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Income Tax Appellate Tribunal, ‘D’ BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI ARUN KHODPIA
and other Das Offshore Limited आदेश / O R D E R PER AMIT SHUKLA (J.M): The present appeal has been preferred by the Revenue and the cross objection by the assessee against the order dated 04.02.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, arising out of assessment framed under section 147 of the Income-tax Act, 1961 for the Assessment Year 2019–20. The Revenue has challenged the deletion of addition of ₹3,75,00,000/- made on account of consultancy fees paid to M/s. AGV Consultants, whereas the assessee, by way of its cross objection, has assailed the validity of reopening under section 147 of the Act on various legal grounds.
The assessee is a company primarily engaged in specialised offshore and infrastructure-related business activities, including fabrication, assembly and maintenance of offshore structures in the hydrocarbon sector, both onshore and offshore, as well as execution of civil infrastructure projects such as water distribution pipelines, water treatment plants and allied works. For the year under consideration, the assessee filed its return of income on 30.10.2019 declaring a total income of ₹66,80,30,300/-. Subsequently, the case was reopened under section 147 of the Act and an order under section 148A(d) was passed on 31.03.2023, culminating in the impugned assessment order.
and other Das Offshore Limited 3. During the relevant previous year, the assessee had secured a substantial offshore contract from M/s. L&T Hydrocarbon Engineering Limited on behalf of M/s. ONGC Ltd. for execution of work at offshore platforms. The said project was of considerable technical complexity and duration. In order to execute the project efficiently and in conformity with technical and operational requirements, the assessee entered into a consultancy arrangement with M/s. AGV Consultants for providing marine spread along with requisite marine crew and other associated technical services.
Pursuant to the consultancy agreement dated 13.08.2018, M/s. AGV Consultants completed the assignment and raised four invoices aggregating to ₹3,75,00,000/- plus applicable taxes. The assessee made payments against the said invoices through regular banking channels on different dates after deducting tax at source in accordance with law. During the course of assessment proceedings, the assessee furnished copies of the consultancy agreement, invoices raised by M/s. AGV Consultants, ledger extracts from its books of account, bank statements evidencing payments and Form 16A evidencing deduction and deposit of tax at source.
During the assessment proceedings, the Assessing Officer issued a notice under section 133(6) of the Act to M/s. AGV Consultants and also relied upon certain information available on the Insight Portal alleging that the said concern was a “high-risk” entity providing accommodation entries, based on a survey conducted under section 133A of the Act.
Proceeding primarily on the basis of the aforesaid information and on noticing that the agreement furnished by the assessee and the agreement furnished by M/s. AGV Consultants in response to notice under section 133(6) were not identical in content and execution details, the Assessing Officer concluded that the consultancy expenditure was not genuine and disallowed the entire amount of ₹3,75,00,000/-.
In appeal, the learned Commissioner of Income Tax (Appeals) examined the entire material placed on record and found that the Assessing Officer had proceeded on incorrect factual assumptions. It was noticed that two agreements dated 13.08.2018 existed between the parties, one being a draft agreement and the other being the final agreement duly signed and stamped after finalisation of scope of work and commercial terms. The learned Commissioner of Income Tax (Appeals) also took note of the fact that the Assessing Officer had relied upon alleged survey findings without bringing any independent corroborative evidence on record and without confronting any incriminating material to the assessee. The relevant findings of the learned Commissioner of Income Tax (Appeals) are reproduced hereunder.
5.6 I have gone through the facts of the case and have considered the submissions filed by the appellant as well as material on record including the case laws relied upon by the appellant.
5.7 The Assessing Officer has effectively relied upon certain inconsistences in documentary evidence as well as survey findings as stated above for arriving at the conclusion that “no genuine business activity / transaction was occurred between the assessee (DOL) and M/s. AGV Consultants but it was created through well planned and executed scheme by the assessee in order to achieve the predetermined objectives”. 5.8 In the impugned assessment order, the Assessing Officer has stated as under: “On perusal of assessee’s reply and copy of agreement(s) furnished by the assessee and M/s. AGV Consultants (supra), it can be observed that not only the contents of both the agreements are differ from each other but the execution dates mentioned on both the agreements are also differ. Even, one of the agreement furnished by the assessee is duly signed and stamped however, on the other hand the agreement furnished by M/s. AGV Consultants is without any signature and stamp on each paper.” 5.9 In this regard, during the appellate proceedings, the appellant has furnished copies of two agreements signed with M/s AGV Consultants viz.,: i. “Consultant Agreement” dated 13/08/2018; and ii. “Service Agreement” dated 13/08/2018. 5.10 During the assessment proceedings, the appellant furnished a copy of Consultant Agreement dated 13/08/2018 (which has been reproduced in the impugned assessment order) while M/s AGV Consultants furnished a copy of Service Agreement dated 13/08/2018 (which has been reproduced in the impugned assessment order). 5.11 In this regard, the appellant has clarified that: “1. Final Agreement copy signed between DOL and AGV Consultants on 13- 08-2018 which is also duly signed and stamped by both the parties. and other Das Offshore Limited 2. Draft Agreement copy signed between DOL and AGV Consultants on 13-08-2018, which was signed prior to final negotiations of scope work and financial terms. (which was wrongly interpreted by the learned NFAC and considering the incorrect date)” 5.12 It is, thus, apparent that the Assessing Officer has incorrectly assumed both the agreements to be same. The Assessing Officer has also mistakenly taken the date of Service Agreement as 13/06/2017 which is actually the date of relevant tender of M/s ONGC Ltd. 5.13 With regard the reliance of the Assessing Officer on the findings of survey conducted u/s 133A of the Act by the Investigation Wing, it is seen that nothing per se has been discussed in the impugned assessment order. The observations recorded in order u/s 148A(d) of the Act have not been substantiated by bringing relevant evidence on record. It is also seen that M/s AGV Consultants has neither denied providing professional services to the appellant nor has accepted providing accommodation entries. 5.14 At the same time, the documentary evidences furnished by both the appellant and M/s AGV Consultants are a matter of record and cannot be denied. The Assessing Officer has not brought any evidence on record to establish that the relevant transactions have not been actually carried out or that they constitute sham transactions. 5.15 It is also pertinent to note that the following observations have been made in the impugned assessment order: “In this instant case even though prima facie it appears that the assessee received the aforementioned proceeds out of sale of shares of the scrip, in reality it was his own cash which he received back through some clandestine deals. The detailed analysis and the modus operandi discussed above firmly establish the events in the instant case. Now the question is whether to prove some transaction as sham, does the assessing authority needs to expose all the four corners of the scheme and establish its findings through fool proof documentary evidences only at par as required in a criminal and other Das Offshore Limited proceeding and further, whether the surrounding circumstances, human conduct and preponderance of probabilities along with related documentary evidences are not sufficient to establish a transaction as such.”[Page 28] “As mentioned above that the shares of this penny stock is controlled by a group of people viz promoter/operator/brokers. All purchases of shares were arranged by them on assurance of booking bogus LTCG/loss in favour of the beneficiaries. It is fact and evidenced from the detailed enquiry conducted by the Investigation Wing that they have not only arranged the sale of shares but also arranged for sales of shares through their entities and by paying certain amount of commission to them. Therefore, generation of LTCG/loss through the process from purchase to receipt of Cheque is totally arranged and actually no capital gain/loss arose, but assessee's own cash has been routed through different entities and ultimately reached to his/her hand by Cheque in the disguise of sale proceeds of listed security.”[Page 32] 5.16 Obviously, the above observations are not relevant to the issues at hand and this faux pas betrays a prima facie lack of application of mind in the matter. 5.17 In view of the facts and circumstances of the case as discussed above, the impugned addition suffers from factual errors and insufficient corroboration and thus, cannot be sustained in view of the contra evidence brought on record. Accordingly, the impugned addition of Rs.3,75,00,000/- is hereby deleted.
Aggrieved, the Revenue is in appeal before us. The learned Departmental Representative relied upon the assessment order and submitted that the information available against M/s. AGV Consultants and discrepancies in the agreements justified the disallowance. Per contra, the learned counsel for the assessee supported the order of the learned Commissioner of Income Tax (Appeals) and submitted that all evidences substantiating the genuineness of expenditure were
We have carefully considered the rival submissions, perused the material available on record and examined the impugned assessment order as well as the order passed by the learned Commissioner of Income Tax (Appeals). The controversy before us essentially revolves around the allowability of consultancy expenditure amounting to ₹3,75,00,000/- paid by the assessee to M/s. AGV Consultants, and whether such expenditure could be disallowed solely on the basis of perceived inconsistencies in documentation and general third-party information, without bringing on record any cogent, direct or corroborative evidence to establish that the services were not actually rendered or that the transaction was a mere façade.
At the outset, it is pertinent to note that the nature of business carried on by the assessee is highly specialised, involving offshore fabrication, assembly and maintenance of offshore structures in the hydrocarbon sector. The execution of offshore contracts of the nature undertaken by the assessee necessarily requires deployment of specialised marine spread, technical expertise and experienced marine crew. The engagement of a technical consultant or service provider for such purposes is not only commercially prudent but is often indispensable for timely and efficient execution of such projects.
and other Das Offshore Limited 11. The material on record demonstrates that pursuant to the award of the offshore contract, the assessee entered into a consultancy arrangement with M/s. AGV Consultants on 13.08.2018 for providing marine spread along with requisite marine crew and associated services. It is not in dispute that the services were rendered during the relevant period and that four invoices aggregating to ₹3,75,00,000/- plus applicable taxes were raised. The assessee has placed on record copies of the consultancy agreement, invoices, ledger extracts, bank statements evidencing payments through regular banking channels and Form 16A evidencing deduction and deposit of tax at source. These documents collectively establish that the transaction was carried out through recognised commercial channels and duly recorded in the regular books of account.
The Assessing Officer’s conclusion rests primarily on two factors: first, the general information emanating from the Insight Portal and survey proceedings in the case of M/s. AGV Consultants, and second, the alleged discrepancy between the agreement furnished by the assessee and that furnished by M/s. AGV Consultants in response to notice under section 133(6). Beyond these two aspects, no independent enquiry has been conducted by the Assessing Officer to establish that the services were not actually rendered or that the consideration paid was fictitious or inflated.
As regards the alleged discrepancy in agreements, the learned Commissioner of Income Tax (Appeals) has recorded a and other Das Offshore Limited categorical finding that two agreements dated 13.08.2018 existed between the parties one being a draft agreement and the other being the final agreement executed after finalisation of scope of work and commercial terms. The final agreement, which was duly signed and stamped by both parties, was the operative agreement acted upon for rendering of services.
We find considerable force in the reasoning adopted by the learned Commissioner of Income Tax (Appeals). In commercial practice, it is not uncommon for parties to exchange draft agreements prior to execution of a final agreement incorporating mutually agreed terms. Merely because a draft agreement was furnished by one of the parties in response to a statutory notice, the genuineness of the transaction flowing from the final agreement cannot be doubted, particularly when the final agreement has been acted upon and the services contemplated therein have been rendered.
It is also of crucial significance that M/s. AGV Consultants has not denied rendering services to the assessee. On the contrary, it has confirmed the transaction, except for the confusion regarding draft and final agreements. The Assessing Officer has not brought on record any material to demonstrate that the invoices raised were bogus or that the services were not commensurate with the consideration paid. There is also no finding that the expenditure was excessive or unreasonable having regard to the nature of work undertaken.
The reliance placed by the Assessing Officer on survey- related information suffers from a fundamental infirmity. No incriminating material emanating from such survey has been confronted to the assessee. No statement, document or evidence has been brought on record to establish that the payments made by the assessee were routed back in cash or that the assessee was a beneficiary of accommodation entries. Third-party information, unless corroborated by independent enquiry and confronted to the assessee, cannot by itself form the basis of an adverse inference.
We also find that the assessment order contains references to issues relating to penny stocks and bogus long- term capital gains, which are wholly alien to the facts of the present case. Such extraneous observations, having no nexus with the consultancy expenditure under consideration, clearly reflect a lack of focused application of mind and further undermine the sustainability of the addition.
The law is well settled that suspicion, however strong, cannot take the place of proof. When an assessee discharges its initial onus by producing primary evidences such as agreements, invoices, bank statements and proof of deduction of tax at source, the burden shifts to the Assessing Officer to disprove the same by bringing on record cogent and credible material. In the present case, the Assessing Officer has failed to discharge this burden.
and other Das Offshore Limited 19. In view of the totality of facts and circumstances, we find no infirmity in the order passed by the learned Commissioner of Income Tax (Appeals). The deletion of the addition of ₹3,75,00,000/- is founded on a proper appreciation of facts and evidence and is in accordance with settled legal principles. We, therefore, uphold the same and dismiss the grounds raised by the Revenue.
Since the addition itself does not survive on merits, the legal grounds raised by the assessee in its cross objection challenging the validity of reassessment proceedings under section 147 of the Act are rendered academic and are accordingly dismissed as infructuous, leaving the issues raised therein open.
In the result, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is dismissed in limine.
Order pronounced on 30th December, 2025.