JAEE VISHWAS JOSHI,MUMBAI vs. ASST CIT CIRCLE-21(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “F”, BENCH MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA No.1028/Mum/2020 (Assessment Year: 2011-12) Jaee Vishwas Joshi Vs. ACIT,Circle-21(1) 8th Floor, Kautilya Bhavan 1002, Om Co-op.Housing Society Limited BKC M.B.Raut Road Mumbai-400 051 Shivaji Park, Dadar Mumbai-400 028 PAN/GIR No.AELPA7074L (Appellant) .. (Respondent)

Assessee by Ms. Ritika Agarwal, AR Revenue by Ms. Samatha, Sr.DR

Date of Hearing 23/06/2020 Date of Pronouncement 29/07/2020 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):

This appeal filed by the assessee is directed against, the order of the Ld. Commissioner of Income Tax (Appeals)–33, Mumbai, dated 31/01/2020 and pertains to Assessment Year 2011-12.

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A.O. was proceeding with premeditated view prejudicial to her. She moved application before JCIT u/s. 144A. Ld. JCIT instead of giving directions to A.O., left the decision to A.O., defeating the purpose of section 144A. Appellant made further submissions and applications to JCIT on 26/12/2018. JCIT under the name direction evaded his responsibility under the law and transferred authority to make decisions to A.O. Provisions of section 144A stand violated rendering order bad in law. Detailed grounds attached. 3. Botched up investigation by ADIT and A.O. - Transactions between the appellant and Avron and Sarvottam took place in F.Y. 2010-11. Investigation by ADIT(lnv.) was done in F. Y. 2017-18. Further investigation was done by A.O. in the F.Y. 2018-19. Thus there was a gap of 7 years which is considerably long period during which many things can change. Cognizance of this possibility had to be taken into account while doing investigation. It seems that neither ADIT (Inv.) nor A.O. took these possibilities into consideration and drew inference prejudicial to the appellant. Detailed grounds attached. 4. Statement of Mr. Dipan Patel recorded at unreasonably short notice - Affidavit of Mr. Dipan Patel was filed with A.O. on 19/09/2018. A.O. issued summons after three months on 19/12/2018 and called Mr. Patel for recording statement on 21/12/2018 giving one day time. One cannot be expected to procure all the documents pertaining to F.Y. 2010-11 in the year 2018-19 in one day. Waiting for three months, then issuing summons on 19/12/2018 and calling him to record a statement on 21/12/2018 for transactions of F.Y. 2010-11 was really at an unreasonably short notice. Detailed grounds attached. 5. A.O. overlooked the following - A.O. overlooked performance of the appellant in F.Y. 2011-12 because contacts with Corporate were established during F.Y. 2010-11 through the introduction provided by M/s. Sarvottam and Avron -Corporates came to know the merit and caliber of the appellant and the appellant got assignments without involvement of any brokers. It is necessary to understand that had business counseling fees not been paid in F. Y. 2010-11, the appellant would not have made any income without introduction by Avron and Sarvottam through Mr. Dipan Patel. Detailed grounds attached."

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subsequently reopened u/s 147 of the I.T.Act, 1961 for the reasons recorded, as per which income chargeable to tax had been escaped assessment and accordingly, notice u/s 148, dated 31/03/2018 was duly served on the assessee. In response to notice, the assesee has submitted a letter on 09/04/2018 seeking reasons for reopening of assessment. Simultaneously, the assessee submitted that return already filed for AY 2011-12 shall be treated as return filed in response to notice issued u/s 148 of the I.T.Act, 1961. Thereafter, reasons recorded for reopening of assessment was provided to the assessee on 06/07/2018. The assessee had filed her objections for initiation proceedings u/s 148 of the I.T.Act, 1961, vide letter dated 19/09/2018 and 22/10/2018. The Ld. AO has disposed of objections filed by the assessee on 12/11/2018 and rejected the contentions of the assessee.

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genuine expenditure, which is booked to reduce profit for the year. The Ld. AO has discussed the facts of the case and the modus operandi of the assessee in detail, in light of detailed investigation was done by the investigation wing of the department wherein it was found and established that M/s. Sarvottam Advisory Pvt. Ltd. and M/s. Avron's Consultancy Services Pvt. Ltd. were shell entities and transactions with them were not genuine. The AO further observed that the assessee has made bogus payments to M/s. Avron's Consultancy Services Pvt. Ltd. and M/s, Sarvottam Advisory Pvt. Ltd of Rs. 2,33,35,000/- and debited under the head business counseling charges. The relevant observations of the AO are as under:

“The enquiries done by the Investigation wing reveals that in case of Avron Consultancy Pvt. Ltd., the revenue of the company during the A.Y. 2011-12 was Rs.18 Crores and profit before interest and depreciation was Rs.2.30 Lakhs. During the course of survey action, it was found that company has never been operated and also presently not operating from the address given i.e. 704 Sai Rath CHS, Kesar Kunj Building,Telly Gully Cross Lane, Andheri (E), Mumbai-69. During the A.Y. 2012-13, address of the company was changed to 4A, BBD Baug, Kolkata, West Bengal-700001. The enquiry at the said address at Kolkata revealed that no such company ever operated from the said address and also presently not operating from the said address. The enquiries done by the Investigation wing also reveals that in case of Sarvottam Advisory Pvt. Ltd., during the spot verification, it was found that the said company was not operating from the given address i.e. 704 Sai Rath CHS Kesar Kunj Building, Telly Gully Cross Lane, Andheri (E), Mumbai-69. Enquiry at the registered office of the company (Shop No.1, Lalwani Bhavan, Opposite Kasturba Hospital, Sane Guruji Road, Sat Rasta, Mahalaxmi, Mumbai 400011) also revealed that there was no such company operating from this address. Even the Director Kavita Patel could not be located at her given address and nobody in the locality could tell about Kavita Patel. Residential address of another Director Sameer Patel at B-106,Jiydani Road, Vasai Virar (E) Thane was

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found to be vague and could not be located. As per ITD Systems also, Sameer Patel is a non filer. The Investigation wing has also recorded statement of Mr. Vishwas V. Joshi , Principal Officer of M/s. Finwiz Consultants on 01/02/2018 who stated that since the proposals were introduced by the Shri Dipan Patel M/s. Avron's Consultancy Services "Pvt Ltd. and M/s. Sarvottam Advisory Pvt. Ltd., business counseling fees for introducing Altius Fin serve Pvt. Ltd, and for ensuring receipt of brokerage from M/s. Altius Finserve Pvt. Ltd. was paid. The Investigation Wing finally concluded that the payments have been made to entities who are not in existence and are shell entities, to reduce the tax liabilities of

During the assessment proceedings, the assessee filed details relating to payments made to Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. by Banks and other details like invoice received from the parties, TDS details etc. However, no details were provided to the A.O, as to what services have been provided by the entities to the assessee, documentary evidence in support of services rendered and any correspondence between these two entities and the assessee. Notice u/s. 133(6) were issued to Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. (both located at Mumbai) to verify the services rendered by them. However, these notices were unserved and returned by the postal authorities which proves that these companies are shell companies and accommodation transactions have been entered to reduce the tax liability of Finwiz Consultants without providing any services. The assessee was also informed that the notices u/s. 133(6) were returned back.

During the course of assessment proceedings, the statement of the assessee i.e. Mrs. Jaee Vishwas Joshi u/s. 131 was recorded on 26/11/2018 which has been reproduced in the assessment order. In her statement, she stated that one Mr. Dipan Patel introduced M/s. Altius Finserve Pvt. Ltd. to Finwiz Consultants and an affidavit was signed by Mr. Dipan Patel to this effect. On the question regarding services rendered by Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd., it was stated that Mr. Dipan Patel represented the above mentioned two companies. He not only introduced the assessee to Altius Finserve but also ensured that the assessee received brokerage once the proposals went through. She relied on invoices issued by Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. in support of her claim. It was also stated that the assessee has rendered services of arranging loan facilities for Corporates namely DLF, ERA Infra Engineering Ltd., Amtek Auto Ltd. and Services were also rendered to M/s. Altius Finserve during F.Y. 2009-10 & 2010-11. On the question of providing addresses of Avron Consultancy Services Pvt. Ltd. &

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Sarvottam Advisory Pvt. Ltd. and the names of the Directors of the two companies, she stated that she is aware of the whereabouts of the person representing Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. and Mr. Vishwas Joshi, Pr. Officer of M/s. Finwiz Consultants may be able to tell the name of Directors of the two companies. On the question of any agreement for receiving or paying brokerage/commission or consultancy, it was stated that the Principal Officer Vishwas Joshi may be able to answer this question. On the above-mentioned statement of the assessee, it was held that the assessee is not aware of anything about the two companies to whom payments have been made. She is not able to prove as to what services has been provided by the two entities for making such huge payments. No documentary evidence such as any correspondence between assessee and two entities, any correspondence with banks regarding progress of proposal etc. has been submitted by the assessee.

During the course of assessment proceedings, letters were filed on alleged letter heads of these two entities signed by some unknown person who does not seem to be authorised persons of the company, requesting that notice issued u/s. 133(6) could not be served because office was locked and it was requested to send notices again.

During the course of assessment proceedings, the JCIT Range 21(1), Mumbai issued direction u/s. 144A to carry out further investigation by conducting field verification in all the known addresses of Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd., located at Mumbai and also attempt to gather information from Kolkata whose address is mentioned in the file especially in view of the data submitted by the assessee. Further, as the assessee has produced the affidavit dated 28/08/2018 signed by Mr. Dipan Patel, his statement should be recorded to verify the said affidavit as Mr. Dipan Patel was neither an M.D. nor Principal Officer of either of the entities to whom payments were made. The nexus of Shri Dipan Patel with the two concerns should be examined. Promoters and Managing Directors of Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. should also be located and examined.

Therefore, notice u/s. 133(6) were issued to Avron Consultancy Services Pvt. Ltd. (Kolkata) & Sarvottam Advisory Pvt. Ltd. (Mumbai). The notice sent to Kolkata in respect of Avron Consultancy Services Pvt. Ltd. returned unserved with a comment insufficient address wanting Room No. Therefore, one more effort was made to serve the notice through Income Tax Inspector Shri S.B. Pandit. The report of Inspector was reproduced in the assessment order who reported that no office/business was carried out from the residential address and Shri Dipan Patel generally visit

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the flat which remains lock otherwise. On the basis of above enquiries, the A.O. opined that these companies are shell companies. Commissions u/s. 131(1)(d) of the IT. Act was issued to the ACIT Cir. 6(2), Kolkata who happens to be jurisdictional A.O. of Avron Consultancy Services Pvt. Ltd. The summons issued by him could not be served and the Inspector on field verification gave a report that he could not find any such company in the stated address. Summons u/s. 131 was issued to M/s. Sarvottam Advisory Pvt. Ltd. at their known address 704, Sairath CHS, Kesar Kunj Building, Telly Gully, Cross Lane, Andheri (E), Mumbai-69. This time the summon was received by a person sitting in the premises claiming his name as Chintan Shah but Sarvottam Advisory Pvt. Ltd. did not respond the summons even till date of passing the assessment order.

Notice u/s. 133(6) dated 18/12/2018 was issued to the Pr. Officer of M/s. Client Bright Consultants Pvt. Ltd. (Formerly known as M/s. Avron Consultancy Services Pvt. Ltd.) at their address 4A, Council House Estate, Kolkata -1. This notice has also been received back as unserved. The assessee was show cause vide notice u/s. 142(1) dated 4/12/2018 as to why the expenses debited in the name of Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. be not treated as her income since it was made to shell company. The assessee however, failed to submit any satisfactory explanation.

To verify the contents of the affidavit of Shri Dipan Patel, his statement was recorded on 21/12/2018 which is reproduced in the assessment order from page 13 to 16. Shri Dipan Patel stated that as a business consultant he had finalized two three business deals for Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. which were in nature of brokerage or commission or referral fees. He further stated that he was not carrying any evidence for the same and could provide later on e-mail or by post. He stated that Shri Arun Kedia is Director in Avron Consultancy Services Pvt. Ltd. and Shri Tapan Doshi is a Director in Sarvottam Advisory Pvt. Ltd. but he was not having any current contact details of the two companies. He was not aware of the residential addresses of the Directors of the two companies. Shri Dipan Patel was C.A. and had declared the address of 704, Sairath CHS Kesar Kunj Building, Telly Gully Cross Lanes, Andheri (E) as his residential address which was also the billing address of the two concerns. He further stated that both the companies received the payments as he had done the canvassing on behalf of both the companies. He also stated that he does not know the exact amount of loans arranged by Finwiz Consultants through him but in the case of DLF {through Altius Finserve Pvt. Ltd.), it was approximately Rs.1000 Crores. On

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the existence of any agreement it was stated by Shri Dipan Patel that there was no formal agreement but several e-mails and other communication with both the parties are available which he promised to organize and submit later. On the basis of answers given by Shri Dipan Patel to various questions, the A.O. concluded that his replies are either evasive or inconclusive leading to no evidence and he was not connected with the two parties and he expressed his inability to provide contact/details of Directors/Promoters of Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. Shri Dipan Patel failed to produce anything till the date of passing the order which he had promised in the statement to file and hence the A.O. held affidavit obtained from Mr. Dipan Patel by the assessee to mislead the department. The assessee made another application u/s 144A on 26.12.2018 before the Range Head who directed the AO to go through certain points highlighted by the Assessee and also peruse the case laws relied on by the assessee and take appropriate decision as per law vis-a-vis the facts and circumstances of the present case. The AO taking into consideration the direction of the JCIT u/s 144A examined the matter and came to conclusion that the allegations made by the assessee are futile and baseless. In view of above discussion and on the basis of investigation carried out both independently and through ACIT Kolkata, the A.O. held that Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. are nothing but shell companies and accordingly amounts paid to them to the extent of Rs.2,33,35,000/- was disallowed and added back to the income of the assessee. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged reopening of assessment, on the ground that reasons for reopening contained only allegations against M/s Altius Finserve Pvt.Ltd. and against the assesee, there is no tangible materials/documents/evidence or any information before the Ld. AO in support of the allegations for formation of his belief that income chargeable to tax had escaped assessment. The assesee had also challenged additions made by the Ld. AO towards disallowances of business counseling charges paid to M/s Sarvottam Advisory

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Consultancy Services Pvt.Ltd. and M/s Avrons Consultancy Services Pvt.Ltd along with affidavit of Shri Dipen Patel, who was the then Director of two companies and argued that business counseling charges has been paid to those two companies for referring assesee to M/s Altius Finserve Pvt.Ltd. and also, for doing necessary work in connection with services rendered to M/s Altius Finserve Pvt.Ltd.

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a) The AO has to apply his mind to the information, if any, collected and must form a belief thereon before issuing any notice u/s 148. b) Assessing Officer has power to reopen, provided there is tangible material / information to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. c) The Assessing Officer cannot proceed mechanically and also on erroneous information that may have been supplied to him. The AO cannot mechanically issue notice u/s 148 of the Act, without coming to an independent conclusion that he has reason to believe that the income has escaped assessment during the AY in question.

d) Therefore, there should be tangible material / information before the AO and he should analyse it by applying his mind and there should be a process in his mind by which he should form a belief and come to an independent conclusion that Income of the assessee has escaped assessment.

e) Reopening of assessment based on suspicion, presumption, conjectures and surmises is not permissible in law.

f) At the time of commencement of the assessment proceedings, the AO has to see whether there is prima facie material. The sufficiency of material is not relevant.

g) The report of the Investigation Wing might constitute material. The decision to reopen a case on the basis of report of the Investigation Wing cannot always be condemned or dubbed as a fishing and roving inquiry. The expression " reasons to believe " appearing in Section 147 suggests that if the AO acts as a reasonable and prudent man on the basis of information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and assessment can be reopened. h) It is not necessary that the AO should hold a quasi-judicial enquiry before acting u/s 147. It is enough if he on the information received believed in good faith that income has escaped assessment.

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30.1 I have examined the reasons for re-opening. The return of the appellant was processed u/s 143(1} and no scrutiny assessment u/s 143(3) had taken place earlier and hence it is not a case of change of opinion. Subsequently, the case was re-opened when the AO received information from ADIT(lnv.), Unit-3(1), Mumbai vide letter dated 26/02/2018. The AO has recorded his satisfaction and how he has formed belief on information from the ADIT. The reasons to believe has been reproduced at page 2 of the assessment order which has already been copied in this appellate order also. The findings of the investigation wing is also been given at para 7 of the Assessment order. 30.2 On perusal of reasons for re-opening, it is found that the ADIT (Inv.) had conducted survey action and spot verification in the case of M/s. Altius Finserve Pvt. Ltd. and noticed that the said company was receiving high fees/commission but substantially also booking certain expenses which were non-genuine in the form of commission/referral fees/consultancy fees. The ADIT had also mentioned in his letter that the assessee's proprietary concern i.e. M/s. Finwiz Consultants had received an amount of Rs.5.35 Crore from Altius Finserve Pvt. Ltd. and has also debited an amount of Rs.2.35 Crore as other expenses in her P & L A/c. and the said amount includes Rs.2.33 Crores paid to one Mr. Dipan Patel of M/s Avron's Consultancy Services Pvt. Ltd. and M/s Sarvottam Advisory Pvt. Ltd. for referring assessee to M/s. Altius Finserve Pvt. Ltd. Since during the course of survey u/s. 133A and spot verification it was established that M/s. Altius Finserve Pvt. Ltd. was getting substantially high fees/commissions from its operation and to reduce the profit by indulging in booking non-genuine expenses, the claim of the assessee for amount debited to P & L A/c. for getting commission from M/s. Altius Finserve Pvt. Ltd. seems to be non-genuine as also it is seem that no such debit is made in A.Y. 2012-13. Moreover, it is evident from the statement of Shri Vishwas V. Joshi, husband of the assessee and Pr. Officer of M/s. Finwiz Consultants that M/s, Finwiz Consultants, Proprietary concern of Smt. Jaee Vishwas Joshi did not transact any business and did not provide any consultancy services to M/s. Altius Finserve Pvt. Ltd. However, it is received brokerage from them for which it paid fees to Shri Dipan Patel of M/s Avron Consultancy Services Pvt. Ltd. and M/s Sarvottam Advisory Pvt. Ltd. This is colourable device to book bogus expenses by Altius Finserve Pvt. Ltd. in which the assessee

30.3 The aforesaid facts communicated by the Investigation Wing has been reproduced by the AO in the reasons for reopening and thereafter the AO has clearly applied his mind on the said information and concluded as under :-

"5. From the above it is crystal clear that the sub-broking fees paid by the assessee for getting income from M/s. Altius Finserve Pvt. Ltd. amounting to Rs.2.33 Crores is not genuine as apart from the income

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from M/s. Altius Finserve Pvt. Ltd., no other income is shown by the assessee during the year under consideration. 6. In view of above narrated facts, I have reasons to believe that income chargeable to tax for A.Y. 2011-12 being Rs.2.33 Crores has escaped from assessment. Since the income has escaped from assessment, notice u/s. 148 of the I. T. Act, 1961 is required to be issued for the above year and the time limit to issue such notice is 31/03/2018."

30.4 Thus, perusal of reasons for reopening clearly reveal that the A.O. has applied his mind on the information received from the ADIT and has incorporated his own view in the last two paragraphs of the reasons for reopening. The AO has referred to the accounts of the assessee and noted that apart from income from Altius Finserve Pvt. Ltd., no other income is shown by the assessee during the year under consideration. So this is the observation of the AO and not that of the ADIT. 30.5 So far the information received from the ADIT is concerned, the said information was very much specific, tangible and concrete based on survey and spot verification in case of M/s. Altius Finserve Pvt. Ltd. and also on the basis of statement of Shri Vishwas V. Joshi, husband of the assessee and Principal Officer of M/s. Finwiz Consultants, Proprietary concern of assessee. Not only that, the investigation wing has also conducted enquiries and spot verification in case of M/s Avron Consultancy Services Pvt. Ltd. and M/s Sarvottam Advisory Pvt. Ltd. which are reproduced in para 7 of the assessment order and found that none of the two entities ever operated from their addresses. Even the directors of M/s Sarvottam Advisory Pvt, Ltd. could not be located and M/s Avron Consultancy Services Pvt. Ltd. has shown negligible income in the relevant AY.

30.6 The information of the ADIT also revealed that the claim of the assessee for amount debited to Profit and Loss account for getting commission from M/s. Altius Finserve Pvt. Ltd. seems to be non-genuine as also it is seen that no such debit is made in AY 2011-13. Obviously, this information was about the non-genuine expense booked by the appellant. Further, involvement of Dipen Patel has also been mentioned in the information on behalf of the two companies which also indicates bogus nature of transactions. Not only that the statement of Shri Vishwas V. Joshi who was principal officer of M/s. Finwiz Consultants also has been noted and communicated in the information which also indicate bogus nature of transactions. 30.7 Therefore, it is found that the appellant is not correct in saying that the said information is mainly related to M/s. Altius Finserve Pvt. Ltd. for the reason that the appellant was also a part of same chain of transaction and even the payments made by the assessee amounting to Rs.2.33 Crores to one Mr. Dipan Patel of M/s Avron Consultancy Services Pvt. Ltd. and M/s.Sarvottam Advisory Pvt. Ltd. has also been clearly mentioned in the said information. Thus it is not a case that the AO has

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reopened the assessment based on absolutely vague and unspecified information. Therefore, it is held that the A.O. had correctly arrived at reasons to believe that expenses of Rs.2.33 Crores were prima facie not genuine after applying his mind after examining the record of the appellant and on examining the information of the ADIT which was based on survey/spot verification of M/s. Altius Finserve Pvt. Ltd. and statement of Shri Vishwas V. Joshi. In view of above, the re-opening is held as legally valid and the ground challenging its validity is dismissed.

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any business activity in the given address. Even, verification done through commissions u/s 131(1)(d) of the I.T.Act, 1961 clearly indicates that the parties are not available or traceable in the given address. From the above, it is very clear that the assessee has booked bogus expenses of Rs.2,33,35,000/- in the name of two bogus concerns, who had no real existence and who did not render any service to the assessee. Accordingly, he opined that there is no error in the findings recorded by the Ld. AO to come to the conclusion that expenditure incurred under the head business counseling charges is non genuine expenditure. The relevant findings of the Ld.CIT(A) are as under:- 31. On merits, it was submitted by the appellant that the receipts and payments shown in the books of A/cs. of the assessee are supported by tax invoices. The payments have been made through banking channel. Service tax and provisions of TDS are also complied with. The assessee vide her submission dated 19/09/2018 had furnished details of services rendered by the two parties to the A.O. Appellant moved an application u/s. 144A before JCIT who did not touch the issue of jurisdiction. It was claimed by the appellant that the investigation of transaction took place after a gap of seven years and in such a long period many things can changed. Smt. Kavita Patel, wife of Shri Dipan Patel ceased to be Director of the Companies w.e.f. 16.12.2012 and Shri Dipen Patel also ceased to be the Principal Officer of the Companies at the same time. 31.1 The aforesaid contention of the appellant is without any merits. In any arrangement even in the case of accommodation entries, all the paper formalities are completed. The tax is deducted and payments are made through bank. But it is settled that merely paper formalities are not sufficient proof particularly in the facts of the present case where the two companies to whom huge payments were made were not found traceable and their existence, their presence, their infrastructure, the services rendered by them are not proved at all. 31.2 The role of Dipan Patel in the entire transactions is obvious. Shri Dipan Patel is a C.A. and had declared the address of 704, Sairath CHS Kesar Kunj Building, Telly Gully Cross Lanes, Andheri (E) as his residential address which was also the billing address of the two concerns. His wife Smt. Kavita Patel has been claimed to be one of the directors in the two companies who ceased to be director w.e.f. 16.12.2012, As per assessee, Shri Dipen Patel also ceased to be principal director of the companies at the same time. Thus , Shri Dipen Patel allowed his residential address to be used for the address of the two companies. Such type of arrangement clearly prove that the two

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companies were controlled and operated by Dipan Patel for providing accommodation entries as the field enquiry revealed that the two companies never operated from their stated addressees i.e. the same as residential address of Dipan Patel or the residential flat which was frequently visited by Shri Dipen Patel.

The master data further reveals that Sarvottam Advisory Pvt. Ltd. was active with the registered address at Shop no. 1 ,Lalwani Bhawan, Opp. Kasturba Hospital, sane Guruji Road, Satrasta, Mahalaxmi, Mumbai- 400011.

32.1 On considering the above contention of the appellant, it is apparent that claim of the appellant is contradictory. On the basis of ROC data downloaded on 01/01/2019, the appellant claims that the company appears to have non-functional when the ADIT conducted investigation. On the other hand, in his letter dated 20.11.2018 filed before the AO during the assessment proceedings, the assessee mentions that she approached the two parties and obtained letters from them that the amount paid was accounted by them along with their balance sheet, Profit and Loss account and the ledger accounts of the assessee. It is not understood as to how the assessee is able to have contact with the said company when the company was non-functional for a long period. If the assessee could contact Avron's Consulatancy Services Pvt. Ltd. [Client Bright Consultants Pvt. Ltd.] in the year 2018 why not the ADIT or AO could contact the said company in the same period. In fact the field enquiries revealed that the two companies were never operational from any of the addresses. Further, the field enquiries on the address mentioned in ROC data in case of Sarvottam Advisory Pvt. Ltd. was also conducted and it was found that the said company never operated from the said address.

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33.1 On the aforesaid claim of the appellant, it is found that Mrs. Jaee Vishwas Joshi in her statement u/s 131 dated 26.11.2018 made an effort to answer various questions. She claimed that Mr. Dipan Patel represented M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. and introduced Finwiz Consultants to Altius Finserve Pvt. Ltd. She also stated that they have rendered services of arranging loan facilities for corporates like DLF, Era Infra Engg. Ltd. ,Amtek Auto Ltd. But when she was asked to provide names of Directors of the two companies, she could not answer and stated that the Principal Officer of M/s. Finwiz Consultants Mr. Vishwas Joshi may be able to answer this question. When a further question as to whether any agreement was there for receiving or paying brokerage /commission or consultancy, she again could not answer anything and again stated that Principal Officer of M/s. Finwiz Consultants Mr. Vishwas Joshi may be able to answer this question.

33.2 On perusal of statement of appellant, it is apparent that she could not answer all the questions. She was not aware about the directors of the two companies i.e. M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. and she was not aware as to any agreement was signed for receiving or paying brokerage/commission or consultancy. So knowing a part of the matter and not knowing salient points of the whole issue clearly establish the truth that M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. did not render any services to the appellant. The affidavit of Mr. Vishwas Joshi is dated 17.12.2018 and does not seem to have been filed before the AO who passed assessment order on 27.12.2018. In the aforesaid affidavit, it is mentioned that both M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. have accounted for the sub-brokerage payments as income in their tax returns for AY 2011-12 and have also confirmed the above transactions. This affidavit is of no help to the assessee for the reason that M/s. Sarvottam Advisory Pvt Ltd and Avron's Consultancy Services Pvt. Ltd. could never be located at their addresses in spite of several rounds of efforts made and no response or confirmations were ever filed by them.

34.1 It is found that in his affidavit, Shri Dipan Patel has stated that during AY 2010- 11 and AY 2011-12, he was representing M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. and authorized to transact business on behalf of these companies. But when his statement was recorded by the AO on 21/12/2018, Shri Dipan Patel stated that he was not having now the contact details of M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. He further stated that currently he was not exactly aware of the address of the companies or residential addresses of the Directors of the said two

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companies. He also stated that there was no formal agreement but there were several emails and other communication with both the parties. But he did not file any such emails or communications even till date of passing the assessment order. Further, there was no basis or evidence filed by him to prove that he was authorized to transact business on behalf of the two companies in AY 2010-11 and AY 2011-12. Further, it is found strange that in his affidavit dated 27/07/2018, how Shri Dipan Patel remembers and confirms the receipts by M/s, Sarvottam Advisory Pvt. Ltd and Avron's Consulatancy Services Pvt. Ltd. along with the cheque date and amount like cheque on 30th June 2010 Rs. 99,27,000/- plus TDS Credit of Rs. 11,03,0007- in case of M/s, Sarvottam Advisory Pvt, Ltd and cheque on 8Th July 2010 Rs, 132.37.654/- plus TDS credit of Rs. 14,70,8507- in case of Avron's Consultancy Services Pvt. Ltd. when he was not having any contact with the aforesaid two companies. It was his onus to tell about the current whereabouts of the two companies or their directors and such affidavits has no meaning as the two companies or their directors could not be traced during several rounds of enquiries attempted by the AO. 35. The enquiries and spot verification done by the Investigation wing reveals that f only a negligible profit of Rs. 2.30 Lakhs was shown by Avron Consultancy Pvt. Ltd. < during the relevant year and the said company had never been operated and also presently not operating from any of the addresses of Mumbai or Kolkata. 36. The enquiries and spot verification done by the Investigation wing revealed that Sarvottam Advisory Pvt. Ltd. was not operating from any of its addresses in Mumbai. The two Directors of the said company were not having proper verifiable address. 37. No details were provided to the A.O. or during the appellate proceedings as to what services have been provided by the entities to the assessee, documentary evidence in support of services rendered and any correspondence between these two entities and the assessee. 38. Notice u/s. 133(6) issued to Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. were unserved and returned by the postal authorities. The assessee was also informed that the notices u/s. 133(6) were returned back, in spite of the same the appellant chose to remain silent about their whereabouts. 39. After the JCIT gave direction u/s 144A to carry out further investigation, notice u/s. 133(6) were again issued to Avron Consultancy Services Pvt. Ltd. (Kolkata) & Sarvottam Advisory Pvt. Ltd. (Mumbai) which returned unserved in respect of Avron Consultancy Services Pvt. Ltd. with a comment insufficient address. In case of Sarvottam Advisory Pvt. Ltd., the Inspector reported that no office/business was carried out from the said address which is a residential flat and Shri Dipan Patel generally visits the flat which remains Jock otherwise.

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with those parties are genuine and in the statement recorded, the chief operating officer of the company has clearly stated that payment has been made for services rendered in connection with the loan proposals of certain clients. The Ld. AR, further submitted that if you go through the reasons recorded for reopening of assessment, it is clearly evident that the Ld. AO has mechanically reopened assessment, on the basis of information received from investigation wing without any independent application of mind to form a reasonable belief of escapement of income, which is evident from the fact that in the reasons, the Ld. AO has made only allegations without any substantive basis or material in possession of the Ld. AO. In this regard, she had relied upon various judicial precedents, including the decision of Hon’ble Bombay High Court in the case of Ankitha Choksi vs ITO (2009) (411 ITR 207). The assessee has also relied upon the following judicial precedents:-

i) Prashanth S.Joshi vs CIT (2010) (324 ITR 154) ii) Plus Paper Food Pack Ltd. Vs ITO (2015) (374 ITR 485) (Bom.) iii) ACIT vs Dhariya Construction Company (supreme Court) iv) CIT (Delhi) vs Kelvinator of India (SC) v) Akshar Builders vs ACIT,28(1), dated 17/01/2019 (Bom.) vi) Pr.CIT vs G &G Pharma Ltd., dated 08/10/2015 (Delhi High court) vii) Chhugamal Rajpal vs. SP Chaliha (1971) 79 ITR 603 viii) ACITvs Dhariya Construction Co. (2010) 328 ITR 515 ix) German Remedies vs Dy.CIT, dated 10/10/2015 (Bombay High Court)

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assessee has filed complete details of expenditure, including proof of services rendered by the parties to prove that expenditure is genuine, which is incurred wholly and exclusively for the purpose of business of the assessee. The Ld. AR, further submitted that transactions of the assessee with M/s Altius Finserve Pvt.Ltd and M/s. Sarvottam Advisory Pvt.Ltd. were accepted as genuine in the immediately preceding assessment years without any adverse inference, however during the year without any changes in facts, the Ld. AO has made a allegations that expenditure incurred in the name of above two companies is a bogus expenditure created to reduce profit of the year, ignoring fact that the assessee has filed complete details, including bills issued by the parties for having rendered services, payment against bills by cheque after deducting necessary TDS applicable as per law. The Ld. AO has also summarily rejected additional evidences filed by the assesee in form of affidavit of Shri Dipen Patel, where he has categorically admitted the fact of having rendered services to the assessee and also, accounted receipt of amount from the assesee in the books of M/s Avrons Consultancy Services Pvt.Ltd. and M/s.Sarvottam Advisory Pvt.Ltd. The Ld. AO has also rejected affidavit filed by Shri Vishwas Joshi, the chief operating officer of the company, where he has admitted the fact that fees has been paid to those companies for rendering services in connection with loan proposals. The Ld. AO has rejected all evidences filed by the assessee only on the basis of report of investigation wing and for the simple reasons that the parties were not responded to various notices issued during the course of assessment proceedings, without appreciating the fact that the transactions was done almost seven years back and assessee cannot keep track of the persons, who rendered services.

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meaning of section 147 of the I.T.Act, 1961. We, further noted that there is a nexus between reasons recorded for reopening of assessment and escapement of income, which is clearly evident from reasons recorded for reopening of assessment, where the Ld. AO has brought out clear facts with reference to information received from investigation wing, the escapement of income on account of booking expenditure in the name of two non existing entities. Further, the assessment in this case was reopened beyond four years, but within six years from the end of the relevant assessment year. The original assessment has been completed u/s 143(1) of the Act. Further, when original assessment has been completed u/s 143(1) of the Act, then the assessment can be reopened within a period of six years from the end of the relevant assessment year, if escapement of income is within specified limit. In this case, there is no doubt with regard to escapement of income as per reasons recorded by the Ld. AO, which is beyond the prescribed limit provided under the Act. Once, original assessment was completed u/s 143(1) of the Act, then reopening of assessment can be made on the basis of reasons to believe that prima-facie there is escapement of income. This principle is supported by the decision of Hon’ble Supreme Court, in the case of ACIT vs Rajesh Jhaveri Stock Brokers Pvt.Ltd.(supra), where it was clearly held that reasons to believe does not mean that the reasons for reopening should have been factually ascertained by legal evidence or conclusion before the reopening of assessment. We, further noted that the Hon’ble Supreme court, in the case of Raymond Woollen Mills Ltd. vs ITO(supra) had held that for determining, whether initiation of reopening proceedings was valid, it has only to be seen, whether there was prima-facie some material on the basis of which the

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department would reopen the case. It was further held that the sufficiency or correctness of the material is not a thing to be considered at the stage of issue of notice. In this case, on perusal of reasons recorded for reopening of assessment, we find that there is a clear nexus between reasons recorded for reopening of assessment and escapement of income and such reasons are based on fresh tangible material in the form of report of investigation wing. In our considered view, the report of the investigation wing might constitute tangible material. The decision to reopen a case on the basis of report of the investigation wing cannot always be condemned or dubbed as fishing and roving inquiry. The expression reasons to believe appearing in section 147 suggest that if the Ld. AO acts as a reasonable and prudent man on the basis of information secured by him that there is a case of reopening, then section 147 can well be pressed into service and assessment can be reopen.

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assessment. But, if reasons to believe is supported by tangible materials and the AO has formed reasonable basis of escapement of income as a prudent persons, then merely for the reason that reasons recorded for reopening is on the basis of information received from investigation wing, it cannot be concluded that the AO has not applied his mind and formed opinion of the basis of information. Therefore, from the case laws cited by the assessee, what we understood is that the reopening of assessment should be on the basis of fresh tangible material which suggest escapement of income, but not on the basis of reasons recorded without any nexus between reasons and escapement of income. In this case, on perusal of reasons recorded by the Ld. AO, it is abundantly clear that the Ld. AO has formed reasonable belief of escapement of income on the basis of tangible material which is came to his possession subsequent to completion of assessment u/s 143(1) of the Act and on that basis, he come to the conclusion that there is an escapement of income within the meaning of section 147 of the I.T.Act, 1961. Therefore, we are of the considered view that reopening of assessment in this case is on valid grounds and hence, the grounds taken by the assessee is rejected.

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two companies to whom payments were made were not found traceable and their existence, their presence, their infrastructure, the services rendered by them or not proved at all. Further, enquiries and spot verification done by the Investigation wing reveals that during the relevant year said companies had never been operated and also presently not operating from any of the addresses of Mumbai or Kolkata. The enquiries and spot verification done by the Investigation wing revealed that Sarvottam Advisory Pvt. Ltd. was not operating from any of its addresses in Mumbai. The two Directors of the said company were not having proper verifiable address. No details were provided to the A.O. or during the appellate proceedings as to what services have been provided by the entities to the assessee, documentary evidence in support of services rendered and any correspondence between these two entities and the assessee. Further, notice u/s. 133(6) issued to Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. were unserved and returned by the postal authorities. The assessee was also informed that the notices u/s. 133(6) was returned back, in spite of the same the appellant chose to remain silent about their whereabouts.

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generally visits the flat which remains Jock otherwise. Further, commissions u/s. 131(1)(d) of the IT. Act was issued to the ACIT Cir. 6(2), Kolkata but his summons in case of Avron Consultancy Services Pvt. Ltd could not be served and the Inspector on field verification gave a report that he could not find any such company in the stated address. Later, summons u/s. 131 was issued to M/s. Sarvottam Advisory Pvt. Ltd, at their known address 704, Sairath CHS, Kesar Kunj Building, Telly Gully, Cross Lane, Andheri (E), Mumbai -69. This time the summon was received by a person sitting in the premises claiming his name as Chintan Shah but Sarvottam Advisory Pvt. Ltd. did not respond to the summons even till date of passing the assessment order. Further notice u/s. 133(6) dated 18/12/2018 were again issued to the Pr. Officer of M/s. Client Bright Consultants Pvt. Ltd. (Formerly known as M/s, Avron Consultancy Services Pvt. Ltd.) at their address 4A, Council House Estate, Kolkata -1. This notice has also been received back as un-served. From the above, it is very clear that so called expenditure incurred under the head business counseling charges and paid to M/s Sarvottam Advisory Pvt.Ltd. and M/s Avrons Consultancy Services Pvt.Ltd is non genuine expenditure booked in collusion with entry providers to reduce profit for the year, which is clearly evident from facts gathered during course of survey u/s 133A in the case of M/s Altius Finserve Pvt.Ltd and subsequent, investigation carried out during the course of assessment proceedings. Further, although, the assessee has filed affidavit of Dipen Patel to justify her case, but on perusal of affidavit filed by the Dipen Patel, we find that it is only an afterthought to circumvent the findings recorded by the Ld. AO, in light of facts gathered during the course of survey proceeding and only a self serving document. Further, the affidavit of Mr.Vishwas

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Joshi, dated 17/12/2018 is also a self serving document is of no help to the assesee, because Mr.Vishwas Joshi had try to contradict his earlier admissions. From the above, it is very clear that expenditure booked in the name of two entities is a bogus expenditure. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were completely right in disallowed expenditure incurred under the head business counseling charges. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject grounds taken by the assessee.

Order pronounced in the open court on this: 29 /07/2020

Sd/- Sd/- (RAVISH SOOD) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai; Dated: 29 /07/2020 Thirumalesh Sr.PS Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. BY ORDER, 6. Guard file. स�यािपत �ित //True Copy// (Asstt. Registrar) ITAT, Mumbai