TMI Blog2016 (11) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... uestioned, nullifying the impugned orders on this score. On the basis of the above discussion, we hold that the learned Commissioner of Income-tax (Appeals) has erred in confirming the non- grant of exemption under section 11 of the Act to the assessee and, accordingly, none of the alternative submissions raised by the assessee requires to be adjudicated, that they having been rendered merely academic. - Decided in favour of assessee - I. T. A. Nos. 706-709 and 712-714/Asr/2014 - - - Dated:- 12-8-2016 - A. D. Jain (Judicial Member) and T. S. Kapoor (Accountant Member) Salil Kapoor, Advocate, Nirmal Mahajan, Chartered Accountant, Samit Lal Chandani, Advocate, and Brij Kishore Nandan for the appellant. Umesh Takkyar, Departmental representative, for the respondent. ORDER A. D. Jain (Judicial Member) Partial Index Document Date Pages Para AO order for A.Y. 2010-11 28.03.2013 010 057 6 Grounds of appeal before CIT(A) Nil 057 058 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant portions of the assessment order and the Commissioner of Income-tax (Appeals)'s order in one of the appeals, and relevant parts of the record, as mentioned in this Index, have been reproduced in extenso in the body of the order. This Index, it is hoped, will facilitate a ready reference to these documents. 1. These are the assessee's appeals for the assessment years 2008-09, 2010- 11 and 2011-12 in ITA Nos. 712 to 714(Asr)/2014, respectively, and the assessee's appeals for the assessment years 2007-08, 2008-09, 2010-11 and 2011-12 in ITA Nos. 706 to 709(Asr)/2014, respectively, in the cases of M/s. Apeejay Education Society and M/s. Rajeshwari Sangeet Academy, Jalandhar. The issues involved being common, they are being disposed of by this composite order. The arguments have been addressed with reference to ITA No. 713(Asr)/2014, i.e., the assessee's appeal for the assessment year 2010-11 in the case of M/s. Apeejay Education Society. 2. The following are the revised grounds of appeal raised by the assessee : 1. That the assessment order passed is bad in law, without jurisdiction and barred by time limitation. 2. That the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing. 3. As stated at the bar by the learned counsel for the assessee and not disputed by the learned Departmental representative and as also discerned from the record, ground Nos. 1 to 6 concern the main issue, ground Nos. 7 and 8 are with regard to the first without prejudice challenge and ground No. 9 is the second alternative argument. Ground No. 11 is consequential, whereas the ground Nos. 10 and 12 are general. 4. The sole issue raised by way of ground Nos. 1 to 6 is the assessee's challenge to the denial of exemption under section 11 of the Income-tax Act, 1961 (hereinafter, referred to also as the Act ) by invoking the provisions of section 13(1)(c) thereof and assessing the assessee's income as business income, instead of assessing the same under sections 11 to 13 of the Act. 5. The brief facts of the case are that the assessee-society, which is stated to be engaged in the activity of running of educational institutions, filed its return of income for the year under consideration on September 27, 2010, declaring therein nil income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his statements recorded on March 16, 2011, April 12, 2011 and May 12, 2011, was also stated to have admitted that his company, M/s. Washington Software Ltd., was involved in providing accommodation entries and he was also stated to have accepted the fact that he had provided accommodation entries to the Apeejay Group of cases through his company, M/s. Washington Software Ltd. The statement of Sh. Sanjay D. Sonawani S/o Sh. Devi Dass Sonawani, chairman and director of M/s. Washington Software Ltd., under section 131 of the Act, was stated to have been recorded by the Deputy Director of Income-tax (Inv.) Unit-I(I), Pune, on March 16, 2011, in which, he had particularly admitted to have provided accommodation entries to the Apeejay Group of cases, including the assessee-society. The relevant portion of the said statement of Shri Sanjay D. Sonawani has also been reproduced by the Assessing Officer in the assessment order. 5.2 During the course of post-search investigations in the case of Sh. Parag V. Mehta, the beneficiary parties were stated to have been identified and information was stated to have been passed on to various field officers by the Investigation Wing, Mumbai for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to such a conclusion, as on physical verification during the course of survey operations under section 133A of the Act, conducted at various premises of the assessee group, including its head office, the software alleged to have been purchased from Washington Software Ltd. was not found, whereas bogus bills from M/s. Washington Software Ltd. were found to have been entered in the books of account of different entities of the group. The Assessing Officer has further pointed out that persons of various entities of the assessee group had admitted that they received only bills for entering in the books of account and no software was ever installed, or received by them. The Assessing Officer has further mentioned that all the payments made to M/s. Washington Software Ltd., were personally approved by Sh. Vijay Berlia, General Secretary and Authorised Signatory of the assessee-society, he being a trustee and a specified person covered under the definition given under section 13(3) of the Act. The Assessing Officer has also observed that a perusal of the statement of Shri Vijay Berlia, as reproduced in para 6(vi) of the order, clearly shows that Shri Vijay Berlia gave evasive replies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in earlier years. Apart from this, expenses stated to be incurred on bogus purchase of software amounting to ₹ 38,60,900 from M/s. Washington Software Ltd. and claimed as revenue expenses have also been disallowed and added to the taxable income of the assessee-society. The deduction claimed by the assessee-society under section 80G of the Act has also been restricted to ₹ 3,50,53,564, as against that claimed by the assessee-society at ₹ 25,00,00,000. The assessment in this case was ultimately completed by the Assessing Officer under section 143(3) of the Act vide order dated March 28, 2013, at an assessed income of ₹ 33,85,12,530, which included the abovementioned additions. 6. The Assessing Officer, thus, disallowed the deduction claimed by the assessee-society under sections 11 and 12 of the Act, on the ground that the assessee-society had violated the provisions of sections 13(1)(c)/13(3) of the Act, and brought to tax an income of ₹ 33,85,12,530. 7. In the assessment order, dated March 28, 2013, the Assessing Officer held as under : The assessee has filed return of income on September 27, 2010 declaring total income of Rs. nil and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware Ltd. was a bogus company was admitted by Sh. Parag V. Mehta in his statement recorded during the course of search and seizure operations on March 22, 2011. It was further admitted by Sh. Parag V. Mehta that the said bogus company was providing accommodation bills to interested parties and Sh. Sanjay D. Sonawani was managing all the affairs of said company. Sh. Sanjay D. Sonawani in his statements recorded on March 16, 2011, April 12, 2011 and May 12, 2011 also admitted that his company M/s. Washington Software Ltd. was involved in providing accommodation entries and also accepted the fact that he has provided accommodation entries to the Apeejay Group through his company, M/s. Washington Software Ltd. 5. A statement under section 131 of the Income-tax Act, 1961 of Sh. Sanjay D. Sonawani S/o Sh. Devi Dass Sonawani, chairman and director of M/s. Washington Software Ltd. was recorded by the Deputy Director of Income-tax (Inv.) Unit- I(I), Pune on March 16, 2011, the relevant portion of which is reproduced as under : Q. 5 What are the various business activities of M/s. Washington Softwares Ltd. ? Ans. Till 2003 this company was actually developing various kind of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 are showing the sale figures as tabulated above. I also agree that the sales figure for current financial year are shown to be at ₹ 5,70,00,000 however in a sound state of mind I am making a responsible statement whereby I in the capacity of chairman of Washington Software Ltd. confirm that all these sales are non-genuine sales (bogus sales). There are no actual delivery challans in the case of any of these sales as the physical sale of any software has never taken place. All the sales bills raised are non-genuine and bogus sale bills. The delivery challan numbers mentioned on the bills are false since such delivery challans are non-existent. I confirm that all these sales are in the form of accommodation entries provided to various corporate entities in order to help them inflating their expenses. My company M/s. Washington Software Ltd. was never the direct beneficiary of the huge amounts received towards these non-genuine sales and my company used to only get 1 per cent. commission on the sale bill value of each bill. Q. 7 As replied by you in the preceding question, please explain the actual modus operandi in respect of providing such accommodation entries to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka Investment and Financial Pvt. Ltd., Ashish Fashions Pvt. Ltd., Begani Dyeing Mills Pvt. Ltd., C. S.Components Pvt. Ltd., etc. Ans. I hereby confirm that all these transactions pertaining to investment used to be taken care by Sh. Parag Mehta, he used to send me blank share application forms as well as share transfer forms which after signing I used to send him by post/courier. To the best of my knowledge he used to utilise the funds available in the bank accounts of WSL for payment towards these investments. Q.10 Please give details of all the entities (corporate and non- corporate) to whom such accommodation entries have been provided by your company M/s. Washington Software Ltd., Pune. Ans. The entities in respect of whom the accommodation entries in the form of bogus sales have been provided by M/s. Washington Software Ltd., Pune for a period between financial year 2003-04 to the current financial year are as follows : Sl. No. Name of the entry 1. Shaf Broadcast Pvt. Ltd. 2. Himachal Futuristic Co. Ltd. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious institutes and head office of the Apeejay Educational group which included the assessee-society and Rajeshwari Sangeet Academy Trust. During the course of the survey operations, genuineness of purchase of software by assessee from M/s. Washington Software Ltd. was examined from different aspects. Also the statements of various persons actively involved in the management and running of Apeejay Group of Institutions were recorded like Ms. Anita Paul, Principal of Apeejay School Saket, Sh. Alok Saklani Director, Deepankar Chakarborti, Dean and IT Head and Sh. Nagendra Nautiyal, Accountant, Apeejay School of Management Dwarka, Sh. Amitava Misra, Head of IT Department and Sh. Vijay Kumar Berlia, General Secretary and authorised signatory of assessee. None of these persons including Sh. Vijay Berlia, (who has personally approved all the bills of WSL) could give any satisfactory reply regarding the purchase and installation of software stated to be bought from M/s. Washington Software Ltd. Copies of all these statements were provided to the assessee's authorised representative during assessment proceedings. The relevant portion of these statements is reproduced as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As far as I know, there was no software ever purchased by head office from this company for our requirement on our requisition or on their own. (iii) Statement on oath dated March 29, 2011 of Deepankar Chakarborti, Dean of Apeejay School of Management, Dwarka. Q. 10 Did you buy any software ever from M/s WSL ? If yes, please tell 1. The year of transaction. 2. The purpose for which it was purchased ? 3. Name of software module. 4. Whether fresh version or updated version of any previous Software. 5. If a standard version of any software or tailor made catering to your specific requirements. 6. Whether only onetime purchase or regular transactions in the form of annual maintenance contract (AMC). Please explain ? Ans. No, we did not have any transaction with M/s. WSL financially or otherwise. I am hearing this name for the first through you, hence, the need to reply to all the six points mentioned in question above does not arise at all. Q.11 I am giving you opportunity to think again whether your Institute had any relationship with M/s. WSL ever in the past ? Ans. I cannot recall because I have heard this name for the first t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.07.200 5,00,000 2009- 7 31.07.200 10,00,000 2009- 7 03.08.200 10,00,000 2009- 7 12.08.200 10,00,000 2009- 7 08.10.200 25,00,000 2009- 7 06.05.200 50,00,000 2009- Total 2,40,00,000 Please explain for what purposes these amounts have been paid to this company and also provide the bills of the same ? Ans. These papers containing the entries related to M/s. Washington Software are sent to us by the head office just to record these entries in our regular books of account. Beyond that I know nothing about these entries. Also we do not have any bill related to M/s. WSL and for the matter of fact, as already mentioned by me, we have no bills for any of the entry sent to us through An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 2007. In these also amount of ₹ 30,00,000 and ₹ 30,50,489 have been spent on purchase of computer softwares for the respective periods. Please also explain which computer software have been purchased during the period May 20, 2006 and 2006-07 and produce their bills also ? Ans. Bills of only three softwares purchased during the financial year 2009-10 are found and we are producing the same, i.e., amounting to ₹ 10,200, ₹ 9,880 and ₹ 2,95,328. All other are only entries which have been made in the end of the respective financial year at the direction of the head office as I have already mentioned in my statement earlier. The entries of purchase of softwares amounting to ₹ 1,80,00,000, ₹ 30,50,489 and ₹ 30,00,000 have been made only at the directions of the head office during the period from April 1, 2009 to March 31, 2010, April 1, 2005 to March 31, 2006 to March 31, 2007. No bills are available for these entries. (v) Statement on oath dated March 29, 2011 of Sh. Amitava Misra, Head of the I.T. Department of Apeejay Educational Society. Q.12. Please produce the software CDs purportedly supplied by M/ s. Washington S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls for payment only assuming that the material must have come. It is the normal course. Q. 12 Who authenticate the actual receipt of such goods ? Ans. I have no knowledge. Q. 13 It is brought to your notice that Smt. Anita Paul principal of your Saket School has stated on oath that the softwares mentioned in the above bills were never received in the school or installed in the computers systems of the school. She also categorically stated that payment to the above company was made on your approval only. It is not out of place to mention here that no receipt (actual) of any Software from the above company could be ascertained from the premise also even with the help of your I.T. people, purchase and accounts people. Please comment on this. Ans. I cannot comment on the subject as I am not a technical man and I have approved the bills in the normal course. Q. 14 You are once again accorded an opportunity to consult the relevant persons as they are available in the premises. Ans. I have consulted them but at present I am not in a position to explain the same. Q. 15 From the records of the society available in the office, it is seen that several payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horised signatory of the assessee-society. He being a member/office bearer, is a specified person and covered under definition given under section13(3). Perusal of his statement as reproduced in para 6(vi) above, clearly shows that he gave evasive replies to almost all the questions. He is the person at helm of affairs at the society besides being the person who has approved huge payments totalling over ₹ 15 crores from the financial years 2003-04 to 2010-11, to a company without receiving any product or service in return. As seen from the statement, Sh. Berlia was accorded several opportunities to consult various IT professionals, purchase and accounts person, who were present during survey and also through telephone, and even after consulting all of them, he failed to give any explanation and could not produce any evidence as to where the alleged software was installed. His assertion that 'he approved bills for payment only assuming that material must have come', is not at all believable, since this is not a case of single transaction but a series of transactions running into more than ₹ 15 crores over a period of eight years. All these enquiries indicate and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apeejay Group prior to 2007, the requirement was never there. Q. 26. How were you generating cash to give back to parties ? Ans. We were inflating expenses and also discounting cheques with various parties in Zaveri Bazar and the cash received from them were given back to the billing parties after deducting the commission. Q. 27. How did you ensure the flow of funds back to the beneficiary who have taken an entry from you. Describe the procedure in details ? Ans. We would issue the bills to the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with parties in Zaveri Bazar and cash received from them was given back to the billing party. Q. 28. Please tell me the name and addresses of various parties (5 to 10) atleast through which you used to discount cheques ? Ans. We were doing it through one major party Deepika Enterprises at Kalbadevi (contact person was Mukesh Jain mobile No. 9820263331).' Perusal of bank accounts of society reveals that all the payments for software has been made by cheques or bank drafts (i.e. ₹ 1,80,00,000 from Dena Bank account of society, ₹ 50,00,000 from HDFC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to this, the registration granted to the asses see under section 12AA has also been cancelled by the Commissioner of Income-tax, Jalandhar II, with effect from the assessment year 2004-05 vide his order passed under section 12AA(3) dated March 25, 2013 and therefore, the income of the assessee-society shall be computed as an association of persons, under the provisions of sections 28 44 of the Income-tax Act, 1961 without giving any effect to section 11. During the course of assessment proceedings, vide order sheet noting dated December 12, 2012 the assessee's authorised representative was required to explain as under : 'It has been found that Apeejay School and Apeejay School of Marketing run by the society have shown following purchases of Software from M/s. Washington Software Ltd. in the financial year 2009- 10 relevant to the assessment year 2010-11 : Sl. No. Name of entity Date of purchase Amount 1. Apeejay School 21.04.2009 50,00,000 2. Apeejay School ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory reply regarding the purchase and installation of software statedly bought from M/s. Washington Software Ltd. (The copies of all the statements were already given to you during the course of assessment proceedings for the assessment year 2004-05). In the light of the above facts, please show cause as to why not the expenses of ₹ 2,68,59,000 in the name of purchase of software be treated as bogus and added to the total income. Case adjourned to December 31, 2012.' On December 31, 2012, the authorised representative of the asses see attended but no reply was furnished, on his request case was adjourned to January 8, 2013. On the said date neither anybody attended nor was any written explanation furnished. Therefore, notices under sections 143(2) and 142(1) were issued on January 9, 2013 fixing case for January 15, 2013. 8.1 In response thereto, the assessee's authorised representative vide reply dated January 15, 2013 submitted as under : The, detailed reply to point raised at the time of last hearing is as under : This query is based on the statement of Mr. Sanjay D. Sonawani which has been recorded behind our back. Before moving further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person who is telling nothing but lies to cover his misdeeds. Otherwise also the statement recorded behind the back of the assessee cannot be used against the assessee unless he is given an opportunity to cross-examine the person who has deposed against him. Reliance is being placed on the honourable Punjab and Haryana High Court in ITA No. 638 of 2007 decided on January 16, 2009 in the case of CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P H). We may be given the opportunity to cross-examine Mr. Sanjay D. Sonawani. As regards the purchase of software is concerned, it has duly been purchased and even Sanjay D. Sonawani has admitted that during the financial year 2003-04, he was doing the business of software development. Further, the desired software is being used in head office at Delhi and same has been told to the official visiting the assessee's office in Delhi and also later on in the office of DDI concerned a demonstration was also given. As regards the statement of Anita Paul is concerned, she has clearly admitted that the software may have been installed in head office. Here we may clarify that this is specialised software being used for majority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to its books in the end of financial year, at the instruction of head office. In view of all the material and statements available on record, the authorised representative was specifically asked vide order sheet entry dated February 14, 2013 to explain as under : 'During the course of survey, it was found that no actual deliveries of any services or software, etc., were provided by M/s. Washington Software Ltd. to the assessee-society, though bills were received and claimed in your accounts. Statements of key persons like Principals, Directors, I.T. personnel and General Secretary and Authorised Signatory of the society were recorded on oath. In their statements on oath, they all have stated that they have never heard the name of M/s. Washington Software Ltd., they have also accepted the fact that no software was purchased from M/s. Washington Software Ltd. They have never ordered or recommended any software from the abovementioned company. In almost every institution they have provided the list of the software installed in their institutions/schools along with the name of the companies, which did not include the name of software purchased from M/s. Washington So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hington Software Ltd. and was unable to show the name of Washington Software Ltd. as developer of the software installed on the computer. Your attention is invited to replies given by him to question Nos. 12 and 13 of his statement dated March 29, 2011. Statement of Sh. Vijay Kumar Berlin, General Secretary and authorised signatory of the assessee-society was also recorded under section 131 by Deputy Director of Income-tax (Inv.) Unit VI(3), New Delhi on Sh. Vijay Kumar Berlia, could not give satisfactory reply regarding the purchase and installation of software statedly bought from M/s. Washington Software Ltd. His replies to question Nos. 5, 6, 9, 10, 11, 12, 13, 14, 15, 16 and 19 of said statement clearly shows that he gave evasive replies and tried to escape his responsibility of being General Secretary and authorised signatory of the assessee-society, though all the payments to M/s. Washington Software Ltd. were approved by him. He were given enough opportunities to reply after consulting the relevant persons but he failed to produce anything in support of transaction with M/s. Washington Software Ltd. (copies of all the statements separately handed over). You are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative placed reliance on the judgment of the hon'ble Punjab and Haryana High Court in ITA No. 638 of 2007 decided on January 16, 2009 (CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P H)) and requested that the opportunity to cross-examine Mr. Sanjay D. Sonawani may be provided to the assessee. 9.1. Sh. Sanjay D. Sonawani is a resident of Pune, Maharashtra, and therefore, in the view of request for cross-examination made by the assessee's authorised representative, a commission under section 131(1)(d) was issued vide this office letter No. 6754-59 dated February 18, 2013 to the Deputy Director of Income-tax (Inv.) Unit I(I), Pune requiring him to cross-examine Sh. Sonawani on March 4, 2013 in the presence of principal officer of the assessee-society. 9.2 The authorised representative of the assessee-society appeared on February 27, 2013 and stated that he shall file reply to various observations given vide order sheet dated February 14, 2013, after cross-examining Sh. Sanjay D. Sonawani on March 4, 2013 at Pune, and therefore, confirmed that he shall be going to Pune on March 4, 2013 to avail the opportunity of cross-examining Sh. Sanjay D. Sonawani. The entire ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draws its powers from the Code of Civil procedure, 1908. In this respect, Order 16, rule 19 of Code of Civil procedure, is reproduced as under : '19. No witness to be ordered to attend in person unless resident within certain limits. No one shall be ordered to attend in person to give evidence unless he resides- (a) Within the local limits of the court's ordinary original jurisdiction, or (b) Without such limits but at a place less than one hundred or (where there is railway or steamer communication or other established public conveyance for five-sixths of the distance between the place where he resides and the place where the court is situate) less than five hundred kilometers distance from the court house. Provided that where transport by air is available between the two places mentioned in this rule and the witness is paid the fare by air, he may be ordered to attend in person.' High Court amendments Allahabad. In Order 16, rule 19(b) : Insert the words or private conveyance run for hire between the words public conveyance and for five-sixths and Punjab-Add the following proviso to rule 19(b) : Provided that any court s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of section 131 of the Income-tax Act, which draws its powers from the Code of Civil Procedure. However, your assertion that, all the proceedings, inter alia the cross-examination of Shri. Sanjay Sonawani, has to be necessarily conducted in the office of the undersigned at Jalandhar, is based on faulty understanding of the provisions of law. As per the Code of Civil Procedure, summons can be issued to a per son only if he is within 500 kms of the distance from the issuing authority. Where the person/witness is more than 500 kms away from the summons issuing authority, commission has to be issued by such authority, authorising other authority to cause/carry out such necessary examination/cross-examination/re-examination, on his/her behalf. 4. In the instant case, the person you wish to cross-examine, namely Shri. Sanjay D. Sonawani, is a resident of Pune and as such, the undersigned is not empowered to issue summons to him so as to accord an opportunity of cross-examination to you. Therefore, the undersigned has no other alternative but to issue commission to Departmental officer in Pune to make you available an opportunity of cross-examining Shri. Sanjay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The demand draft No. 652344 dated February 27, 2013 drawn on OBC Pune in the name of Sh. Sanjay D. Sonawani enclosed by you vide above referred letter is returned herewith, as the undersigned has no power under Civil Procedure Code to issue summons to Sh. Sanjay D. Sonawani who resides at Pune. Yours faithfully, (Ratinder Kaur) IRS Asstt. Commissioner of Income tax, Circle III, Jalandhar Encl : Original demand draft 9.6 In response to the above letter, the assessee's authorised representative vide letter dated March 14, 2013 stated as under : 'We acknowledge the receipt of your letter number ACIT/CIII/JAL/ 2012-13/7099, dated March 11, 2013. In response to same it is sub mitted as under : As already replied vide earlier letter, we would like to cross-examine Mr. Sanjay D. Sonawani at Jalandhar. Mr. Sonawani is the witness of the Department and the onus to bring/ensure presence of its own witness squarely lies with the Department and the same cannot be relegated to the assessee. Further there is no bar for distance under amended provisions of the Civil Procedure Code. Hence it is prayed that he may please be called to Jalandhar.' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Berlia, General Secretary of society and no other details whatsoever was found to be mentioned on the said bill, i.e., when the software was received, whether installed/working, entered on which page number of stock register/fixed assets register, etc., as is done in the case of all other software purchased by the school (copies of certain bills of software other than purchased from WSL have been taken, signed by accountant and are placed on record). These facts have been duly noted vide order sheet of same date (March 7, 2013) signed by the assessee's authorised representative and accountant and the authorised representative was required to further explain as under : '(1) From where payment of this ₹ 50 lakhs has been made. (2) Produce stock register/fixed assets register for verification along with IT Manager of the assessee school. (3) Reply to queries raised vide order sheet dated January 15, 2013, February 14, 2013 and March 6, 2013. (4) Produce books of other institutes as per order sheet dated March 6, 2013.' 10.2 On the next date of hearing, i.e., March 8, 2013, again no reply was furnished. The authorised representative of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and accountant stated on oath that he was directed by head office to pass the entry for purchase of software amounting to ₹ 1.80 crores on March 31, 2010, (the copy of voucher signed by accountant is placed on record.) Sh. Nautiyal is shown his statement recorded during survey on March 29, 2011, especially question Nos. 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16, wherein he has categorically stated that he recorded these entries on the instructions of head office and no bill or ledger account of WSL was available with them. When this statement is confronted to Sh. Nautiyal, he stated that he stands by the replies given by him and that bills from WSL were never provided to the institute, only entries were made in books at the instructions of head office. Further perusal of stock register produced during hearing also shows that ERP software was never received or installed at this institute. Copy of relevant page of stock register is taken, signed by accountant, Sh. Nautiyal and is placed on record. Further, from the perusal of the invoices raised by M/s. Washington Software Ltd. in the name of various schools/institutes of the assessee-society, it is seen that the description of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bills of software supplied by WSL are enclosed herewith. (Annexure A1 A14). As regards the statement of Mr. Sanjay D. Sonawani is concerned, it is nothing but bundle of lies. He has got no legs to stand. During the year he has given four statement, two each before Deputy Director of Income-tax, Pune and Mumbai. If you go through all those statements that he was retracted from major points in his subsequent statement recorded by Deputy Director of Income-tax, Mumbai but again when he appeared before the Deputy Director of Income-tax, Pune, for the second time, he retracted from his statements in Mumbai and confirmed the contents of first statement given in Pune. How reliance can be made on the statement of the person, who has claimed to be giving statement on oath, but there is a huge difference in his statements before two authorities on same matter. If we see his statement, he has discussed about his shareholding, if we compare the same with the information filed with the Registrar of Companies regarding shareholding and directorship it totally differs. A person who does not know about his shareholding and directorship how can he tell about huge transactions for a number of yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with Mr. Nagendar Nautiyal he being an accountant. During the survey, they made a categorical statement that softwares were purchased from various software companies including from Washington Softwares Ltd. While institution staff makes use to their own softwares for their day-to-day use, they need not know about software which was admittedly installed at the head office. As the head office in Delhi is well equipped to install and maintain especially since the softwares are for management information/control purposes to which school staff is not fully privy to. As the software was installed at the head office she also stated that the Software may have been installed at head office. As already mentioned, the cost of the software is debited to different cost centres but same is installed at head office. As regards Mr. Amitava Misra, even though he showed ignorance about the availability of original CD's but he at no stage admitted that WSL software is not installed. He may not have been able to show any printing at that time due to confusion. Various reports generated from the software are being produced herewith for your verification and for your record. Being voluminous, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its directors a number of times. Further it is a listed company and audited accounts cannot be taken as false and fabricated as claimed by Mr. Sonawani. . . . As regards query pertaining to some points regarding ERP software, it is submitted as under : No. Question Reply a. What is the name of the software ? ERP for Schools b. On which platform it is based, whether oracle or some other ? Database : Ms SQL Server 7.0 Dev Tool : Ms Visual Basic 6.0 and Crystal Reports c. What are different modules of this ERP ? Attendance Finance Inventory Fees Payroll Library Admission Student Development Time Table E-Learning d. Who had been given the access to different modules of ERP ? ERP was installed and used centrally. It was primarily used to hold data and generate reports as well when needed. It was initially operated by Mr. K. K. Varghese. It is currently operated by Mr. A. D. Dutta. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The replies of assessee as submitted from time to time have been carefully considered in the light of material impounded during survey dated March 29, 2011 as well as books of account and other documents produced during the course of assessment proceedings. The arguments given by the assessee's authorised representative vide his submissions have been closely gone through and it is seen that the authorised representative has taken up the following issues : a) That the statement of Sh. Sanjay D. Sonawani, is nothing but bundle of lies and that he himself is of doubtful character and was imprisoned. Further that he has been changing his stance in various statements. Also that SEBI has taken action against the WSL. b) That the statement of Sh. Sanjay D. Sonawani has been recorded under section 133A and it is not a statement on oath and has no evidentiary value. c) That the statement of Sh. Sanjay D. Sonawani, has been recorded behind the assessee's back and the same cannot be used against assessee unless opportunity to cross-examine him is provided to assessee. d) That accounts of WSL are audited and the Department has not examined the auditor concerned. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his main deposition that his company WSL was providing only bogus sales bills without actual delivery of software thus, the basic fact that his company had no infrastructure, man power and expertise to develop software and that its sales were not genuine, remained the same in all the statements given by him. He has retracted only on the version that whether Sh. Parag V. Mehta, chartered accountant was instrumental in all the bogus activities of WSL or he himself conducted all the affairs of his company, WSL and this has no bearing on the present case because the fact remains that the assessee was procuring bogus bill without actual receipt of Software and thereby, misutilised the income derived from the property of trust. In this way, the assessee has been claiming 100 per cent. utilisation on account of purchase of software and further 60 per cent. on account of depreciation on said software in the year of purchase and balance during next years. Thus, it was claiming double benefit under section 11 on account of alleged software, though the software were never received and the money paid through cheques/drafts was routed back to the persons managing affairs of assessee-society. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gued that the assessments of WSL should have been reopened and action should have been taken against it. In this respect, it is clarified that WSL is being assessed at Mumbai/Pune and the required assessments/reassessments, etc., are being made by the Departmental Officer who has jurisdiction over WSL. As such the assessments/ surrender of WSL would have no impact on the assessment of asses see-society, which has artificially inflated its expenses and thereby misutilised the funds, by procuring bogus sales bills from WSL. e) The argument of the assessee's authorised representative that Smt. Anita Paul, Sh. Alok Saklani and Sh. Deepankar Chakrabarti are academicians and does not have computer knowledge is also not acceptable because these people are head of institutions and the bills/ vouchers, etc., are entered in books only after their approval. Further, they were allowed to consult the I. T. professionals, purchase and accounts persons of institutions who were present during survey. All of them and Sh. Nautiyal, accountant, categorically stated that the bills related to purchase of software were entered in books only on the directions of head office and that no software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manage its business. The ERP in Educational Institute covers the functionalities of that institute from the perspective of various users carrying different roles and responsibilities such as students, teachers, staff, principal, management, parents, alumni, etc. All the data is managed in a time sensitive manner along with the rules and policies applicable at that time, so whenever required, the exact information can be reproduced as it is. An ERP software consists of many enterprise software modules. Each ERP module is mostly focused on one area of business processes, such as student attendance, payroll, library management, etc. ERP software package is designed right from the beginning to incorporate most of the information an organisation needs into one program. This means that the system is designed to integrate all departments. All the information is in one system, so managers and owners have access to the data they need when they need it. The basic goal of ERP is to provide one central repository for all information that is shared by all the various ERP facets in order to smooth the flow of data across the organisation. In short, ERP is a comprehensive system which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the reports submitted during assessment and alleged to have been generated through ERP software have been perused but the same could nowhere establish that these have been generated through the same ERP software, for which huge bills are entered in books every year. It may be a case where the assessee has installed a similar kind of software after survey because during survey operation on March 29, 2013, no such software was found to be installed at any premise of the assessee. h) It is pertinent to mention here that perusal of record reveals that during the year under consideration, the assessee has procured bills amounting to ₹ 2,68,59,000 from WSL, the delivery address mentioned on these bills shows that the software has been delivered to the respective institutes/schools and not the head office as alleged by the assessee. For example perusal of certain bills shows following delivery address : a) Invoice date April 21, 2009, Multiple user ERP software for ₹ 50,00,000 Deliver to : Apeejay School, Noida (U.P.) b) Invoice date April 27, 2009, Multiple user ERP software for ₹ 50,00,000 Deliver to : Apeejay School of Marketing, Dwarka, Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousand rupees, could not be considered as an innocent customer who has purchased the software worth several crores of rupees just relying on an unreliable person, as stated by the authorised representative, without bothering to obtain original CD and licence for the said software. Actually, the fact is that no software has ever been purchased ; only bogus bills are obtained to inflate expenses. i) During the course of assessment proceedings, it was seen that the assessee-society has paid money through cheques/bank drafts which have been credited in the Axis Bank account No. 104010200005128 of WSL (Copy of bank statement is placed on record). The fact as narrated by Sh. Sonawani in his statement that his company WSL was actually not developing any software and was issuing only bogus sale bills is further corroborated from the fact that after credit of amount in said account from the assessee, the cheques were immediately issued to the following parties : Date Cheque No. Narration Amount (Rs.) 11.05.2009 288640 Netania Shares and Securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Technologies, Topsun Rim Iron Ore Industries, A to Z Alloy P. Ltd., Karma Ispat Ltd. and Swati Spentose P. Ltd, it is clear that the subsequent payments have been made to parties other than those involved in software development services. Therefore, it is proved beyond any doubt that the statement given by Sh. Sonawani that his company did not develop software from financial year 2003-04 onwards and that it was providing only accommodation entries without actual delivery of software to certain concerns, is correct, the assessee being one of the major beneficiary of these bogus transactions. 12. Taking into account the entirety of facts, circumstances, observation and evidences, it is concluded that the assessee-society has been procuring bogus bills of software from WSL since financial year 2003-04, and the money has been routed back to the persons managing affairs of assessee-society. Thus, the assessee is clearly hit by the provisions of section 13(1)(c) read with section 13(3), and exemption claimed under section 11 of the Income-tax Act, 1961 is denied for the year under consideration. Therefore, the income of assessee-society is being computed under the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has procured bogus bills of software from M/s. Washington Software Ltd. from financial year 2003-04 to financial year 2009-10, as per the following details : Table-1 Purchase of software from WSL Financial year Amount 2003-04 1,30,00,000 2005-06 2,50,00,000 2006-07 3,40,00,000 2007-08 80,00,000 2008-09 2008-09 1,20,00,000 2009-10 2,68,60,900 (2,30,00,000 +38,60,900) 13.1 Out of total amount of ₹ 2,68,60,900 paid during the year under consideration, software worth ₹ 2,30,00,000 only has been taken to fixed asset block of computer and depreciation at 60 per cent. is being charged on this software. Whereas the balance ERP software of ₹ 38,60,900 has not been added to fixed assets but has been claimed as revenue expenses by either debiting to 'other expenses under activity expenses' or by writing off ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 2 3 4 5 6 2003-04 0 1,30,00,000 1,30,00,000 78,00,000 52,00,000 2004-05 52,00,000 0 52,00,000 31,20,000 20,80,000 2005-06 20,80,000 2,50,00,000 2,70,80,000 1,62,48,000 1,08,32,000 2006-07 1,08,32,000 3,40,00,000 4,48,32,000 2,68,99,200 1,79,32,800 2007-08 1,79,32,800 80,00,000 2,59,32,800 1,55,59,680 1,03,73,120 2008-09 1,03,73,120 1,20,00,000 2,23,73,120 1,34,23,872 89,49,248 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration, thus, the donation paid of ₹ 25 crores to Apeejay Society a education foundation is not an allowable expense, as the money has not been used for the purpose of business of assessee. Further, in view of provisions of section 13(1)(c) read with section 13(3), the assessee is not eligible for exemption under section 11 for the year under consideration. Therefore, out of this donation, deduction can only be allowed to assessee under the provisions of section 80G, maximum deduction being restricted to ten per cent. of gross total income under section 80G(4). Therefore, the donation paid of ₹ 25 crores is being disallowed and out of this, deduction allowed under section 80G is computed as under : Surplus/excess of income over expenditure as computed in para 12.1 above ₹ 10,05,35,645 Add : Donation paid ₹ 25,00,00,000 Gross total income ₹ 35,05,35,645 Deduction allowable under section 80G (25,00,00,000 x 50% restricted to 10% of GTI) ₹ 3,50,53,564 Thus, out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not justified in holding that the appellant has violated the provisions of section 13 of the Income-tax Act, 1961. 5. That the learned Assistant Commissioner of Income-tax has failed to apply her independent mind and pass the quasi-judicial order. Instead he has been influenced by the administrative order of worthy Commissioner of Income-tax-II Jalandhar. 6. That the learned Assistant Commissioner of Income-tax is not justified in assessing the income as business income instead of assessing the same under sections 11 to 13 of the Income-tax Act, 1961. 7. That the learned Assistant Commissioner of Income-tax though admitting that the appellant is running 24 educational institutions which is as per the objects of the society and is carrying out genuine educational activities yet ignored it and assessed the same under sections 28 44 of the Income-tax Act instead of assessing the same under sections 11 to 13 of the Income-tax Act, 1961. Without prejudice to the aforegoing and in the alternate : 8. The learned Assistant Commissioner of Income-tax has legally erred in treating capital receipts as revenue receipts. 9. The learned Assistant Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sonawani were recorded as per chart below : Date of recording statement Officer who recorded the statement Page 16.03.2011 DDIT, Pune 1-11 12.04.2011 DDIT, Mumbai 12-16 12.05.2011 DDIT, Mumbai 17-25 30.12.2011 DDIT, Pune 26-35 On perusal of the aforesaid four statements, it would be noted that there were certain glaring contradictions, as mentioned under : a. In the first statement, Mr. Sonawani stated that it was Mr. Parag Mehta, who was doing the accommodation entry business and Mr. Sonawani was acting in accordance with latter's directions. In the second and third statement, Mr. Sonawani completely retracted from his above stand and took the onus on himself and said that Mr. Parag Mehta had no role to play. In the fourth statement, Mr. Sonawani took complete U-turn and again, put the onus on Mr. Parag Mehta. b. In the first statement, in response t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;thought the books of account are audited, the books of account were never maintained and no actual audit took place.' The appellant fails to appreciate as to how being a listed company, the accounts were not maintained. Further, even presuming accounts were not maintained, then, how was the audit done by the auditors and audited financial statements were prepared. As per the Assessing Officer the auditor of the company has denied having done such audit. (Para 11.1(d) page 25 of assessment order). In the third statement, in response to Q. No. 11, Mr. Sonawani had replied that 'cheques/RTGS were directly by Apeejay Group in our bank.' Further, in the very same statement, in response to Q. No. 27, Mr.Sonawani had replied that 'We would issue the bills to the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with parties in Zaveri Bazar and cash received from them was given back to the billing party.' On perusal of the above, the appellant fails to directly deposit by the parties into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that Shri Sukla has proved to be a shifty person as a witness. At the earlier stages, he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that Shri Sukla is not a trustworthy witness and little value can be attached to what he stated either in his affidavits or in his examination by the Assessing Officer. His conduct neutralises his value as a witness. A man indulging in double speaking cannot be said by any means a truthful man at any stage and no court can decide on which occasion he was truthful.' From the above it is clear that Mr. Sonawani on whose statement the Assessing Officer has relied on and treated the same as word of Bible is not society worthy and cannot be used against the assessee. Even the fact that he was discounting the cheques and returning cash to the assessee has been refuted by the Assessing Officer in paragraph 11.1 (i) of her order. She has herself admitted that cheques paid by the assessee were duly deposited in the account of WSL and further invested in various securities. From the above it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sons v. Presiding Officer, Sales Tax Tribunal 107 STC 300 (P H) ; (ix) Anupam Agencies v. State of Punjab 98 STC 338 (P H); (x) Prakash Chand Mehta v. CIT [1996] 220 ITR 277, 279 (MP) ; (xi) Sona Electric Co. v. CIT [1985] 152 ITR 507 (Delhi) ; (xii) CIT v. D. M. Joshi [1999] 239 ITR 315 (Guj) ; (xiii) Amarjit Singh Bakshi (HUF) v. Asst. CIT [2003] 263 ITR (AT) 75, 151 (Delhi) (TM) ; (xiv) Mahes Gulabrai Joshi v. CIT (Appeals) [2005] 95 ITD 300 (Mum) ; (xv) Monga Metals (P) Ltd. v. Asst. CIT [2000] 67 TTJ (All) 247; (xvi) Sarita Devi Kajaria v. ITO [2005] 276 ITR (AT) 34 (Kol) ; [2004] 89 ITD 109 (Kol) (TM) ; and (xvii) ITO v. Pukhraj N. Jain [2005] 95 ITD 281 (Mum). The Assessing Officer in her order has stated that the assessee was given opportunity by issuing commission to go to Pune and cross- examine the witness but the same was not availed of by the assessee. It is wrong to say on the part of the Assessing Officer. From the day one we made request to give us opportunity to cross-examine the witness with a condition that he being witness of the Department be called to Jalandhar and assessee should not be put to hardship to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of software and concerned person has confirmed the installation of the software at the central server. If the Assessing Officer feels that it is not genuine purchase but just accommodation, the Assessing Officer has failed to prove that how the money has travelled back. WSL has stated that he used to discount cheques and return the cash. However the Assessing Officer in her order herself has given the findings that amount received from the assessee was duly invested in securities. So how the cash has exchanged hands and from where WSL has given cash. As there is no source of returning the cash, it is clear that the assertion of WSL and the Assessing Officer is without any basis. Keeping in view the above it is prayed that justice may please be done to the assessee by reversing the order of the Assessing Officer and restoring the assessment as society to be assessed under sections 11 and 12. Without prejudice to our above arguments and not admitting but for the sake of arguments, in case the Department feels that the purchase of software is not genuine and expenditure is to be disallowed, the whole of the received cannot be assessed as association of persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, tax shall be charged on the relevant income or part of relevant income as if it were the total income of an association of persons : Provided further that where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of or includes, profits and gains of business, the preceding proviso shall apply only if such prof its and gains are receivable under a society declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such society is the only society so declared by him. (2) In the case of relevant income which is derived from property held under society wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances existing at the relevant time, that the society, to the extent it is not for charitable or religious purposes, was created bona fide exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in the circumstances where such relatives or members were mainly dependent on the settler for their support and maintenance, tax shall be charged on the relevant income as if the relevant income (as reduced by the income if any, which is exempt under section 11) were the total income of an association of persons : Provided further that where the relevant income consists of, or includes, profits and gains of business, the preceding proviso shall apply only if the income is receivable under a society declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such society is the only society so declared by him : Provided also that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 11-13. Even if we presume (not admitting), that purchase is not genuine, only disallowed portion is to be charged at higher rate and registration is not to be disturbed. Keeping in view the above, it is prayed that justice may please be done to the assessee by quashing the illegal order passed by the Assessing Officer and assess the assessee as association of persons. 10. The learned Commissioner of Income-tax (Appeals) asked for a remand report from the Assessing Officer. The Assessing Officer's remand report dated September 15, 2014 is reproduced as under : Kindly refer to the letter No. CIT(A)/Jal/2014-l5/1020, dated August 20/25, 2014 on the subject cited above. 2. Submissions of the assessee received along with the above referred letter have been gone through. It is submitted that the contents of the submissions are by and large repetition of the sub missions made at the time of assessment proceedings. Assessments were framed after considering these submissions. Accordingly, reliance is placed on the assessment orders passed for the assessment years 2006-07, 2007-08, 2008-09, 2010-11 and 2011-12. 11. The assessee furnished the following count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Mr. Sonawani should not be treated as reliable evidence keeping in view the observations of the honourable Calcutta High Court in the case of CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) as tied by us in our submissions dated August 7, 2014. Keeping in view the above, it is prayed that justice may please be done to the assessee by quashing the illegal order passed by the Assessing Officer. 12. The following written submissions, dated September 26, 2014 were also filed by the assessee before the learned Commissioner of Income-tax (Appeals) : This is in continuation to our earlier submissions in the appeal under reference. As already stated the whole of the assessment is based on the statements of Mr. Sanjay D. Sonawani of Washington Software Ltd. (WSL). The statement is nothing but bundle of lies and is a shifting one. The value of shifting statement has been discussed by the honourable Calcutta High Court in Eastern Commercial's case and the same has already been filed with you along with submissions dated August 13, 2014. Even the Assessing Officer has applied section13(1)(c) read with section 13(3) just on basis of that false statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income-tax (Appeals) has recorded a finding of fact. It was not known that any part of the income of the asses see-society was misutilised. For so saying, the appellate authority referred to the balance-sheet. The appellate authority further noticed that the assessee-society is a registered society under the Rajasthan Societies Act and that it is also recognised by the CBSE. If there was any misutilisation or mismanagement, action could be taken against the members of the society, but, from the records and facts, it is not possible to say that any amount of funds of the society was not utilised for educational purposes.' Further reliance is also being placed on : (i) CIT v. Sri Baldeo Ji Maharaj [1996] 84 Taxman 448 (All) (33-34). (ii) Saveetha Institute of Medical and Technical Sciences v. Asst. CIT [2011] 12 ITR (Trib) 376 (Chennai) (35-48) In our case while applying section 13(1)(c) read with section 13(3) the worthy Assessing Officer has just relied upon the statements of Mr. Sonawani, who has shifted his stand in every statement that too under oath. The various shifting stances have been explained in our submissions dated August 7, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee. We are wholly unable to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the Revenue and consequently most adverse to the assessee, they should be deemed not to have exercised it in a proper and judicious manner.' Here in the case of the appellant, the Assessing Officer has acted in a biased manner with revenue in mind and has made his opinion on statement which is false and shifting and has not considered the genuine submissions of the appellant. Even when a judicial authority when he takes some decision as administrative head keeping in view the revenue, he/she should come out of the shell of predetermined notions, and follow the law based on evidence as judicial officer. In case he feels difficult to come out of that shell, he should recluse himself from the case. In case he feels like continuing, he should analyse every evidence afresh and apply his judicious mind to deliver justice. The decision taken by your honour while deciding 12AA(3) was as administrative head and now you have to act as a judicial officer and your decision should be on the basis of evidence available before you and appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both ; (b) if any land, building or other property of the society or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation ; (c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the society or institution for services rendered by that person to such society or institution and the amount so paid is in excess of what may be reasonably paid for such services ; (d) if the services of the society or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation ; (e) if any share, security or other property is purchased by or on behalf of the society or institution from any person referred to in sub- section (3) during the previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been given. Other conflicts already mentioned in the earlier submissions. Keeping in view the above, it is absolutely clear that onus to prove the violation of Act lies on the Assessing Officer and in this case he/she has completely failed to prove the same with any tangible material/ evidence and his/her views are just based on surmises and mere assumptions which have no legs to stand in the eyes of law. Hence it is prayed that the relief may please be given to the assessee by directing the Assessing Officer to make the assessment restoring provisions of section 11 and section 12. With prejudice for the sake of arguments but not admitting, even if it is presumed that there is violation as per Act, and registration is to be denied, the question arises, which income is to be taxed and at what rate. That is the time when section 164 comes into play. The CBDT vide Circular No. 387, dated July 6, 1984 ([1985] 152 ITR (St.) 1), (60-82) has clarified this controversy in paragraph 28 of the circular and has clearly held that tax at maximum marginal rate is to be charged only on the income which has not been used for charitable purposes and has forfeited the exemption due to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gton Software Ltd. The Assessing Officer has further observed that Shri Vijay Berlia (trustee) was instrumental in arranging all these accommodation entries and has been directly benefitted by entering into such bogus purchase transactions. It was also observed by the Assessing Officer that in spite of enormous opportunities provided to the asses see-society during the course of survey operation at its various premises and also during the course of assessment proceedings, the assessee-society could not produce the original software CD or the hard disc of the computer where the software has been installed. On the other hand, the learned authorised representative of the assessee- society has submitted that the statement given by Sh. Sanjay D. Sonawani should not have been relied upon by the Assessing Officer while denying the deduction claimed by the assessee-society under sections 11 and 12 of the Act as he has given different statements at different occasions and being a shifty person his statement cannot be relied upon. 6.7. On careful consideration of the assessment order, remand report, written submissions filed on behalf of the assessee-society and its counter comments as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at various premises of the group. Providing some print outs with the plea that these have been taken from the software will not prove that the software has actually been purchased in the absence of original software CD and hard disc of computer where it has been installed. Moreover, Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries and everything was done on his directions, the statements of various key employees/persons employed by the assessee group unambiguously prove without any doubt that the entries reflected in the books of account are just accommodation entries and nothing else. Onus entirely lies on the representatives of the assessee-society to produce original software CD and hard disc of computer where it has been installed. It is also interesting to note that the representatives of the assessee-society who were present during survey operations have never taken the stand that the software has been installed in central server in head office otherwise the survey team would have found the truth at that time itself. Moreover, the Assessing Officer has dealt with each and every argument advanced by the learned authorised representatives of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of account of various group concerns including assessee-society are only accommodation entries which were arranged at the behest of main kingpin of the assessee-society namely Shri Vijay Berlia (trustee). I also concur with the findings of the Assessing Officer that the trustees of the assessee-society have been benefited directly by this arrangement of accommodation entries. I further concur with his findings that the assessee-society has certainly violated the provisions of section 13(1)(c)/13(3) of the Act and is not eligible for deduction under sections 11 and 12 of the Act. 6.10 I do not find any force in the alternate plea taken by the learned authorised representative of the assessee-society that only that amount should be taxed at maximum marginal rate which has allegedly been misappropriated and corresponding depreciation expenses claimed thereon. The judicial pronouncements relied upon by the learned authorised representative of the assessee-society are also distinguishable on facts. In those cases there was not any misappropriation of society funds but violation was with regard to the provisions of section 11(5) of the Act. The reliance placed by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, upheld. In the result, grounds Nos. 2 to 11 of appeal taken by the assessee-society are dismissed. 6. The ground No. 12 of appeal taken by the assessee-society is consequential in nature and do not require and adjudication as per settled position of law. 7. The ground No. 13 of appeal taken by the assessee-society is general in nature and do not require any adjudication at all. 8. As a result, the appeal filed by the assessee-society is dis missed. 15. Before this Bench, the assessee has filed written submissions, which have been reiterated in the oral arguments advanced by the learned counsel for the assessee. These written submissions are reproduced/referred to in respective succeeding paras. 16. The learned Departmental representative, on his part, has placed strong reliance on the impugned order. It has been contended that as rightly observed by the learned Commissioner of Income-tax (Appeals), the Assessing Officer was fully justified in disallowing the whole of the exemption claimed by the assessee-society under sections 11 and 12 of the Act, by invoking the provisions of section 13(1)(c)/13(3) thereof. 17. We have heard the parties and have pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) one by one. The learned Commissioner of Income-tax (Appeals) has observed that Sh. Sanjay D. Sonawani categorically and unambiguously admitted to have provided accommodation entries to the Apeejay Group of cases, including the assessee-society. He changed his stand only with regard to the person who was instrumental in providing accommodation entries to the Apeejay Group. He, in his statements, has tried to put the blame on Sh. Parag V. Mehta with regard to providing accommodation entries, but he has never turned back from his admission that the accommodation entries have actually been provided by him through his company, M/s. Washington Software Ltd. 19. The assessee has maintained in the written submissions, as under : (i) The basis of reopening and the addition/disallowance is the statement of Sh. Sanjay D. Sonawani, which is relied on by the Revenue. There are patent contradictions in the statements of Sh.Sanjay D. Sonawani. Some of the contradictions have been mentioned at pages 615-617 of the paper book, which is the copy of the synopsis filed by the assessee before the Income-tax Appellate Tribunal in the appeal against cancellation of registration under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. The Assessing Officer has nowhere denied these facts in his remand report (paragraph 6.2 of the Commissioner of Income-tax (Appeals)'s order). In paragraph 6.3. of the Commissioner of Income-tax (Appeals)'s order, the rejoinder of the assessee has been noted, in which, these facts have again been highlighted. (ix) The Commissioner of Income-tax (Appeals) has deliberately ignored these contradictions and has upheld the validity of the statement only for the reason that Sh. Sanjay D. Sonawani had retracted other parts of the statement, but with regard to the transactions with the assessee, he has not retracted. (x) It is an admitted fact that there are glaring contradictions in the statements of Sh. Sanjay D. Sonawani and these contradictions go to the root of the matter. It is also an admitted fact that Sh. Sanjay D. Sonawani has been retracting and changing his stands in different statements. In such a situation, no evidentiary value can be attached to the statement given by Sh. Sanjay D. Sonawani. Reliance is placed on CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (pages 80 to 83 of CLC). 20. A comparative chart of the four statements of Sh. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page numbers-343 and 344 Question numbers-4 and 8 Page number Question number Remark Page 61 of appeal paper of 2010-11 (Paragraph B) Till 2003 this company was actually developing various kind of software such as . . . . In the year 2003 there were some financial and legal problems on account of which I was not in position to pay attention to day-to-day affairs of the company. All the other directors of the company namely (i) . . . . . (ii) Late Rohitdas Kumbharkar, Pune and (iii) . . . . deserted the company . . . Answer to question 4 up to 2007, the business was handled by Mr. Rohitdas Kumbharkar and after his death the business was drastically reduced . . . . Answer to question 8 As stated earlier up to 2007, Mr. Rohitdas Kumbharkar brought all the parties and to the best of my knowledge Mr. Rohitdas Kumbharkar was responsible for getting the parties. After 2007 only one party was there, i.e., Apeejay Group who was handled by me. On perusal of the above, the appellant fails to understand that as to how Mr. Rohitdas Kumbharkar who deserted the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, reliance on such statements by the authorities below is unsustainable in law. For this proposition, the assessee has sought to place reliance on CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (copy placed at case law PB 80-83). For ready reference, all the said four statements of Sh. Sanjay D. Sonawani are being reproduced hereunder : (i) Statement dated March 16, 2011 (APB 328 to 332) Statement of Shri Sanjay D. Sonawani son of Shri Devidas Sonawani age 46 years occupation businessman resident of L-5, Mantri Park, Kothrud, Pune, recorded under section 131 of the Income-tax Act on oath on March 16, 2011 at the office of Deputy Director of Income-tax (Inv.), Aayakar Bhavan, 12 Sadhu Vaswani Chowk, Pune-411001. oath administered by oath taken by (Abhinay Kumbhar) (Sanjay D. Sonawani) DDIT (Inv)-Unit 1(1), Pune Q. 1 Please identify yourself Ans. I am Sanjay D. Sonawani son of Shri Devidas Sonawani 'aged 46 years occupation, businessman', resident of L-5 Mantri Park, Kothrud, Pune. My educational qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and the office premises was also attached. Thus, virtually there is no physical activity of any . . . . software development after, financial year 2003- 04. The company since financial year 2003-04 is neither having the necessary set up for developing any software nor the man power and expertise required. As on date the company is virtually defunct with no activity since last seven years. Q.6 Your authorised representative before undersigned on March 2, 2011 and March 11, 2011 had furnished the details of sales made by M/s. Washington Software Ltd. (WSL) from financial year 2003-04 up to current financial year. The details of such sales made are given below in a tabular manner. Sl. Financial year Sales made 1. 2003-04 16,18,25,345 2. 2004-05 6,36,30,300 3. 2005-06 7,86,30,300 4. 2006-07 5,94,35,001 5. 2007-08 1,06,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above for a consideration of 1 per cent. commission on such bills. He had asked me to open a current account at ICICI Bank, Nariman Point, Mumbai. I had only signed the documents in this regard and rest of the formalities were done by him. The cheque book of this account in which all the cheques, were signed by me, was kept in his personal custody and, accordingly he used to transact with this. Mr. Parag Mehta used to send me the soft copies/hard copies of such bogus sales bills, which I after signing used to send to Mr. Parag Mehta. I would like to confirm that I did not know to whom or to which parties these cheques were given or issued by Mr. Parag Mehta. In 2005 this account was closed and a new account was opened at Axis Bank, Kothrud Branch, Pune and in this case also the cheque book of this account in which all the cheques were signed by me, was kept in personal custody of Shri Parag Mehta and accordingly he used to transact with this. However, during the period of 2004-05, I was in prison for some time, the bills and invoices issued in this period are not in my knowledge and nor the company has received any money for that. Q.8 After going through the balance-sheet of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration Ltd. 8. Melstar Infotech Pvt. Ltd. 9. Mokshil Comm. Traders 10. Situation Advertising and Marketing 11. Shyam Ltd. 12. S. K. Trading Corporation 13. S. K. Trading Corporation 14. Kesar Entertainment Ltd. 15. Indibiz Infotech Pvt. Ltd. 16. RucKiFN. Slpah 17. Global Energy Ltd. 18. Apeejay School 19. Aptech Ltd. 21. GMR Technologies and Industries EW. 22. Panjxouux (India) Ltd. 23. Thirdware Consulting 24. Ipca Laboratories 25. Deepak Kantibhai Chouhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 lakhs for various assessment years, the year-wise break up of this will be submitted to your honour shortly. Q. 12 Do you want to say anything more. Ans. No Whatever stated in the above statement is true and correct to the best of my knowledge and belief. I have given this statement on oath in sound state of mind without any coercion, threat or undue influence. I have read over the statement and found it has been recorded correctly. Sd. 16/03/2011 Sd. 16-3-11 Before me. (Sanjay D. Sonawani) (Abhinav Kumbar) DDIT (Inv)-Unit 1(1), Pune. (ii) Statement dated April 12, 2011 APB 336-337 Statement recorded under section 131 of the Income-tax Act, 1961. Statement of Shri Sanjay D. Sonawani son of Shri Devidas Sonawani age 46 years occupation businessman resident of L-5, Mantri Park, Kothrud, Pune, recorded under section 131 of the Income-tax Act on oath on April 12, 2011 at the office of Deputy Director of Income-tax (Inv.), Room No. 234, Scindia House, Ballard Pier, Mumbai-400038. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of the company, who was approached, by a financial journalist Mr. Anil Roy who approached me with this proposal of bogus billing. Since I was in prison during this time, i.e., March 4 till June 2004 and my company was going through tough times as all our capital and reserves were locked up for the long-term investments, I had no option but to accept Mr. Anil Roy who approached me with this proposal to bogus billing. Since I was in prison during this time, i.e., March 4 till June 2004 and my company was going through tough times as all our capital and reserves were locked-up for the long-term investments. I had no option but to accept Mr. Anil Roy's and the other director's proposal to bail out the company from financial crisis. We requested Mr. Parag Mehta who is a friend to let us use a table space in his office as we did not have an office in Mumbai. The relevant bank accounts were opened by us. We have used this office for our company purposes. The cheque books and slip books were kept with his office employees for ease of transaction as lot of our parties were from Mumbai. In respect of Q. No. 6. I would like to make a slight correction to the answer. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of giving false statement on oath have been explained to you ? Ans. Yes, I do confirm that an oath has been administered to me and the consequences of giving false statement on oath have been explained by you. Kindly refer to answer No. 3 given by you on April 12, 2011 under oath before me, wherein you have said that the cheque books and slip books, kept with his (Parag V. Mehta) employees. Please keep the cheque books slips ? Ans. The cheque books and slip books were kept with Mr. who is the employee Mr. who is the employee Mr. Parag Mehta Q4. How often did you come and sit in the office of Mr. Parag Mehta in order to transact the business ? Ans. Up to 2007, the business was handled by Mr. Rohidas Kumbarkar and after his death, the business was drastically reduced and only one was there, i.e., Apeejay Group. However, to take care of routine and sit in Mr. Parag Mehta office once in 3 to 4 months. Q. 5. Q. 6. On whose directions did you issue bills and what was the frequency. Whether it was once a month, 15 days or every day ? Ans. Up to 2007, the bills were been issued under the instructions of Mr. Rohidas Kumbarkar who was the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Please tell me the name of the contact persons of the parties who used to collect these bills from you ? Ans. I do not remember the exact names of the persons but the bills were collected by one of the employer of the Apeejay Group. Q 10. Did you give these bills after talking to any important persons of the interested companies ? Ans. Since we were already giving bills to Apeejay Group prior to 2007, the requirement was never there. Q 11. How were the cheques in respect of accommodation bills collected by you ? Ans. Cheques RTGS were directly deposited by Apeejay Group in our bank. Q12. How do you know Mr. Rohidas Kumbarkar ? And where did you meet him ? Ans. Mr. Rohidas Kumbarkar was a director in our company since 2002 and he was a personal friend. He was well known businessman in Pune. Q13. How do know Mr. Anil Roy and where did you meet him ? Ans. Mr. Anil Roy was a financial journalist and I knew him since 2002 when we met during the share placement of our company. Q14. How often did they, that is the directors, talk with you, say during the day ? Ans. Between the period 2002 to 2007, we use to talk on a daily basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in your statement before Pune Deputy Director of Income-tax (Inv.) on March 16, 2011 or before me (DDIT Inv. Mumbai) on April 12, 2011 ? Ans. My statement given to you on April 12, 2011 is correct and it clarifies some misunderstanding which I had about Mr. Parag Mehta This statement dated April 12, 2011, should be taken final. Q. 23. I am making you aware of the provision under section 277 of the Income-tax Act, 1961 (false statement in verification) and also provision of CRPC and CPC. Which I am reading to you right now. Why it should not be construed that you are making a false statement and prosecution may be launched against you ? Ans. I have not made false statement in Pune on March 16, 2011. In fact at that time I was told that, I would have a heavy liability of 100 crores, so I got frightened and I took Mr. Parag Mehta's name thinking that he being a chartered accountant would be able to help me out. Further that retracted my statement dated March 16, 2011 in respect of the income disclosed by the company. I still reiterate and stand by the fact that we will be offering ₹ 32,00,000 as income of the company in respective years and pay tax thereon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded under section 131 of the Income-tax Act, 1961, on oath on December 30, 2011 at the office of Deputy Director of Income-tax (Inv), Aayakar Bhavan, 12 Sadhu Vaswani Chowk, Pune-411001. I, Sanjay Sonawani, solemnly affirm on oath that in answers to the questions being asked hereunder, I shall speak the truth, nothing but truth and the only truth. Oath administered Oath taken Q. 1 Please identify yourself. Ans. I am Sanjay D. Sonawani son of Shri Devidas Sonawani aged 47 years, occupation businessman, resident of L-5, Mantri Park, Kothrud, Pune. My educational qualification is M.Com (Master of Commerce). Q. 2. Please confirm that oath has been administered to you and the consequences of giving false statement on oath have been explained to you. Ans. Yes I do confirm that an oath has been administered to me and the consequences of giving false statement on oath have been explained to me. Q. 3. Are you assessed to Income-tax ? Please provide your PAN and also brief about your sources of income. Ans. Yes, I am assessed to tax my PAN is ACZPS9915M. My source of income is salary drawn from M/s. Pushp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls have ever been provided by M/s. Washington Software Limited since financial year 2003-04. In fact, no records of the same were maintained by me. Q. 7 If it is to be believed that you do not posses any documents pertaining to the transactions with the outside parties, how come the details of sales made by M/s. Washington Software Limited to Appejay Education Society were filed by you vide your letter dated December 20, 2011 ? Ans. Sir, in this regard, I contacted the office of Shri Parag Mehta, who sent me the requisite details by e-mail. I can show you my e- mail account to confirm this fact. (As claimed by the assessee and as further requested by him, the e-mail account was allowed to operate the assessee. The mail was traced out and a screen shot of this mail is copied and pasted below after the permission received by Shri. Sonawani.) 22. A perusal of the afore-quoted four statements of Sh. Sanjay D. Sonawani shows that in his first statement, Sh. Sanjay D. Sonawani stated that it was Sh. Parag Mehta, chartered accountant, who approached him and made an offer of providing accommodation entries. In his second statement, however, Sh. Sanjay D. Sonawani retra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t them use table space in his office in Mumbai. He also stated in his second statement that Sh. Parag Mehta was not involved in any of the bogus billing transactions of the company. 28. In his third statement, in answer to question No. 3, Sh. Sanjay D. Sonawani stated as follows : The cheque books and slip books were kept with Mr. who is the employee of Sh. Parag Mehta. (stress supplied by us) 29. From the above, it is evident that all the four statements of Sh. Sanjay D. Sonawani are riddled with discrepancies. There are assertions and retractions and re-assertions and re-retractions, not only on one point, but with regard to numerous issues. The deponent, i.e., Sh. Sanjay D. Sonawani, has taken mutually intrinsically inconsistent and contradictory stands in all his statements. He was continually and continuously shifting his stand. He is, thus, decidedly, a very shifty and inconsistent person as a witness. 30. The learned Commissioner of Income-tax (Appeals) has concluded that the retraction by Sh. Sanjay D. Sonawani in his statements was that of the blame he had put on Sh. Parag Mehta in his original statement, but he had never withdrawn from his deposition of ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Commissioner of Income-tax (Appeals) has further observed that the representatives of the assessee-society have also denied cross-examination of Sh. Sanjay D. Sonawani on one pretext or the other . It was the learned Commissioner of Income-tax (Appeals)'s opinion that the representatives of the assessee-society did not want to cross-examine Sh. Sanjay D. Sonawani, as they knew the truth ; that the Assessing Officer had made proper arrangement for cross-examination at Pune, but the representative of the assessee-society insisted on his presence at Jalandhar on the ground that he was the witness of the Department and he ought to be produced at a place where the assessee wanted ; and that in fact, the representative of the assessee-society did not want to cross-examine Sh. Sanjay D. Sonawani and instead, put the blame on the Assessing Officer, who had perfectly made arrangement for his cross-examination, as per the provisions of law. The learned Commissioner of Income-tax (Appeals) rejected the assessee's plea for allowing cross-examination of Sh. Sanjay D. Sonawani, observing that such plea was being summarily rejected, as it was the fault of the representative of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination. Whereas the witness was examined by different officer at Pune/Mumbai and the assessee is being assessed at Jalandhar and adjudicating authority is also at Jalandhar. 7. The Revenue cannot ask the assessee to travel to Pune, when the Assessing Officer who has to adjudicate is at Jalandhar and statement is not recorded by him. The assessee has the right in asking right of cross-examination. The denial of cross-examination goes to the root of matter can such statement cannot be made basis for making addition/disallowance. Reliance is placed on the following decisions : a) Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) ; and b) Andaman Timber Industries v. CCE-Civil Appeal No. 4228 of 2006 (SC) [2016] 38 GSTR 117 (SC) (copy enclosed). 36. On the other hand, the learned Departmental representative has supporting the learned Commissioner of Income-tax (Appeals)'s order, contended that the assessee has not been able to rebut the categorical finding of fact recorded by the learned Commissioner of Income-tax (Appeals), to the effect that it was the assessee, who had been avoiding cross-examining Sh. Sanjay D. Sonawani on one specious pretext or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Chand Mehta v. CIT [1996] 220 ITR 277, 279 (MP). (xi) Sona Electric Co. v. CIT [1985] 152 ITR 507 (Delhi). (xii) CIT v. D. M. Joshi [1999] 239 ITR 315 (Guj). (xiii) Amarjit Singh Bakshi (HUF) v. Asst. CIT [2003] 263 ITR (AT) 75, 151 (Delhi) (TM). (xiv) Mahes Gulabrai Joshi v. CIT (Appeals) [2005] 95 ITD 300 (Mum). (xv) Monga Metals (P) Ltd. v. Asst. CIT [2000] 67 TTJ (All) 247. (xvi) Sarita Devi Kajaria v. ITO [2005] 276 ITR (AT) 34 (Kol) ; [2004] 89 ITD 109 (Kol) (TM). (xvii) ITO v. Pukhraj N. Jain [2005] 95 ITD 281 (Mum). The honourable Delhi High Court in CIT v. Dharam Pal Prem Chand Ltd. [2007] 295 ITR 105 (Delhi) has held that (headnote) : . . . the Assessing Officer had based his assessment order on the report obtained from the research institute. The correctness of that report itself having been under challenge by the assessee who had not only filed objections thereto but also sought permission on several occasions to cross-examine the analyst even agreeing to pay the necessary expenses, the report could not automatically have been accepted. Since the Assessing Officer did not permit the correctness or otherwise of the report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Commissioner of Income-tax (Appeals) in view of his observations, as discussed hereinabove. 40. In the opinion of the learned Commissioner of Income-tax (Appeals), it was the assessee who did not, in fact, want to cross-examine Sh. Sanjay D. Sonawani at all, as this suited the assessee's nefarious designs. The learned Commissioner of Income-tax (Appeals) has harboured the view that the assessee actually wanted to do away with and forego the genuine opportunities provided to it by the Assessing Officer to cross-examine Sh. Sanjay D. Sonawani, on one pretext or the other. Is it so ? 41. The impasse which ensued was that whereas the assessee wanted to cross-examine Sh. Sanjay D. Sonawani before the Assessing Officer at Jalandhar, the Assessing Officer at Jalandhar was of the opinion that the cross-examination ought to be conducted at Pune. Now, the four statements of Sh. Sanjay D. Sonawani were recorded by the ADITs, at Pune and Mumbai. The adjudicating authority, on the other hand, is undeniably the Assessing Officer at Jalandhar. This is so, obviously because all the assessees are located in Jalandhar and, therefore, it is the Assessing Officer at Jalandhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. 45. From the above provision, it is evident that the Assessing Officer of an area has jurisdiction over the persons either carrying on business or profession within such area, or residing therein. Such Assessing Officer, as the designation itself suggests, assess the income of the residents of his area. Therefore, he is the adjudicating authority of his area. For such adjudication, the Assessing Officer would require the attendance of persons, for examining them as witnesses. It is for enforcing such attendance of witnesses, that the Assessing Officer has been vested with the same powers as are vested in a court under the Code of Civil Procedure, when trying a suit. 46. Now, as per section 30(b) of the Code of Civil Procedure., the court may issue summonses to persons whose attendance is required, eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of law. Then, the alleged fault of the assessee to not avail of the opportunity provided for cross- examination was not a fault at all, but was wholly as per a correct construction of the relevant provisions of law, as above. 50. In furtherance of the assessee's request to cross-examine Sh. Sanjay D. Sonawani at Jalandhar, the assessee had duly deposited travel expenses/ diet money amounting to ₹ 15,000. Then, the assessee has sought to place reliance on the provisions of Order XVI, rule 19 of the Code of Civil Procedure, contending that even the law applicable provides for a situation where the witness to be examined is located far away from the court. Order XVI, rule 19 of the C.P.C. provides as under : Order XVI Summoning and attendance of witnesses Rule 19. No witness to be ordered to attend in person unless resident within certain limits.-No one shall be ordered to attend in person to give evidence unless he resides- (a) within the local limits of the court's ordinary original jurisdiction, or (b) without such limits but at a place less than one hundred or (where there is a railway or steamer communication or other establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode of Civil Procedure would not apply to the parties to the suit, meaning thereby, that it applies to persons who are not parties. It was held, in keeping with Indrajeet Roy v. Bank of Baroda, AIR 1991 Orissa 45, that, however, the court has discretion to examine any person on commission, which includes a party also, when they are to appear as witnesses. Herein, as a matter of fact, Sh. Sanjay D. Sonawani is not a party to the assessment of the assessee. 54. The observation of the learned Commissioner of Income-tax (Appeals) is that it was the fault of the assessee, who repeatedly avoided the cross- examination of Sh. Sanjay D. Sonawani at Pune. In this regard, it remains undisputed that the statements of Sh. Sanjay D. Sonawani were recorded by the ADIT(s) at Pune and Mumbai. However, the cross-examination requested by the assessee was required for the purposes of the assessment of the assessee, which was to be made at Jalandhar. It is, therefore, that the cross-examination was required to be conducted before the adjudicating Assessing Officer, i.e., the Assessing Officer at Jalandhar, and not before the ADIT(s) at Pune. Hence, the learned Commissioner of Income-tax (Appeals) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that the rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchase of the software during the survey operations conducted at the various premises of the Group ; that providing some printouts, with the plea that they had been taken from the software, would not prove that the software had actually been purchased, in the absence of the original software CD and the hard-disc of the computer where it had been installed ; that moreover, Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries and everything was done on his direction ; that the statement of various key employees/ persons employed by the assessee-Group unambiguously proved without any doubt that the entries reflected in the books of account of the assessee were just accommodation entries and nothing else ; that the onus lay entirely on the representatives of the assessee to produce the original software CD and hard-disc of the computer where it had been installed ; that the representatives of the assessee-society, who were present during the survey operations, had never taken the stand that the software had been installed in the central server in the assessee's Head Office, otherwise, the survey team would have found out the truth at that time itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DL No. 338509Y (photocopy enclosed) as my proof of identity. Q. 2 Please confirm that oath has been administered to you and the consequences of giving false statement on oath have been explained to you. Ans. Yes. Q. 3. In what capacity you are present here ? Ans. I am present here in the capacity of Principal, Apeejay School and have been working here since March 1, 2007 as Principal. Q. 4 Who are persons in the management of this institution ? Ans. There are many persons in the management and I am providing a list of the same. Q. 5 How many schools/institutions are there in India/abroad ? Ans. I am giving a list of schools/institutions in India/abroad. Q.6 Do you use any software for use of this school ? Ans. Yes. Q.7 What are the different softwares that you use, please explain ? Ans. I cannot name the software which are used in this school. Q.8. Which are the companies from whom these softwares were brought. Ans. The list is as under : 1) Softlink Asia Pvt. Ltd. 2) Tally Software 3) Integrated Solutions 4) Microworld 5) Taarak India P. Ltd. 6) Washington Software Ltd. Q.9. Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was seen from computer stock register that 2 softwares dated 16/06--. What you say in this regard ? Ans. In the year 2003-04, I was not working in this school, voucher for 2006, the entry has not been made inadvertently but the entry has been made in the balance-sheet. Q.21. Are you filing your Income-tax return, please give your PAN or copy of Income-tax return filed. Ans. Yes, I am filing my Income-tax return regularly with PAN AECPP505. At present I do not remember the exact ward/circle. Q.22. I am again asking you that the software purchased vide voucher dated March 25, 2008, September 16, 2006, February 11, 2006 and March 9, 2004 are not installed at your school. In this regard, I am giving you another opportunity-check and confirm your IT professional at your school ? Ans. No, they are not installed. I have checked up with the IT professionals whose signatures are attested below : 1. Sd. 2. Sd. Rakesh Kumar Jha Mamta Ghei Computer Lab Incharge PGT Computers 558/1,Devli Bank Colony, Devli, New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AN card as ID proof. Q. 2 You have been appraised with the consequences of incorrect delivery of statement and you have taken oath that you will speak truth and nothing but truth. Do you agreed to that ? Ans. Yes Q. 3 Please state the name of an employer and nature of work assigned to M/s. Apeejay Education Society is my employer. I and my team implement the hardware, software, networking, internet band width, in the institutions ; I also do some amount of website related implementation. Q. 4. You are hereby shown copy of account of M/s. Washington Software Ltd. in the books of the Apeejay Educational Society for financial year 2010-11. Please state what kind of material/services are procured from the above company. Ans. So far is copy of account is concerned I know nothing as this is not my Id. However Washington Software Ltd., I am aware has been supplying our upgrading ERP/Talent search software, admission software, fee software and computer aided learning software. Q. 5. Please state when these softwares were supplied, who had provided the basic requirement/frame work for the preparation of the software. How the software was supplied. How many time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that those were procured from M/s. Washington Softwares Ltd. Ans. He mentioned this several years back and then once again 2- 3 years back over and above this, I do not here any other evidence nor did I ever ask about the softwares. These do not pertains to my scope of work that the origin of the software. Q. 10. Have you had any occasion to communicate with any person of M/s. Washington Software Ltd. in respect of implement often or execution of their softwares ? Ans. No, Never. Q. 11. There you ever tried to ascertain whether those softwares were actually applied by the above company and no other because usually, softwares CDs contains the name of the developers also. Ans. No, I have never ascertained. Q. 12. Please produce the software CDs purportedly supplied by M/s. Washington Software Ltd. Ans. We can show you the softwares installed on the system of the office. However we do not have the original softwares CDs of M/s. Washington Softwares Ltd. Q. 13. We have searched for the above CDs along with you and with your team and could not find the original CDs purportedly supplied by the above company. Your people have also shown us the sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware Ltd. He stated that M/s. Washington Software Ltd., as he was aware, had been supplying their upgrading ERP talent search software, admission software, fee software and computer aided learning software. By way of Q. No. 5, he was asked to state as to when and how these softwares were supplied, who had provided the basic requirement/frame-work preparation of the software and as to how many times and when these softwares were upgraded. Sh. Amitava Misra stated that the softwares had been supplied over a period of 5-6 years ; that they were given the softwares on CD by the management and that some 2-3 years earlier, the upgraded form of some of the softwares had also been supplied by M/s. Washington Software Ltd. By virtue of Q. No. 7, Sh. Amitava Misra was asked to explain the exact particulars of the softwares purportedly supplied by M/s. Washington Software Ltd., and he responded by stating that the softwares supplied by M/s. Washington Software Ltd., the ones which he dealt with, were softwares related to admission (school) talent scholarship, fees, website and ERP. To Q. No. 8, he replied that the softwares were mostly installed in Apeejay School, Delhi, NCR, except for a fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice. The learned Commissioner of Income-tax (Appeals) failed to take into consideration the fact that the Assessing Officer, in deciding against the assessee, relied only on her response to Q. No. 22, in response to which, she had stated that the software had not been installed in her school. It is trite law, as discussed supra, while dealing with the statements of Sh. Sanjay D. Sonawani, that a statement has to either be accepted in full, or fully rejected. The deposition of Ms. Anita Paul in response to Q. No. 3, that the software may have been installed at the assessee's head office at 14, Commercial Complex, Masjid Moth, GK-II, New Delhi, was illegally ignored by the Assessing Officer and this very material discrepancy was not considered by the learned Commissioner of Income-tax (Appeals), causing prejudice to the assessee. 66. Apropos the statement of Sh. Amitava Misra, the position remains much the same. He too maintained, in response to Q. No. 12 that the software installed in the system of the office (the head office at Apeejay House, 144 Commercial Complex, GK-II, New Delhi), where the statement of Sh. Amitava Misra was recorded during the course of the survey pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icator. The learned Commissioner of Income-tax (Appeals), however, arbitrarily confirmed the same. 71. We are also alive to the legal position that statements recorded under section 133A of the Act carry no evidentiary value. However, it has nowhere been held that such statements cannot be taken into consideration for collateral purposes. 72. Then, the learned Commissioner of Income-tax (Appeals) has observed that no evidence was ever produced with regard to purchase of the software even during the survey operations conducted at various premises of the group. This observation, however, has also been made in stark oblivion of the fact that, as discussed above, the computer server wherein the software, stated to have been purchased from M/s. Washington Software Ltd., stood installed, had, per se, physically been impounded during the survey conducted at the central/head office of the assessee-society. 73. Thus, impounding of the computer server at the head office of the assessee also puts to naught the observation of the learned Commissioner of Income-tax (Appeals) that the representatives of the assessee-society, who were present during the survey operations, had never taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 76. At the cost of repetition, Sh. Amitava Misra, in his statement, in response to Q. No. 17, had categorically stated that the software stood installed in the server/system impounded by the survey team during the survey proceedings. He had also responded to Q. No. 12, pointedly stating that the software installed in the system of the office could be shown to the survey team. 77. Further, it also remains undisputed, and which fact has nowhere been discussed by the learned Commissioner of Income-tax (Appeals) in the order under appeal, that the assessee, on having been asked to tender corroborative evidence that the software stood installed at its head office, had filed an expert report (APB 24-25) from M/s. Trident International System Pvt. Ltd., confirming that the programme stood installed at the head office of the assessee from 2004 to 2011. The said report dated September 11, 2012 is reproduced hereunder : Sub : Software Certification of ERP Software for School installed at Apeejay Education Society. This is to certify that Trident Information Systems Pvt. Ltd. (with office at M-31A, M-Block Market, Greater Kailash Part II, New Delhi- 110048, India) underto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apeejay Education Society are functional with several years' data beginning from year 2004 to 2011 for multiple institutions of the Apeejay Education Society. However, there was no data in the financial accounting module. Each of the modules has multiple report- generation facilities (which are printable). 78. A perusal of the above report of the expert, M/s. Trident International Pvt. Ltd., clearly shows that it has been certified by the expert that the software was installed at the assessee's central office and it was functional for the past several years, i.e., it contained data from 2004 to 2011. The report, inter alia, also certifies that the name of M/s. Washington Software Ltd. is indicated in the source code of the software. This report adequately meets the Assessing Officer's objection in this regard. However, this aspect of the matter has also remained untouched by the learned Commissioner of Income-tax (Appeals), in so far as this report failed to earn even as much as a mere mention in the order under appeal. 79. And not only this, the assessee had requested to the Assessing Officer, as it also brought to the knowledge of the Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated by the learned Commissioner of Income- tax (Appeals). The above elaborate discussion also questions this observation of the learned Commissioner of Income-tax (Appeals), particularly when, in the assessment order, the Assessing Officer has nowhere identified Sh. Barliya or, for that matter, anyone else, to be a beneficiary, being a person covered under section 13 of the Act. Therefore, in no manner can the provisions of section 13 be said to be either operative, or even applicable. 83. Moreover, section 13(1)(c) of the Act states that sections 11 and 12 shall not exclude any income of a trust received directly or indirectly for the benefit of any person referred to in section 13(3). The learned Commissioner of Income-tax (Appeals) has erred in observing that everything was done under the instructions of Sh.Vijay Berlia, meaning thereby, that it was Sh. Vijay Berlia, who was benefitted. Now, it is also not the case of the Department, as submitted on behalf of the assessee, that money was withdrawn from the bank and it was returned to any such person. 84. In this regard, the Delhi Bench of the Tribunal, in Devinder Kumar v. Deputy CIT vide order (authored by one of us, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000 10.08.2009 60003 Netania Shares and Securities P. Ltd. 10,00,000 12.10.2009 60007 Amit International Ltd. 25,00,000 22.10.2009 60008 Rahul Enterprises 11,00,000 22.10.2009 60010 Sanjay Sonawani 2,00,000 23.10.2009 60009 Suryoday Finmark 5,00,000 15.02.2010 60016 Topsun Rim Iron Ore Industries 10,00,000 18.02.2010 60018 A to Z Alloy P. Ltd. 10,00,000 12.03.2010 60024 Karma Ispat Ltd. 20,00,000 22.03.2010 60025 Swati Spentose P. Ltd. 50,00,000 23.03.2010 6002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the said Tribunal order and their Lordships, vide their order dated March 10, 2015, observed, inter alia, as follows, upholding the Tribunal order : Thus, it cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The allegation is regarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in canceling the registration granted on May 13, 1999 with effect from the assessment year 2004-05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011. 90. So, the grant of registration has been approved by the hon'ble High Court, despite the deposition of Sh. Sanjay D. Sonawani. 91. The assessee, contending that exemption under section 11 was wrongly denied to it, has rightly relied on CIT v. Stock Exchange, rendered by the hon'ble Gujarat High Court, on December 14, 2010 in ITA Nos. 471, 473 and 478 of 1999 (CLPB 67-74), wherein, it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee is a trust or institution entitled to claim the benefit of sections 11 and 12. That however, is not the end of the matter. It would be entitled to be granted the benefit only if it complies with the other requirements of these sections. An assessee that has complied with the provisions of section12A must also establish that the conditions of sections 11 and 12 are satisfied before it is entitled to the exemption under sections 11 and 12. 22. A view to the contrary would lead to the most unusual consequences. A view to the contrary would mean the assessee can by merely complying with the provisions of section 12A claim an exemption under sections 11 and 12 even though the ingredients thereof are not satisfied. The fallacy of such a contention is obvious from the fact that an assessee may well acquire the properties even after it complies with section 12A. Such properties may not be held under trust wholly for charitable purposes. A view to the contrary would entitle the assessee to the benefit of sections 11 and 12 despite the same. 23. The question then is whether the assessee has satisfied the conditions stipulated in section 11. Firstly, the exemption u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gious purposes to the extent it does not exceed 15 per cent. of total receipts 26,281,771.85 4. Amount of income, in addition to the amount referred to in item 3 above, accumulated or set apart for specified purposes under section 11(2) Total of (3+4) 26,281,771.85 Net income Nil Tax due Nil Tax paid (TDS) 495,741.82 Refund due 495,741.82 Apeejay Education Society New Jawahar Nagar Bhagwan Mahavir Marg Jalandhar City Status : Society PAN : AAATA3534F Year ended : 31.03.2010 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAATA3534F Year ended : 31.03.2011 Assessment year : 2011-12 Ward : Range-III, Jalandhar Computation of income 1. Receipts : (Amount in Rs.) Revenue receipt 1,291,448,145.76 Capital receipt 183,613,350.00 1,475,061,495.76 2. Utilization 1,516,765,937.83 1,516,765,937.83 Surplus during the year, amount set apart to be incurred for the purposes of the society 41,704,442.07 3. Amount of income accumulated or set apart/finally set apart for application to charitable or religious purposes to the extent it doe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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