the issue afresh on merits by the AO whereby the Revenue will also provide statement of said Mr. Rajendra Bhimrajka to the assessee and allow cross examination of said Mr Rajendra Bhimrajka , if the Revenue wants to use the said statement against the assessee to the prejudice of the assessee. The assessee is directed to submit cogent evidences and explanations to prove the actual ..... 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