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

आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member

2. The following grounds have been raised by the Revenue in memo of appeal filed with the Income-Tax Appellate Tribunal (Hereinafter called “the tribunal) in their appeal in :-

“1. 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 Consultancy Private Limited by ignoring the evidentiary value of the statement of its director recorded u/s 131 of the Act wherein he had unequivocally admitted to his inability to substantiate the transactions with Akon Management Consultancy Private 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 Consultancy 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 & 3 C.O. No. 140/Mum/2016

cross-examine witness is not an invariable attribute of requirement of 'audi alteram partem' and that when the statement of witness is only secondary evidence, there 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 Officer 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 and framing assessment of the assessee by invoking the provisions of Section 147 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.”

Information was received by the AO from the Investigation Wing of the Income Tax Department,Mumbai and based upon the same, the A.O. inferred that the assessee company has claimed expenses which were 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, and 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 confronted 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 Consultancy Pvt. Ltd. were as per contract entered and payments were by account payee cheques which were duly accounted. The A.O. rejected the contentions 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 party viz. Akon Management Consultancy Pvt. Ltd. was one of the entities which was involved in providing accommodation entries 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 have been carried out under the garb of 'expenses' alleged to have been executed by those parties and the same are shown under the garb of 'expenses' by the beneficiaries (including the present assessee) in their respective books of accounts.

ITA 798/Mum/2015 & 5 C.O. No. 140/Mum/2016 ii) During the course of statement recorded u/s 131 of the Act, Shri Sharat Chandra Satpathy, director of assessee company has submitted that he is unable to substantiate the transaction with evidence and accordingly held that expenses amounting 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 made with M/s Akon Management Consultancy Pvt. Ltd. However the documentary evidences filed were not proving the genuineness of the transaction, 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 expenditure incurred;

(c) If the investigation done by the Department leads to doubt regarding the genuineness of the expenditure, it is incumbent on the assessee to produce the parties along ITA 798/Mum/2015 & 6 C.O. No. 140/Mum/2016 with the necessary documents to establish the genuineness of the transaction and (d) Payment by account payee cheque is not sacrosanct.”

Hence, the assessee’s claim of expenditure with respect 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 unexplained 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.

ITA 798/Mum/2015 & 7 C.O. No. 140/Mum/2016 The ld. CIT(A) after considering the entire facts and circumstances of the case observed that after completion of the assessment u/s 143(3) of the Act vide orders dated 29th March, 2010, new information had come to the knowledge of the A.O. from the investigation Wing of the Income Tax Department 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 assessee submitted before learned CIT(A) that the reassessment had been made by disallowing genuine expenditure of Rs. 58,62,940/- without any valid ground and the AO disallowed such expenditure on the basis of baseless statement given by third party. It was submitted that there is no contrary evidence in possession of the AO which could prove in-genuineness of such expenditure. The assessee relied on the following case laws:-

ITA 798/Mum/2015 & 8 C.O. No. 140/Mum/2016 1) United Electrical Company v. CIT (2002) 258 ITR 317 (Del.)

2) Sarthak Securities Company Pvt. Ltd. v. ITO (2010) 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 (Asr) (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 submissions filed during course of the original assessment proceeding. As it will be clear from perusal of the same, the assessee had filed exhaustive details as called by the AO from time to time. This included, among others, the details regarding M/s. Akon Management Consultancy P. Ltd. It was only after making full and proper verification and inquiry that the A.O. framed the assessment. Neither there was any lapse.' deficiency on the part of the A.O. while framing the assessment nor is there even such allegation.

As far as the reassessment is concerned, it is clear that the initiation of the reassessment itself was bad in law. 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 Bhimrajka; and (b) The statement of a director of the assessee.

Now, as far as the first statement is concerned, the same is required and liable to be rejected/ignored all together, on fact as well as in law. This is because the statement is not confronted to the assessee at any stage, even till today. This was in spite of ITA 798/Mum/2015 & 9 C.O. No. 140/Mum/2016 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-existent material. Secondly, in any 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 director of the 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 clearly averred that the transaction was duly accounted and recorded, meaning thereby, the transaction was genuine. Nowhere in the statement the director had ever stated that the transaction was bogus or that it represented any unaccounted income of the assessee. There is absolutely no whisper about any wrong doing.

It was only that the director did not have supporting evidence at the time when his statement was being taken by the Additional Director of Investigation of Scindia House and he was asked to prove the transaction with supportive evidence 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 & 10 C.O. No. 140/Mum/2016 statement/material concerning M/s Akon. As such, the 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 averred that the transaction with M/s Akon was genuine, thereby disputing & retracting the alleged disclosure made by the director. Assuming, but not admitting, that such statement had any evidentiary value, it can never be the sole basis, especially when it is retracted/clarified/disputed. This is more so, when the assessee places on record numerous evidences in support of the transaction and the A.O. does not deny/dispute/controvert such plethora of material evidence. Neither the Act nor any judicial precedent supports or allows such action on the part of the A.O. Even section 132 {4} - which refers to the statement 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 such conclusive evidentiary value under the Act, there is no question of according such status to a statement given u/s 131. If the statement given by an assessee, that too, given u/s. 131 of the Act, is to be regarded as the conclusive and sole basis for making an addition, than nothing prevented the legislature to clearly provide so, directly or even indirectly. In fact, if the stand of the A.O. is to be accepted, this would make the entire provisions 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:

ITA 798/Mum/2015 & 11 C.O. No. 140/Mum/2016

“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. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during 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 of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.

“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 in law.

As regards the merits of the case, the case of the assessee is impeccable. The assessee placed on record host of material to prove not only the identity but also the genuineness of the transaction. The concern, M/s Akon is registered under the Companies Act, Income tax Act, Sales tax laws as well as service tax laws. In fact, the Income tax Department itself had issued a certificate for lower deduction of tax u/s 197 of the Act. The concern has also filed return of income for this very year and has offered this receipt from the assessee has its income. The payments for the professional services were made under written contracts and for which regular bills were issued. The entire ITA 798/Mum/2015 & 12 C.O. No. 140/Mum/2016 payments were by account payee cheques. All documentary evidence in support of these were submitted before the A.O. As such, the assessee had more than adequately discharged its preliminary onus to support its claim of deduction of such expenditure.

As against this, the A.O. miserably failed to discharge his onus to support the disallowance. In fact, he abdicated 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 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:

ITA 798/Mum/2015 & 13 C.O. No. 140/Mum/2016

"Q5. On the basis of information is 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 them with corroborative evidences and explain the allowability of the expenses under the Income Tax Act, 1961."

“Sir, the transactions with M/s Akon Management Consultancy 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 substantiate the transaction. The issue has a potential of protracted litigation. In order to buy 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 shall pay the 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 Bhimrajka and (ii) Mr. Sharat Chandra Satpathy (Assessee's Director). The statement of Mr. Rajendra Bhimrajka has not been given to us. In so far as the statement of Mr. Satpathy is concerned, recorded in the said statement ,he has proceeded on the assumption that the assessee may not be able to substantiate the transaction. However, we have the following details in respect of the said transaction: In this respect, we would like to submit as under to substantiate the transaction made by us :

(i) M/s Akon Management Consultancy Private Limited is a registered company with ROC, Maharashtra. Certificate of Registration is enclosed herewith for your ready reference. (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 herewith for your ready reference. (iv) Our Company has availed the services from them as per the contracts dated 1st Nov., 10th Nov, Ist Dec., 10th Dec. 2007 entered with them for liasoning work services. The copy of contracts is enclosed for your ready reference.

ITA 798/Mum/2015 & 14 C.O. No. 140/Mum/2016

(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 Consultancy Private Limited has also e-filed the Return of Income. The Copy of Audited Annual Account, Acknowledgement of Return of Income e- filed and Computation of Income is enclosed herewith for your ready reference.

(x) It can be observed from the above that the transactions are according to normal business parlance.

(xi) Further, in the case of original assessment proceedings u/s 143(3) of the Act.

Our case was selected for scrutiny as per notice under section 142 (1) of the Income Tax Act, 1961 vide notice dated 14/01/2010 along with annexure wherein as per question no 14 ITA 798/Mum/2015 & 15 C.O. No. 140/Mum/2016

"Furnish party wise details of all major expenses exceeding 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 dated 29/7/2010 and allowed the expenses under section 37(1) of the Income tax Act, 1961 as wholly and exclusively incurred for the purpose of the business/profession.

In view of the above, we submit that Professional fees paid by us amounting to Rs. 58,62,940/- to M/s Akon Management Consultancy Services Private Limited should be allowed as wholly 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 assessee submitted a chart, which is exhibited in the appellate order from pages 8 to 11, wherein the assessee submitted nature of work done by Akon Management Consultancy Private Limited in brief. The learned CIT(A) observed 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 Management Consultancy Private Limited to the assessee also stood explained. The learned CIT(A) observed that the AO does not have contrary evidence 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 was the observation of the learned CIT(A). The learned CIT(A) observed that there is a gross breach of ITA 798/Mum/2015 & 16 C.O. No. 140/Mum/2016 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 Remarks GR 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 payment of Rs. 58,62,940/- was made by the assessee to M/s Akon Management Consultancy Pvt. Ltd. and apparently it is not the case of inflation of expenses 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 which substantiate the contention of the assessee that M/s Akon Management Consultancy Pvt. Ltd. is a genuine party. Further it was observed by learned 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 services as mentioned in tax invoice/bills raised by it and payments were made through A/c payee cheque. In nutshell, the ld. CIT(A) held that the A.O. has disallowed the expenditure ITA 798/Mum/2015 & 17 C.O. No. 140/Mum/2016 without any contrary evidence and without refuting the verifiable evidences submitted by the assessee and accordingly learned CIT(A) deleted the disallowance of expenditure of Rs. 58,62,940/- towards consultancy services , as made by the AO , vide appellate order dated 05-11-2014 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 while the assessee has filed its C.O. . The Revenue has challenged the deletion of disallowance of expenditure of Rs. 58,62,940/- paid to Akon Management Consultancy Private Limited by the assessee, while the assessee filed C.O. challenging the invocation of provisions of section 147/148 of the Act for reopening of the assessment.

ITA 798/Mum/2015 & 18 C.O. No. 140/Mum/2016

“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, 1961.

Ans. Sir, the transactions with M/s Akon Management Consultancy 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 substantiate the transaction. The issue has a potential of protracted litigation. In order to buy peace of mind, cover up the discrepancies and to avoid penal consequences, I submit 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/Mar/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 value Rs. 11,23,600/-: Rs. 12,00,000/-, Rs. 12,00,000/-, Rs.12,00,000/-, Rs. 12,00,000/- and Rs. 6,00,000/- aggregating to Rs. 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 transactions 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 mentioned nor it is reflected in the sundry creditors. I submit that these transactions had never been entered into and the company has never claimed these amounts as expenses or under any 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 assessee company while recording statement on oath u/s 131 of the Act. The learned DR further relied upon the order of the A.O..

ITA 798/Mum/2015 & 19 C.O. No. 140/Mum/2016

“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.

ITA 798/Mum/2015 & 20 C.O. No. 140/Mum/2016

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 0/o the Dy. Director of Income Tax (Inv.)-Unit V(3)~ Mumbai, wherein it has been stated that –

"During the investigation in case of one Jignesh Patel, a group of concerns were identified which were involved in providing accommodation entries.

The statement of the Rajendra Bhimrajka, who was controller of the above mentioned group of concerns, was recorded u/s 131 of the Income Tax Act, 1961 (hereinafter, “the Act"). He deposed on oath that he had provided accommodation entries through the above mentioned group 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 issued 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 14.10.2011.

The statement of Shri Sharat Chandra Satpathy, Director of I&E was recorded on oath under section 131 of the Act and he deposed that out of the above mentioned concerns the I&E had had transactions with following concerns as follows:-

Sl No. Name F.Y. Amount 1 Akon Management 2007-08 Rs. 58,62,940/- Consultancy Private Limited In question no. 5, of the above mentioned statement, Shri Sharat Chandra Satpathy was asked

“Q5. On the basis of information is 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 them with 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 Consultancy 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 substantiate the transaction. The issue has a ITA 798/Mum/2015 & 21 C.O. No. 140/Mum/2016 potential of protracted litigation. In order to buy 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 shall pay the tax along with interest at the earliest.”

In view of the above facts, I have reason to believe that income of Rs. 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.