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2016 (11) TMI 1042 - ITAT AMRITSAR

2016 (11) TMI 1042 - ITAT AMRITSAR - [2016] 51 ITR (Trib) 5 - Non grant of exemption u/s 11 - Held that:- As all the conditions of section 11 of the Act stand fully satisfied by the assessee cumulatively. Section 12 is not applicable to the facts of the case. Firstly, the income is derived from property held wholly for charitable purposes. Hence, the mandate as per "M. Visvesvaraya Industrial Research and Development Centre" (2012 (11) TMI 235 - BOMBAY HIGH COURT), as to whether the assessee has .....

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erefore, the requirements of section 11 of the Act, as noted, qua both the assessees, has remained unquestioned, 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 mer .....

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rounds of appeal before CIT(A) Nil 057 058 7 Assessee s written submissions before CIT(A) 13.08.2014 059 070 8 AO s remand report 15.09.2014 070 070 9 Assessee s counter comments 22.09.2014 071 072 10 Assessee s submissions before CIT(A) 26.09.2014 072 078 11 Impugned order 26.09.2014 078 083 13 Assessee s submissions before ITAT Nil 085 087 18 Assessee s comparative chart of statements of Sanjay Sonawani Nil 088 091 19 1st statement of Sanjay Sonawani 16.03.2011 092 097 (i) 2nd statement of San .....

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rant of registration 10.03.2015 151 151 88 Computations of income Nil 153 156 92 Note : This "Partial Index" has been necessitated due to the fact that relevant 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 .....

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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-tax (Appeals) has grossly erred in law and on facts in upholding the assessment order and also in upholding the denial of exemption under section .....

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ion of the Assessing Officer in invoking the provisions of section 13(1)(c) of the Act, although there is no evidence or even allegation that amount of purchase of software from Washington Software Ltd. has reached the assessee-trust or any of trustees. 5. That the Commissioner of Income-tax (Appeals) has erred in law by upholding the contention of the ACIT, Circle III, Jalandhar, in holding that the appellant has violated the provisions of section 13 of the Income-tax Act, 1961. 6. That the Com .....

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Act. 8. That the depreciation on computer software has been illegally and wrongly denied and the Commissioner of Income-tax (Appeals) has erred in upholding the same. 9. Without prejudice and in the alternative, expenses claimed has been illegally and wrongly disallowed and income has been wrongly and illegally assessed at a highly exorbitant figure. 10. That the evidence filed and materials available on record have not been properly construed and judiciously interpreted, hence the addition/dis .....

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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 sect .....

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tration Act. The assessee- society was also granted registration under section 12AA of the Income-tax Act with effect from April 1, 1998 by the Commissioner of Income-tax, Jalandhar, vide order dated May 13, 1999, which was subsequently withdrawn by Commissioner of Income-tax-II, Jalandhar, vide his order dated March 25, 2013, with retrospective effect from the assessment year 2004- 05. However, the registration granted to the assessee-society was restored by the honourable Income-tax Appellate .....

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y School of Management. It was noticed that information was received by the Assessing Officer about a search and seizure operation conducted under section 132(1) of the Act by the Director of Income-tax (Investigation)-II, Mumbai at the business premises of one Sh. Parag V. Mehta, Chartered Accountant, located at 114/114A, Jolly Bhawan No. 1, 10 Marine Lines, Mumbai, during the course of which, it was found that Sh. Parag V. Mehta had given table space in his office premises to various bogus com .....

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eizure operation on March 22, 2011. It was further stated to be admitted by Sh. Parag V. Mehta that the said bogus company was providing accommodation bills to interested parties/concerns and Sh. Sanjay D. Sonawani was managing all the affairs of the said company. Sh. Sanjay D. Sonawani, 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 an .....

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odation 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 taking further .....

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ington Software Ltd. was stated to have been examined from different aspects. At the time of the survey operations at different premises of the assessee group, statements of different persons actively involved in the management and running of the Apeejay Group of Institutions, namely, Ms. Anita Paul, Principal of Apeejay School, Saket, Shri Alok Saklani, Director, Deepankar Chakarborti, Dean and IT Head, Sh. Nagendra Nautiyal, Accountant, Apeejay School of Management, Dwarka, Shri Amitava Misra, .....

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eral Secretary and Authorised Signatory of the assessee-society were also stated to have been provided to the learned authorised representative of the assessee-society by the Assessing Officer. The relevant portions of the statements of the persons as mentioned above have also been reproduced in the assessment order. Apart from reproduction of the abovementioned statements, the relevant portion of the statement of Shri Sanjay D. Sonawani, dated May 12, 2011, has also been reproduced in the asses .....

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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 accoun .....

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ra 6(vi) of the order, clearly shows that Shri Vijay Berlia gave evasive replies to almost all the questions. It has also been observed that Shri Vijay Berlia was the person at the helm of affairs of the society, besides being the person who had approved huge payments totalling to ₹ 15 crores from financial year 2003-04 to financial year 2009-10, to a company, without receiving any product or service in return. The Assessing Officer has further observed that Sh. Vijay Berlia was accorded s .....

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a case of a single transaction, but of a series of transactions running into ₹ 15 crores, spread over a period of eight years. In the opinion of the Assessing Officer, all these enquiries indicate and prove beyond any doubt that the assessee-society has been taking only accommodation entries from M/s. Washington Software Ltd., in the form of bogus bills of purchase of ERP software, without receiving any actual delivery thereof. It has further been observed by the Assessing Officer that pay .....

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and computed the taxable income of the assessee-society under the provisions of sections 28 to 44 of the Act. As per the provisions of sections 28 to 44 of the Act, the Assessing Officer computed the excess of income over expenditure at ₹ 10,05,35,645 and brought it to tax. Apart from this, the Assessing Officer has also disallowed the depreciation of ₹ 1,91,69,549 on alleged bogus purchases of ERP Software claimed by the assessee during the year under consideration, as well as in e .....

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s 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 th .....

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July 23, 2012 and served upon assessee on July 30, 2012. Notice under sections 143(2) and 142(1) were again issued on August 6, 2012 and served upon assessee on August 7, 2012. 2. In response thereto, Sh. Nirmal Mahajan, CA, Sh. Jagdish Raj CA, Sh. Bharat Bhushan, GM, Sh. Rajiv Jain, Accounts Officer along with Sh. Deepak Gupta Acctt., Apeejay Institute of Management Rama Mandi, Sh. D. R. Sethi, OS and Sh. Yogesh Gupta, IT (Manager) of Apeejay School, Jalandhar, Sh. Nagendra Nautiyal, Acctt., A .....

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jab Amendment Act, 1957. The assessee was also registered under section 12AA of the Income-tax Act, 1961 with effect from April 1, 1998 vide order No. CIT-JUlTO(TECH.)/99-2000/1466, dated May 13, 1999. The assessee-society is running 24 educational institutions in various cities of India under its control and management. 4. Brief facts of the case are that information was received that a search and seizure operation under section 132(1) of the Income-tax Act, 1961 was conducted by the Director o .....

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ing run by one Sh. Sanjay D. Sonawani. The fact that M/s. Washington Software 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, .....

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come-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 softwares such as Mechanical Design Software, Process Audit Software, My Home and Business (Brand Name) Software, etc. In the year 2003 there were some financial and legal problems on account of which I was not in a position to pay attention t .....

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ftware development after financial year 2003-04. The company since financial year 2003-04 is neither having the necessary setup 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 us undersigned on March 2, 2011 and March 11, 2011 and furnished the details of sales made by M/s. Washington Software Ltd. (WSL). From financial year 2003-04 up to current f .....

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g 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 .....

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he 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 these corporate entities Ans. My company was in deep financial crisis in year 2003 due to legal and other personal problems. During that period Shri Parag Mehta who is a chartered accountant having his office at 115, Jolly Bhavan, 10 Marine Lines, Churchgate Mumbai 20 approached me and made an offer of providing accommod .....

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d copies of such bogus sales bills, which I after signing used to send to Mr. Parag Mehta. I would like to I did not know to whom or to which parties these cheques were given or issued by Parag Mehta. In 2005 this account was closed and a new account was opened with Axis Bank, Kothrud Branch, Pune and in this case also the cheque book of it in which all the cheques were signed by me, was kept in personal custody of Parag Mehta and accordingly he used to transact with this. However during 2004-05 .....

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these expenses are non-genuine (bogus expenses). As already stated above there was no any actual activity in regard to development of software. As such the figures debited are adjusted figures match up with the sales. Though the books of account are audited, the books of account were never maintained and no actual audit took place. Q.9 From the balance-sheet it is observed that there is substantial investment in the non-trade shares of various companies such as Ishu Software Ltd., Suryodha Allo- .....

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ilable 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. .....

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t only sales bill has been raised in respect of these entities and no actual sale has taken place. Q. 11 What is the total amount of commission M/s. Washington Software Ltd. has received from Mr. Parag Mehta during this period, i.e., financial year 2003-04 to current financial year ? Also explain the mode of receipt of such amount. Ans. The company has so far received commission of ₹ 32 lakhs during the abovementioned period from time to time in cash from Sh. Parag Mehta. Over the turnover .....

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honour shortly. During the course of post search investigations, the beneficiary parties were identified information was passed on to various field formations by the Investigation Wing, Mumbai for taking further action. As a result of this information, survey operations were conducted on March 2011 under section 133A of the Income-tax Act, 1961 by the Department at the premises of various institutes and head office of the Apeejay Educational group which included the assessee-society and Rajeshwa .....

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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 .....

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not installed. I have checked up with the I.T. professionals whose signatures are attested below 1. Signature 2. Signature Rakesh Kumar Jha Mamta Ghai Computer Lab Incharge PGT, Computer 558/1, Devli, Bank Colony C-203, Paryavaran Complex Devli, New Delhi 302 New Delhi-30 Q.23. Is there any admission software or scholar software installed in this school. Ans. No, no such type of softwares are installed at my school independently which I have again checked/confirmed with I.T. professionals named .....

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.T. Department of the school. (ii) Statement on oath dated March 29, 2011 of Sh. Alok Saklani, Director of Apeejay School of Management, Dwarka. Q. 10 Do you know one software company with the name M/s. Washington Software Ltd.? If yes, then how ? Ans. I have never heared the name of this software company prior to your mentioned of the same. Q.11. Did you have any business transaction with this company ever in the past ? Please elaborate. Ans. No, we did not ever purchase any software from the i .....

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, 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 th .....

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the statement of Sh. Nagendra Nautial, Accountant. These Annexures-'B', 'C' and 'D' are the trial balances of Apeejay School of Management for the financial years 2009-10, 2005-06 and 2006-07 where in purchase of computer softwares worth ₹ 1,83,15,408, ₹ 30,00,000 and ₹ 30,50,489.31 have been recorded respectively. Please explain which softwares have been purchased during these three financial years. Please give a brief description and demonstration of t .....

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the question of demonstration of these softwares and other related queries does not arise at all. (iv) Statement on oath dated March 29, 2011 of Sh. Nagendra Nautiyal, Accountant in Apeejay School of Management, Dwarka. Q. 12 Perusal of Annexure 'A' of your statement reveals that you have paid certain amount of M/s. Washington Softwares Ltd. as per details below : Page No. of Annexure A of the statement Date Amount (in Rs.) F.Y. 1 08.03.200 30,00,000 2006-07 3 17.03.200 30,00,000 2008-09 .....

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e 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 Annexure "A" to this statement. Q. 13. I am showing you page Nos. 59 to 66 of Annexure, A-1 which contains the ledger account of 'computer software' of the institute Apeejay .....

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y H.O. during the year 2009-10 now entries taken by us as per reconciliation 1,80,00,000 Please explain what these narrations means and what context these narrations have been made in the books ? Ans. These narrations only means to highlight the particular trans actions recorded against these narrations that these entries have been made only at the directions of head office. These narrations have been made in the end of the financial years in which these entries have been sent to us for recordin .....

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have been purchased during this period and where the bills of these purchases are lying ? Please produce these bills related to the purchase of computer software of ₹ 83,15,408. Similarly, I am showing you annexures C and D made part of this statement and are trial balance of Apeejay School of Management for the period April 31, 2005 to June 31, 2006 and April 1, 2006 to March 31, 2007. In these also amount of ₹ 30,00,000 and ₹ 30,50,489 have been spent on purchase of computer .....

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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. Ple .....

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ere in the above software the name of M/s. Washington Softwares Ltd. appeared, rather the name of your institutions, i.e., Apeejay Education Society. Can you show us any evidence that the said software were developed or conceptualised by any other entity other than your Apeejay Education Society ? Ans. No. (vi) Statement on oath dated March 29, 2011 of Shri Vijay Berlin, General Secretary and authorised signatory : Q. 5 What kinds of transactions are being carried out by your societies with M/s. .....

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g payment to M/s. Washington Software Ltd. Please state what was the purpose/basis of making such payments ? Ans. So many cheques comes for signing, sometime cheques comes along with the vouchers, sometime not, I simply sign the cheques. Q. 10 How do you verify the authenticity of the vouchers as to whether goods were actually received or not, or whether the head under which the payment is made is authenticated or not ? Ans. I do not do it myself I trust my people. Q. 11 You are hereby shown a b .....

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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 .....

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the society available in the office, it is seen that several payment have been made to the above company under your signature. You are hereby shown the relevant vouchers. Why these payment have been made ? Ans. Presently I am not in a position to make any comment. Q. 16 It is seen that an amount of ₹ 2.60 crores have been paid to the above company within a period from September 2010 to February 2011 without any receipt of bills or goods. It is the period after the sad demise of Shri Satya .....

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t persons are present here and you have also consulted them. You have also been accorded opportunities to consult relevant persons telephonically still no correct replies has come out. Please state why you are not in a position to furnish the replies and who is the person who can reply all such questions ? Ans. I was not fully involved with the society work I was doing all the work as casual manner. As you have seen that I have not known the full procedure. Hence, I am not in a position to give .....

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to be entered in the books of account of different entities of the assessee. It was also admitted by the key persons that various entities of the group have received only bills for entering in the books of account and no software were ever installed or received by them. It is pertinent to mention here 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 member/off .....

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h. 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 transacti .....

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the software was made by the assessee from M/s. Washing ton Software Ltd. The assessee merely procured bills from WSL and booked the amount of bill as expenses in its books of account and inflated its expenses to that extent over a period of time. During the post survey proceedings, Investigation Wing, Mumbai was requested to conduct further inquiry in this regard. Statement of Sh. Sanjay Sonawani was again recorded by Deputy Director of Income-tax (Inv.), Unit-VII(4), Mumbai on May 12, 2011. I .....

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azar, Mumbai and cash received from them were given back to the Apeejay Group. Copies of all the statements of Sh. Sanjay Sonawani have been provided to the assessee's authorised representative. Relevant portion of statement dated May 12, 2011 of Shri Sonawani is reproduced below : 'Q. 8 Who brought the clients or interested parties to you ? Ans. As stated earlier up to 2007, Mr. Rohidas Kumbarkar were handling all the parties and to the best of my knowledge Mr. Rohidas Kumbarkar was res .....

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roup 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, th .....

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l 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 Bank account of Apeejay School, Noida and balance ₹ 38,60,900 through various bank drafts). Thus, as per statement of Sh. Sonawani, the amount debited in books of assessee for purchase of alleged software from WSL, was received back by the persons managing the affairs of the assessee-society. This amount did not come back to the corpus .....

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as been followed up by me) to the Commissioner of Income- tax, Jalandhar-II, Jalandhar, requesting him to review the registration under section 12AA already granted to the assessee-society vide order dated May 13, 1999. On the basis of said reports, the worthy Commissioner of Income-tax-II, Jalandhar after considering the provisions of section 13(1)(c) read with section 13(3) of the Income- tax Act, 1961 and after providing due opportunity to the assessee, cancelled the registration under the pr .....

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years. Accordingly, taking recourse to the provisions of section 12AA(3) of the Income-tax Act, 1961, the registration granted to the assessee-society on May 13, 1999 is hereby cancelled with effect from the assessment year 2004-05.' 7.2 On the basis of findings given in paragraph 7 of this order, it is concluded that the assessee-society is clearly hit by the provisions of section 13(1)(c) read with section 13(3), and therefore, does not qualify to claim any exemption under sections 11 and .....

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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 5 .....

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njay D. Sonawani S/ o Sh. Devi Dass Sonawani, 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. In this statement Sh. Sanjay D. Sonawani has stated that his company provided accommodation entries in the form of bogus sales from financial year 2003-04 to financial year 2010-11. He also stated that since financial year 2003-04, there was neither necessary set up for developing of software nor the man power and exper .....

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ed by Sh. Vijay Kumar Berlia, Secretary of Apeejay Education Society. Statement of Sh. Vijay Kumar Berlia was also recorded on March 29, 2011. Sh. Vijay Kumar Berlia, could not give satisfactory 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 w .....

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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, we may clarify that the company Washington Software Ltd. is a listed company and under the control of SEBI. It is not a closely he .....

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tion downloaded from the site of MCA, the board of directors consisted of Sanjay Devidas Sonawani, Pushpa Sanjay Sonawani, Arvind Devidas Sonawani and Meena Surendar Naidu. How is it possible that the person does not. Regarding shareholding pattern he has stated that he is holding 3,55,000 shares, Mahesh Kadu 10 shares and Prafull Mehta 10 shares. Whereas as per record of MCA the paid up capital is 1,10,52,000 shares and out of it Sanjay D. Sonawani is holding 18,65,000 shares and Pushpa Sanjay .....

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clarified. May be he was doing development without proper permissions and just for that he was arrested and to cover up that he is denying having done any development work. Reason for his imprisonment needs to be verified. Further he is saying in his statement that he was getting his accounts audited but no accounts were being maintained. Just agreeing to his contention that he was not maintaining any accounts, how he can remember names of the parties and the amount of bills given to them when h .....

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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 developmen .....

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ead office. The cost of the same has been allocated among the various schools/institutions as per procedure and that is why there is no entry in the records of those schools except books of account and the staff working in the schools is not aware of the same. As regards Sh. Vijay Berlia is concerned, he could not give satisfactory reply at that time because he is not an I.T. professional and questions were raised to him all of a sudden late in the evening. Keeping in view the above, it is clear .....

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statements of Washington Software Ltd. In case still any adverse opinion is to be formed, an opportunity may be given to us to elaborate our case.' 8.2 The reply of the assessee as reproduced above has been carefully considered. It is seen that the assessee's authorised representative stressed more on the general conduct of Sh. Sanjay D. Sonawani and did not give any explanation regarding the findings of survey and could not produce any supporting evidence to show when and where the all .....

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cal verification of premise. It is further seen from the bills of WSL that though 10 bills were received with the delivery address of 10 different schools/institutes, totalling ₹ 2,68,60,900 which includes only one bill of ₹ 50,00,000 in the name of Apeejay School of Management, whereas ₹ 1,80,00,000 have been debited 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 repre .....

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r 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 .....

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given to question Nos. 10, 11 and 12 of statement recorded under section 131(1) dated March 29, 2011. Secondly, Sh. Deepankar Chakarbarti, Dean of Apeejay School of Management, Dwarka also admitted that no software has ever been purchased by his institution from Washington Software Ltd. Your attention is invited to replies given by him to question Nos. 10 and 11 of his statement recorded under section 131(1) on March 29, 2013. Further, in reply to question No. 16, he stated that since 2006 no n .....

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m to question Nos. 12, 13 and 14 of his statement dated March 29, 2011 recorded under section 131(1) of the Income-tax Act. Statement of Smt. Anita Paul, Principal of Apeejay School, Saket, New Delhi was also recorded on oath. She was asked to check whether the said software was installed in the systems of the school with the help of I.T. professional at the school. In her reply, she accepted that the software were never installed at her school. You attention is invited to her reply given to que .....

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oper 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 .....

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with M/s. Washington Software Ltd. (copies of all the statements separately handed over). You are requested to offer an explanation to all the above observations and to explain that when it has been proved beyond any doubt during survey operation dated March 29, 2011 that no software was ever purchased from Washington Software Ltd. and installed at any of the institution/school, though bills were entered in their books at the instruction of head office, please explain why the entire purchase fro .....

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per bills issued by Washington Software Ltd. available in this office, software of ₹ 50,00,000 was purchased in Apeejay School of Marketing (now Management) Dwarka whereas as per books impounded from above institution during survey, it is seen that Software of ₹ 1,80,00,000 has been purchased in this institution and vouchers entered in books, though bills were not found available at institution. Please reconcile the difference and explain the actual amount of software purchases from .....

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ng so that the ruled material may be confronted. Case adjourned to February 22, 2013.' 9. Cross examination of Sh. Sanjay D. Sonawani Vide reply dated January 15, 2013, the assessee's authorised representative has stated that statement of Sh. Sanjay D. Sonawani has been recorded behind the back of assessee and it cannot be used against the assessee unless he is given an opportunity to cross-examine the person who has deposed against him. The authorised representative placed reliance on t .....

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ed 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, 2 .....

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d February 18, 2013, addressed to Deputy Director of Income-tax (Inv.), Pune and copy to us. In the same you have directed us to visit Pune on March 4, 2013 and cross-examine Mr. Sanjay D. Sonawani in the office of Deputy Director of Income-tax (Inv.), Pune. In regard to same it is submitted as under : That assessment proceeding in our case is going on before and you are our Assessing Officer. We want to cross-examine the witness in your presence as you have to decide our case on the basis of hi .....

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se here in Jalandhar before you. In case his expenditure is more than this, we will reimburse the same on his arrival or if you want we can pay in advance. Hence it is prayed that he may please be called to Jalandhar.' 9.3. In reply to Commission dated February 18, 2013, the Deputy Director of Income-tax (Inv.), Unit-I(I), Pune vide letter No. PN/ DDIT(Inv.)/WSL/2012-13/960 dated March 6, 2013 informed that neither the Principal officer nor the representative of the assessee-society attended .....

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on 131 of Income-tax Act, which 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 (whe .....

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sert 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 situate in the State of Punjab may require the personal attendance of any witness residing in the Punjab or Delhi State." 9.5 The above provisions of Civil Procedure Code makes it clear beyond any doubt that as per law, for a distance beyond 500 kms, and in case of Stat .....

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), therefore, in view of the provisions of Civil Procedure Code, this office has no jurisdiction to issue summons to Sh. Sanjay D. Sonawani to appear in person at Jalandhar for cross-examination. The only way available for providing an opportunity of cross-examination of Sh. Sanjay D. Sonawani to assessee, was to issue Commission under section 131(1)(d) to my counterpart at Pune, who has territorial jurisdiction over Sh. Sonawani. Accordingly, in the interest of justice, one more opportunity was .....

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28-02-2013 submitted in this office on 01- 03-2013 (Demand draft No. 652344, dated 27-02-2013 in original enclosed). . . . Kindly refer to the above. 2. In this regard, it is hereby brought to your notice that, vide para 3 of your said letter, you have stated that the assessment proceedings in your case are going on before the undersigned and that you want to cross-examine Shri. Sanjay Sonawani, in the presence of under signed at Jalandhar. 3. There is no gainsaying the fact that the office of t .....

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f 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 .....

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g cross-examination of Sh. Sanjay D. Sonawani in the presence of Principal Officer of assessee. A copy of this commission was issued to you stating that the same is a final opportunity granted to you for cross-examining the witness. Your authorised representative appeared before the undersigned on February 27, 2013 and stated that he is going to Pune on March 4, 2013 to cross-examine Sh. Sonawani. However, perusal of your letter dated February 28, 2013 reveals that you failed to avail of the opp .....

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wish to avail this opportunity of cross-examination as stated above, kindly communicate your intention in writing to the undersigned on or before March 15, 2013, so that necessary arrangements could be made. In case, you do not wish to avail of this opportunity, kindly communicate the same. 7. If your reply in this regard is not received on or before 1100 hrs on March 15, 2013, the undersigned will be constrained to presume that you do not wish to cross-examine the Departmental witness Shri. San .....

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y 1100 hrs. Non-compliance shall lead to finalisation of assessments on the lines as stated in earlier show-cause notices. 9. 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, Circl .....

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o 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.' 9.7. In view of replies filed by the assessee on March 1, 2013 and March 14, 2013, it is seen that though the assessee was provided a reasonable and sufficient opportunity to cross-examine Sh. Sanjay D. Sonawani, wi .....

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given vide order sheet dated February 14, 2013 was filed. The books of account for Apeejay Institute of Management, Rama Mandi were produced and examined by test check. The assessee's authorised representative was asked vide order sheet entry of same date as under : 'To further furnish : i) Complete reply to queries raised vide order sheet noting dated January 15, 2013 and February 14, 2013. ii) Produce original CDs along with copies of bills for purchase of Computer Software, also state .....

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no reply was furnished. The authorised representative produced books of account of Apeejay School, Jalandhar and same were examined. As per information available in this office software worth ₹ 50 lakhs has been purchased from WSL which is delivered to Apeejay School, Jalandhar as per Invoice No. WSL/DC/012 dated May 26, 2009 issued by M/s. Washington Software Ltd., Pune. However, during examination of books, it was seen that no such software was purchased or installed at Apeejay School, .....

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d 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 queri .....

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irement for software purchase and upgradation is projected to Vice-President of society and after his approval software is purchased. Purchase invoice is approved by Vice-President and cross-verified by Principal of school and signed by IT (Manager) after installation of software, which is also entered on stock register. Stock register was also produced and it was seen that no software from M/s. Washington Software Ltd. has even been purchased or installed on the computer system of schools at Ja .....

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ed representative and Sh. Yogesh Gupta, IT (Manager). The assessee's authorised representative was again asked to furnish reply to earlier order sheets and to produce books of other institutes for verification. 10.3 On the next date of hearing, i.e., March 11, 2013, again no reply was furnished. Books of accounts of Apeejay School of Management, Dwarka, and Apeejay School, Noida as well as Faridabad were produced and same were examined by test check. Examination of impounded record along wit .....

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nt of Sh. Nagendra Nautiyal recorded under section 131 during survey on March 29, 2011 revealed that no bills for purchase of software from WSL were available with the respective institute 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, especial .....

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ring 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 the item refers to 'Multiple User ERP Software' in most of the cases. Therefore, the assessee's autho .....

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given the access to different modules of ERP ? e) Who are the person in charge of the server of ERP ? f) Name of the person who handles the maintenance issues of ERP? g) Name of person who handles the updates of this ERP system ? h) After how many months, the ERP is updated ? i) Who supervised the installation of activation of ERP in each institute ? j) Name the person, who gave/gives training for ERP operations ? k) Who are the persons actually operating this ERP in each institute ? l) Mention .....

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hard disk impounded during survey at society head office at Delhi may be examined in his presence. Furnish copy of bank account out of which payment to Washington Software Ltd. has been made. 10.4 After seeking an adjournment, the assessee's authorised representative furnished reply dated March 18, 2013 and submitted as under : The reply to queries raised at the time of last hearing which are still pending is as under : At the outset, we may confirm having purchased the software in question .....

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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 d .....

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has stated that his accounts have been prepared by his chartered accountant without maintaining books of account and have even been audited. We may let you know that company WSIL is a public limited company and duly registered on stock exchange. How a public limited company which is duly registered on stock exchanges can dare to say that it is not maintaining any books of account. To verify his statement, has the Department tried to examine the auditor of the company or informed the SEBI about t .....

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n 133A is not a statement on oath and has no evidentiary value unless it is supported by some documentary evidence. The special leave petition of the Department has duly been dismissed by the hon'ble apex court. Here the Department is acting against us just on his statement and has not bothered to collect any documentary evidence by cross-examining the auditors who have audited the accounts. Further the assessments of WSIL must have been reopened, what has happened to them ? What treatment h .....

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our presence at Jalandhar. Unless we are given opportunity to cross-examine him at Jalandhar in your presence, it cannot be used against us. So far as statement of Mr. Alok Saklani, Deepankar Chakrabarti and Anita Paul, they are academician and do not have a computer background. Same is situation 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 .....

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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 same .....

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ey team and being tried got confused and could not recollect full details. The software purchased from Washington Software Ltd. though debited to various institutions, is installed in the central server at the head office being of utmost importance and requiring secrecy. The software includes various modules and various types of reports are generated which include data of students and also about the institutions. It generates reports which are very big and contains large number of pages. Some of .....

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save his skin and putting onus on others to prove it. We are enclosing herewith balance sheets and profit and loss account of Washington Software Ltd. (pages 1 to 65). From the same it is clear that the sale and profitability has lead to increase in assets of the company and reduction of liabilities. No where it appears that financial position of the company has gone down due to closure to business (as stated by Mr. Sanjay Sonawani). Pages 66 to 68 show that Washington Software is US based comp .....

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cated 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. .....

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dles the updates of this ERP System ? Persons from Washington Software Ltd. who delivered the software also installs the update. h. After how many months, the ERP is updated ? Washington Software Ltd. delivered and installed update as and as when they had them ready. i. Who supervised the installation of activation of ERP in each institute ? ERP was installed centrally to safe guard data and maintain confidentiality as also to avoid being hacked and misused. j. Name the person who gave/give trai .....

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ceived and how it is installed in computer. The purchase of software was handled directly by Dr. Satya Paul, Chairman. (Since deceased). Bills were received from time to time and the bills were paid by banking channel. Software was delivered by Washington Software Ltd. persons and installed centrally. The bills of softwares purchased from WSL along with bank statements are enclosed herewith and reply to same has already been furnished in this reply. As regards presence of IT expert is concerned, .....

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sentative 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 .....

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r Chakrabarti, the authorised representative stated that they are academicians and does not have a computer background and that same is the situation with Sh. Nagendra Nautiyal, he being an Accountant. Further, that while the institution staff makes use of their own software for day-to-day use, they need not know about software installed at head office, since these are for management information/ control to which school staff is not fully privy to. f) That regarding statement of Sh. Amitava Misr .....

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the institutions and software decisions were made by chairman Dr. Satya Paul (since deceased). Further that Sh. Berlia, being tired on the day of survey, got confused. h) Software purchased from WSL is installed in the central server at the head office being of utmost importance and requiring secrecy. i) That the assessee is an innocent customer who has purchased software relying on an unreliable person. 11.1 The above arguments of the assessee have been duly considered but the same are not fou .....

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ised. The argument of the assessee's authorised representative that Sh. Sonawani has changed his stand in various statements and therefore, has no force is not acceptable because Sh. Sonawani has nowhere back- tracked from 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 .....

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ng 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. This has been discussed in detail vide para 7 of this order. The argument o .....

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so not acceptable because the statements of Sh. Sanjay D. Sonawani have been recorded under section 131, which draws its power from Code of Civil Procedure, 1908 and not under section 133A as alleged by the authorised representative, therefore, these statements have full evidentiary value. c) The assessee was given reasonable and sufficient opportunity to cross-examine Sh. Sanjay D. Sonawani as per the provisions of Civil Procedure Code vide this office's commission dated February 18, 2013 a .....

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428/2, New Mangalwar Peth, Near Apollo Talkies, Pune-30. From the field enquiries conducted by Deputy Director of Income-tax (Inv.) U-1(1) Pune, it was found that the address and phone number mentioned in audit report were wrong and that this chartered accountant actually works from Chennai and has never dealt with WSL and that the signature appearing on the audit report of WSL does not match with his signatures. (The copy of letter written by Sh. Sampath to Deputy Director of Income-tax (Inv.) .....

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red 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 ha .....

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e from WSL has ever been received/installed at their institutions. f) The authorised representative has argued that Sh. Vijay Berlia did not have complete background and that the software decisions were made by Dr. Satya Paul (since deceased). This argument is nothing but an effort to save the office bearer Sh. Vijay Berlia, who is at helm of affairs at the society besides being the person who has approved huge payments totalling over ₹ 15 crores from financial years 2003-04 to 2010-11, to .....

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for software was looked after by Dr. Satya Paul and not Sh. Berlia because perusal of impounded record reveals that the bills of WSL since the year 2003, were signed by Sh. Berlia and word "approved" has been written in his handwriting. The assessee is just trying to shift the entire blame for wrong doing on a deceased person but this would not serve any purpose because the evidence placed on record proves otherwise. g) Vide order sheet dated March 11, 2013, the assessee was required t .....

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arly established that the ERP software were never purchased from WSL or installed in any of the institutions or head office of the assessee-society. The perusal of bills of WSL reveals that software in question is multiple user ERP software, where ERP stands for "Enterprise Resource Planning". It is a business Management software that allows an organisation to use a system of integrated applications to manage its business. The ERP in Educational Institute covers the functionalities of .....

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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 .....

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he alleged software is installed centrally to maintain secrecy and that only one employee Sh. K. K. Varghese was trained in operation of ERP, than how the assessee is able to operate and maintain such a comprehensive software as the same is multiple user software system which is designed to integrate all departments ? Further, out of modules mentioned above, the modules like attendance, library, time-table, student development and e-learning are institution specific for which the access should h .....

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ERP software developed by M/s. Washington Software Ltd., Pune, installed on the computer system neither could they produce original CD or licence received from WSL. Even during the course of assessment, sufficient opportunities were provided to the assessee vide order sheet notings dated February 14, 2013, March 6, 2013, March 7, 2013, March 8, 2013 and March 11, 2013, to produce the original CD of ERP software, stock register and fixed asset register showing receipt of software as well as licen .....

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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 i .....

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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, New Delhi c) Invoice date May 5, 2009, Multiple user ERP software for ₹ 30,00,000 Deliver to : Apeejay School, Greater Noida (U.P.) d) Invoice date May 14, 2009, Multiple user ERP software for ₹ 50,00,000 Deliver to : Apeejay School, Faridabad e) Invoice date May 26, 2009, Multiple user ERP software for  .....

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nd as per bills, these should have been delivered to the respective institution at the addresses mentioned above, and not to the head office as alleged by the asses see now. Further, the peculiar thing is that ERP software with the same description has been procured for ₹ 50 lakhs as per invoices mentioned at Nos. "a, b, d and e" above, and for ₹ 30 lakhs as per invoice at No. "c" above and the same has been the case with ERP software for nursery classes. The reas .....

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oftware, the date of installation along with report of successful installation/running of software have to be mentioned on bills of WSL, also the software CD and licence were required to be entered in stock register/fixed assets register. However, nothing of this sort has been done in case of software from WSL, whereas the assessee is following this detailed procedure in case of all the software other than those purchased from WSL. This shows that the assessee, which has been over-conscious to o .....

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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 .....

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ities Pvt. Ltd. 10,00,000 10.08.2009 60003 Netania Shares and Securities Pvt. 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 Suiyoday 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 60026 Swati Spe .....

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y 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 .....

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n to above, it is pertinent to mention here that the registration granted under section 12AA to assessee-society has also been cancelled by the Commissioner of Income-tax, Jalandhar II with effect from assessment year 2004-05. Thus, otherwise also assessee is not entitled to any benefit under section 11. 12.1 Perusal of income and expenditure account reveals that out of income of the year, the assessee has transferred certain amounts to various reserves and provisions, which is not allowable und .....

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Development reserve 5,23,77,900 Repairs and renewals reserve 5,04,87,100 Contingency reserve 5,10,90,000 29,00,77,926 Surplus/excess of income over expenditure 10,05,35,645 Thus, the surplus/excess of income over expenditure of ₹ 10,05,35,645 is taxable and since the assessee, by procuring bogus bills for purchase of software, concealed its income from assessment and also furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) of the Income-tax Act for .....

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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 t .....

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s see could not produce the original CD, licence or entry of receipt of these software in stock register, so it cannot be said that whether these software were actually procured or not. In view of these facts, the expense of ₹ 38,60,900 on purchase of ERP software which are debited to income and expenditure account as revenue expenses, are being disallowed and added to total taxable income of assessee. Since, the assessee has concealed and furnished inaccurate particulars of its income and .....

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of the assessee-society. Perusal of schedule of fixed assets reveals that the total depreciation of ₹ 3,53,21,395 has been debited to income and expenditure account for the year ending March 31, 2010, in respect of block comprising of "computer" which includes software. For the purpose of computing the depreciation to be disallowed for the year under consideration, depreciation has been calculated by making a separate block "computer software" from financial years 2003- .....

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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 89,49,248 2,30,00,000 3,19,49,248 1,91,69,549 1,27,79,699 As per above table, out of total depreciation of ₹ 3,53,21,395 debited under the Block-'Computer', depreciation of ₹ 1,91,69,549 pertaining to ERP software purchased from .....

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donation in its income and expenditure account. Perusal of record revealed that the said amount has been paid to Apeejay Society a education foundation. The assessee's authorised representative was asked vide order sheet entry dated March 6, 2013, as under : '(v) Justify the payment of donation of ₹ 25 crores to Apeejay Society a education foundation ; also explain whether this foundation is registered under section 80G.' In response the assessee's authorised representative .....

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been given about of the current accruals keeping view the provisions of sections 11 and 12 and is allowable. The various documents concerning registration, etc., are enclosed herewith. (Annexures A43 A48).' The reply of assessee as reproduced above has been carefully considered but the same is not found to be acceptable. It is seen that consequent to cancellation of registration of assessee-society by the Commissioner of Income-tax, the assessee-society is no more registered under section 12 .....

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n 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% .....

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nsideration is computed as under : (in Rs.) Excess of income over expenditure as computed in para 12.1 10,05,35,645 Addition as discussed in para 13.1 above 38,60,900 Addition as discussed in para 13.2. above 1,91,69,549 Addition as discussed in para 14 above 21,49,46,436 Total taxable income 33,85,12,530 Assessed as above. Give credit for prepaid taxes after verification. Charge interest under sections 234A, 234B, 234C and 234D and with draw interest under section 244A as applicable as per Inco .....

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modation entry merely on the basis of statements of Mr. Sonawani and even without giving the appellant an effective opportunity to cross-examine him and also not taking cognizance of working sheets of the software provided to her. 3. That the learned Assistant Commissioner of Income-tax is not justified in forcing the assessee to go to Pune and cross-examine Mr. Sanjay D. Sonawani citing old provisions of (which were amended) even though she knew that Mr. Sonawani is Department's witness tha .....

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-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 o .....

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s legally erred in disallowing depreciation on software are purchased during the year. 11. The learned Assistant Commissioner of Income-tax has legally erred in disallowing, depreciation on software purchased in the earlier years." 9. The assessee filed the following written submissions dated August 13, 2014 before the learned Commissioner of Income-tax (Appeals) : "The present appeal is against the order dated March 28, 2013 passed by the Assistant Commissioner of Income-tax, Circle-3 .....

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being assessed regularly and the year under appeal was also taken up for scrutiny. The Assessing Officer assessed the assessee as association of persons applying the provisions of sections 28 to 44 of the Income-tax Act, 1961. This has been done presuming that the assessee has done bogus purchase of software from Washington Software Ltd. Pune (hereinafter mentioned as WSL). A statement of Sanjay Sonawani director of WSL was recorded by the ADIT, Pune on March 16, 2011 and he denied having suppl .....

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efore the ADIT Pune and ADIT Mumbai on different dates. If we read those statements it appears that the statement has been given by a person who himself in not sure that what he has stated. The statements of Mr. 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 note .....

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gain, put the onus on Mr. Parag Mehta. b. In the first statement, in response to Q. No. 6, Mr. Sonawani had replied that '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 .....

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up who was handled by me.' On perusal of the above, the appellant fails to understand that as to how Mr. Rohidas Kumbharkar who deserted the company in 2003 could bring clients till 2007. c. In the first statement, in response to Q. No. 6, Mr. Sonawani had replied that 'all these sales are non-genuine sales (bogus sales)'. However, in the second statement, in response to Q. No. 3, Mr. Sonawani had inter alia, replied that 'In respect of Q. No. 6, I would like to make a slight cor .....

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reserves and surplus aggregating to ₹ 20.50 crores. Further during the said year, WSL had recorded sales revenue aggregating to ₹ 20.12 crores and earned the net profit of ₹ 2.55 crores. In view of the aforesaid, the appellant failed to appreciate as to how and in what manner, there was any financial crisis. D. In the first statement, in response to Q. No. 8, Mr. Sonawani had replied that 'thought the books of account are audited, the books of account were never maintained .....

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'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.' O .....

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plied that. . . . After 2007 only one party was there, i.e., Apeejay Group who was handled by me. In the fourth statement, in response to Q. No. 4, Mr. Sonawani had replied that 'Q. No. 4 Do you know the concern-Apeejay Education Society as a director of Washington Software Ltd. ? Ans. No. I do not know the concern Apeejay Education Society.' From the above it is absolutely clear that Mr. Sonawani has contradicted his own replies in different statements and hence it is not possible to un .....

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he has stated that he was just a puppet in the hands of Mr. Parag Mehta. But in his second and third statement he has admitted that he was doing all this of his own and Mr. Parag gave him just table space. However in his last statement he again admitted being a puppet of Mr. Parag. From the above it is crystal clear that the Assessing Officer for the reasons best known to her is relying upon the statement of a person who is totally unreliable and is also changing his statement time and again. No .....

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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 truthf .....

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sessee were duly deposited in the account of WSL and further invested in various securities. From the above it is clear that statement of Mr. Sonawani is nothing but bundle of lies and no cognizance can be taken of same. Keeping in view the above, the assessment made relying upon a shifting statement needs to be quashed on this ground only for delivering justice to the assessee. Without prejudice to above the Assessing Officer has just acted on the statement of the WSL and has not supported the .....

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smissed by the Supreme Court ; (v) ITO v. Vijay Kumar Kesar [2010] 327 ITR 497 (Chhattisgarh) ; and (vi) TDI Marketing (P.) Ltd. v. Asst. CIT [2009] 28 SOT 215 (Delhi). Further the statement recorded ex-parte cannot be relied upon in the absence of cross-examination. It is submitted that the statements of Mr. Sanjay D. Sonawani was recorded by the Department behind the back of the appellant and such person was not made available for cross-examination by the Assessing Officer, even after the appe .....

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(ii) Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 (SC) ; (iii) State of Punjab v. Bhagat Ram, AIR 1974 SC 2335 ; (iv) Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498 (SC) ; (v) CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103, 110 (Cal) ; (vi) P. S. Abdul Majeed v. Agrl. ITO and STO [1994] 209 ITR 821, 823 (Ker) ; (vii) CIT v. Sham Lal [1981] 127 ITR 816 (P&H) (pages 51-53) ; (viii) Mukand Singh and Sons v. Presiding Officer, Sales Tax Tribunal 107 STC 300 .....

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. 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 bein .....

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s adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the corner-stones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination in chief. It is the necessary requirement of the process of taking evidence that the examination in chief is followed by cross-examination and re-examination, if necessary.' The Assessing .....

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nd on the verification conducted by the Department. I. The appellant had placed on record complete documentary evidences, like details of software purchased from WSL and details of payments made to WSL, copies of the reports generated from the software, etc. II. The appellant had submitted before the Assessing Officer that the software purchased from WSL had been installed in the central server at the head office, which is of utmost importance and requires secrecy. It was also submitted that the .....

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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 .....

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at 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 but only the part of the amount which has been disallowed can be assessed at the higher rate if it is within the statutory limit of 85 per cent. In case it is in excess of 85 per cent. the same cannot be taxed. At no stage whole of income can be taxed at higher rate applying provisions of sections 28-44 of the Act. Section 164(2) of the Income-tax .....

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e or unknown (such income, such part of the income and such persons being hereafter in this section referred to as 'relevant income', 'part of relevant income' and 'beneficiaries', respectively), tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate : Provided that in a case where- (i) none of the beneficiaries has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an a .....

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vant time, that the society 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 circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance ; or (iv) the relevant income is receivable by the societies on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund c .....

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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 .....

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the relevant income or part of relevant income at the maximum marginal rate. (3) In a case where the relevant income is derived from property held under society in part only for charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or is of the nature referred to in sub-section (4A) of section 11 and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically rec .....

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association of persons ; and (b) the tax on that part of the relevant income which is applicable to purposes other than charitable or religious purposes, and which is either not specifically receivable on behalf or for the benefit of any one person or in respect of which the shares of the beneficiaries are indeterminate or unknown, at the maximum marginal rate : Provided that in a case where- (i) none of the beneficiaries in respect of the part of the relevant income which is not applicable to c .....

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nd the Assessing Officer is satisfied, having regard to all the circumstances 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 mainten .....

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ance, 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-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. Explanation 1.-For the purposes of this section,- (i) any income in respect of which the persons mentioned in .....

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such order, instrument or deed ; (ii) the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is received shall be deemed to be indeterminate or unknown unless the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable, are expressly stated in the order of the court or the instrument of society or wakf deed, as the case may be, and are ascertainable as such on the date of such order, .....

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urable Karnataka High Court on February 10, 2014. From the above citations, it is clear that in case there is 13(1)(c) or 13(1)(d), the whole of income cannot be taxed at higher rate. Ground Nos. 8-11 Without prejudice it is submitted that the assessee is duly registered under section 12AA and assessment has to be made keeping in view the provisions of sections 11-13. The Assessing Officer has treated the assessee as association of persons and assessed invoking sections 28-44. First of all the r .....

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e 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 .....

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d September 19, 2014 along with reply dated September 15, 2014 of the Assessing Officer on our arguments dated August 21, 2014. After going through the arguments, it is submitted as under : The Assessing Officer has placed reliance on his assessment order citing the arguments of the assessee are almost repetition of the arguments given at the time of assessment and the same have duly been dealt with. The arguments put up by us before you are on the basis of analysis of assessment order in additi .....

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in the account of the WSL. The Assessing Officer has failed to clarify on this point in his reply. Mr. Sonawani has stated that he used to return cash to the asses see but the Assessing Officer has said that the amount paid by asses see was being invested in securities. So the Assessing Officer has faded to clarify from where the cash was being refunded. Mr. Sonawani has stated that he has made sale exclusively to Apeejay Group after 2007. But if we see the sale figure given by the Assessing Of .....

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nawani cannot be relied on because the same has been contradicted by the Assessing Officer and now he has failed to justify the false statement of Mr. Sonawani. The statement 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 pleas .....

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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 and is not supported by any tangible material. It is just on surmises and has got no value and is against the provisions of law. Onc .....

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imed by the assessee-society are not verifiable and therefore, could be inflated. But the Assessing Officer has not pointed out any instance out of various expenses as to whether it was not at all incurred or it was incurred excessively or the funds or money relating to such expenses was diverted to other persons and in particular, to the founder member of the society. Thus, rest of the inferences other than the expenditure not being verifiable/proved are hypothetical and therefore, not acceptab .....

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72 (16-29) has held as under : 'For applicability of clause (c) of sub-section (1) of section 13 read with clause (b) of sub-section (2) of section 13 of the Act, conditions mentioned in sub-section (3) read with Explanation 3 have to be fulfilled. The Revenue has failed to bring on record any evidence in the form of bill, voucher or other records proving that the amount of purchase which has accounted for in the construction cost and money has been taken by the managing trustee or the good .....

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iced 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). .....

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n his/her order. In his statement Mr. Sonawani has stated that he used to discount the cheques received from the appellant and handover the cash to the appellant. However the Assessing Officer has explained about each and every cheque of the appellant and has confirmed that no cheque has been discounted and encashed but all the cheques were deposited in the account of WSL and further invested in the securities. Hence no cash has been withdrawn and it has not been confirmed from which source the .....

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e appellant produced its books of account ; reports generated out of the said software and further offered that the Department can send its own expert at the cost of appellant to verify the installation of said software in the main server of the appellant. The Assessing Officer for the reasons best known to him/her without verifying the facts produced by the assessee acted on her predetermined mind and activated section 13(1)(c) on the basis of false shifting statement and without any cogent mat .....

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udicial powers and in doing so they must act in a fair and not a partisan manner. Although it is a part of their duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighted against 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 th .....

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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 appella .....

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s Act and under the terms of the society or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the society or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) : Provided that in the case of a society or institution created or established before the commencement of this Act, the provisions of sub-c .....

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for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the society or institution for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of June, 1970 ; . . . (2) Without prejudice to the generality of .....

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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 institut .....

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(3) during the previous year for consideration which is more than adequate ; (f) if any share, security or other property is sold by or on behalf of the society or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate; (g) if any income or property of the society or institution is diverted during the previous year in favour of any person referred to in sub- section (3) : Provided that this clause shall not apply where the .....

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n (1) and sub section (2) are the following, namely :- (a) the author of the society or the founder of the institution ; (b) any person who has made a substantial contribution to the society or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thou sand rupees ; (c) where such author, founder or person is a Hindu undivided family, a member of the family ; (cc) any trustee of the society or manager (by whatever name called) .....

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sub-section (3) and in the method referred in sub-section (2). The Assessing Officer has relied upon only the statement which has following flaws : The statement is misleading and shifting on. Hence not reliable in the eyes of law. He has failed to prove that how the consideration has been received back by the appellant and from which source the same has been given. Other conflicts already mentioned in the earlier submissions. Keeping in view the above, it is absolutely clear that onus to prove .....

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ting, 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 purpo .....

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o the assessee by quashing the illegal order passed by the Assessing Officer and assess the assessee as association of persons." 13. The assessee, as noted at page 74 in paragraph 6.5 of the impugned order, also relied on Central Board of Direct Taxes Circular No. 387, dated July 6, 1984 in support of its alternative claim that the income of the society is to be taxed only to the extent of income which has been alleged to have been misappropriated, and the income which has been brought to t .....

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e further considered various judicial pronouncements relied upon by the learned authorised representative of the assessee-society on the issue under reference. I have again considered the clarification issued vide Circular No. 387, dated July 6, 1984. On careful consideration of the assessment order, it has been noticed that the Assessing Officer has disallowed the deduction claimed by the assessee-society under sections 11 and 12 of the Act in view of alleged violation of the provisions of sect .....

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ed 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 o .....

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eration of the assessment order, remand report, written submissions filed on behalf of the assessee-society and its counter comments as well as other material brought on record, I am also of the opinion that Sh. Sanjay D. Sonawani has 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 and not with r .....

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er. In my opinion, the representatives of the assessee-society did not want to examine Sh. Sanjay D. Sonawani as they know the truth. The Assessing Officer has made proper arrangement for cross-examination of Sh. Sanjay D. Sonawani at Pune but the representatives of the assessee-society have insisted his presence at Jalandhar on the ground that he is the witness of the Department and he should be produced at a place where the assessee wants. I fail to understand this attitude of the representati .....

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is the fault of the representatives of the assessee-society to not to avail opportunity provided to them for cross-examination. I am also of the opinion that the asses see-society has vehemently failed to produce original CD of the Software or hard disc of computer where it has been installed although it was specifically asked by the Assessing Officer during assessment proceedings pertaining to all assessment years involved. No evidence was ever produced with regard to purchase of software even .....

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d 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 .....

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hemselves busy in finding mistakes in the statement of Shri Sanjay D. Sonawani who in fact categorically admitted that he has provided accommodation entries to the assessee group through his company M/s. Washington Software Ltd. When asked that as to whether the original CD of software or the hard disc of computer is available with the assessee-society, the learned authorised representative of the assessee-society could not offer any satisfactory explanation. This also proves that the assessee-s .....

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ment of Shri Sanjay D. Sonawani as has been alleged by the learned authorised representative of the assessee-society but assessment framed by the Assessing Officer is supported by the statement of various employees of the assessee group, findings of survey operation, non- deduction of original CD or hard disc of computer where the software has been installed, failure on the part of the representatives of the assessee-society to cross-examine Shri Sanjay D. Sonawani and many more reasons as discu .....

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fficer that the assessee-society has not purchased any software from M/s. Washington Software Ltd. and the entries reflected in 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 accomm .....

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ereon. 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 learned authorised representative of the assessee-society on Circular No. 387, dated July 6, 1984 is also misplaced. The main and clear cut provisions of section 13 of the Act talks .....

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6 ITR 164 (Mad). 5. Champa Charitable Trust v. CIT [1995] 214 ITR 764 (Bom). 6. Kanahya Lal Punj Charitable Trust v. DIT (Exemption) [2008] 297 ITR 66 (Delhi). 7. CIT v. Audh Educational Society [2011] 203 Taxman 166 (All). 8. CIT v. Sree Narayana Chandrika Trust [1995] 212 ITR 456 (Ker). 9. Sree Narayana Chandrika Trust v. CIT (No. 2) [1997] 224 ITR 464 (Ker). 10. CIT v. Chandrika Educational Trust [1997] 224 ITR 449 (Ker). 11. Chandrika Educational Trust v. CIT [1997] 224 ITR 453 (Ker). 12. CI .....

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d 12 of the Act by invoking provisions of section 13(1)(c)/13(3) of the Act. Moreover, the learned authorised representative of the assessee-society has not found any fault with the working of the Assessing Officer which has been done for working out the income to be taxed under the normal provisions of sections 28 to 44 of the Act. The addition of ₹ 33,85,12,530 made by the Assessing Officer on account of disallowance of deduction claimed by the assessee-society under sections 11 and 12 o .....

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re 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 right .....

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1 and 12 of the Act, broadly, on the following points : "(i) Sh. Sanjay D. Sonawani, chairman and director of M/s. Washington Software Ltd., from whom, the assessee stated to have purchased the software, admitted to have provided accommodation entries to the assessee. Though he later put the blame on Sh. Parag Mehta, chartered accountant, with regard to providing accommodation entries, he never retracted from his admission that the accommodation entries had actually been provided by him thr .....

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me print-outs, statedly from the software allegedly purchased would not amount, in the absence of the original software, to prove the actual purchase thereof. (vi) Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries. (vii) The statements of key employees of the assessee prove the entries to be just accommodation entries. (viii) The representatives of the assessee never stated that the Software stood installed in the central server in the head office of the assessee. .....

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t to be taxed at the maximum marginal rate, was without force." 18. Now, let us examine the aforesaid observations of the learned Commissioner of Income-tax (Appeals) 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 providi .....

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ni, 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 12AA of the Act. The said synopsis is being relied on in these appeals also. (ii) It is mentioned at pages 345-46 of the paper book in the s .....

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336-337 of the paper book, in his statement, Sh. Sanjay D. Sonawani has mentioned that his company was involved in development of software till assessment year 2003-04, whereas at page 337, he says that there is a slight correction and some of the sales are genuine. The percentage of genuine sales is 3-4 per cent. (iv) In the statement dated May 12, 2011, at page 334 of the paper book, it is mentioned that after 2007, it was only one party, i.e., the Apeejay Group, which was handled by them, whe .....

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D. Sonawani were recorded under threat that there would arise liability of Rs. Hundred crores on him. (vi) All the instances clearly show that the statement of Sh. Sanjay D. Sonawani cannot be relied on and it has no evidentiary value. Reliance is placed on 'CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (CLC 80-83). (vii) There is no search on Sh. Sanjay D. Sonawani (viii) A chart showing the contradiction in the statements of Sh. Sanjay D. Sonawani is being filed separatel .....

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en 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 .....

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s been filed on behalf of the assessee. These statements are dated March 16, 2011, April 12, 2011, May 12, 2011 and December 30, 2011. This chart is being reproduced hereunder : Date of statement 16.03.2011 12.04.2011 12.05.2011 30.12.2011 Remark Original Copy pg. No. 322-327 333-335 338-342 347-351 Typed Copy pg. No. 328-332 336-337 343-346 352-356 Submission before CIT(A) Page number-330, question number-7 Page number-336, question number-3 Page number-344, question number-7 Page number-353, q .....

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une on 16.03.2011 was based on a misunderstanding and misinformation. In fact Mr. Parag Mehta did not approach me as stated in my answer. I was misinformed and there was a misunderstanding between me and Shri Mehta. I took Mr. Parag Mehta s name thinking that he being a charted accountant would be able to help me in this case. As I told in my statement dated 16.03.2011, Shri Parag Mehta, charted accountant used to handle all the transactions with outside parties. In first statement Mr. Sanjay pu .....

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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 Kumbhark .....

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ge 61 of appeal paper of 2010-11 (Paragraph C) . . . all the sales are non-genuine sales (bogus sales) In respect of question No. 6 I would like to make a slight correction to the answer. There are some sales which are genuine. The percentage of genuine sale would not be higher than 3 per cent. to 4 per cent. Considering the fact that business was closed down in 2003, how he was doing genuine. Page number, question number Page number, question number Page numbers-344, 346 question numbers 11, 27 .....

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from them was given back to the billing party. were credited in bank account of WSL and further invested by WSL. It proves there was no bill directly. No cash was withdrawn and funds were used by WSL for own purpose. On perusal of the above, the applicant fails to understand that when cheque/RTGS were directly deposited by the parties into the bank account of WSL, then how the same can be discounted to pay back cash to the billing parties. 21. The crux of the argument of the assessee is that sin .....

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ment 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 Dev .....

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ovide your PAN and also brief about your sources of income. Ans. Yes I am assessed to tax my PAN N-ACZPS9915M. My source of income is salary drawn from M/s. Pushpa Prakashan Ltd., 302 Narayanpeth, Pune 411030 and also royalty in lieu of books written by me. My annual income including salary and royalty income is around ₹ 4,22,000. In addition to that I am director of M/s. Washington Software Ltd., 47/2B Govinda Chambers, Karve Road, Pune- 411004. I do not get any salary from this company i .....

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Sonawani. The shareholding patten of M/s. Washington Software Ltd. is as under : Sanjay D. Sonawani 3,55,000 shares Mahesh Kandu 10 shares Praful Mehta 10 shares 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 softwares such as Mechanical Design Software, Process Audit Softwares, My home and Business (Brand Name) software, etc. In the year 2003 there were some financial and legal problems ; on .....

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ttached. 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 .....

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velopment activity after financial year 2003-04. In that case please explain as to how the sales of this volume were made, by your company in the absence of any requisite set up for developing the software and making the sale. Ans. Yes I do agree that the profit and loss account and the balance-sheet of the company from financial year 2003-04 to financial year 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 .....

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ry 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 o .....

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lls. 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 confir .....

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is 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 your company for various financial years, it seems that you have debited software development related expenses. Please offer your comments in this regard. Ans. Yes, I agree that in the balance-sheet of WSL for various financial years there are debits related to software development expenses. I confirm these expenses are non-genuine (bogus expenses). As already state .....

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ncial Pvt. Ltd., Ashish Fashions Pvt. Ltd., Begani Dyeing Mills Pvt. Ltd., C.S. Components Pvt. Ltd., etc. Please offer your comments in this regard : Ans. I hereby confirm, that all these transactions pertaining to investment used to be taken care by Shri 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 WS .....

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ast Pvt. Ltd. 2. Himachal Futuristic Co. Ltd. 3. TVC Skyshop Co. Ltd. 4. Vishnu Chemicals Pvt. Ltd. 5. Montclair Systems Pvt. Ltd. 6. Global Telecom Ltd. 7. Mahaveer Corporation 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 Te .....

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itute of Management 39. Apeejay Institute of Fine Arts 40. Apeejay School of Marketing 41. Apeejay International School 42. Apeejay Education Society 43. Apeejay International School 44. Council for Educational and Professional 45. Rajeshwari Sangeet Academy I once again confirm that only sales bill has been raised in respect of these sales and no actual sale has taken place. Q.11 What is the total amount of commission M/s. Washington Software Ltd. has received from Mr. Parag Mehta during this p .....

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ot been recorded in M/s. Washing ton Software Ltd. regular books of account and therefore I on behalf of M/s. Washington Software Ltd. voluntarily disclose unaccounted income of ₹ 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 m .....

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orded 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. "I swear in the name of God that whatever I speak, I will speak only truth and nothing but the truth". Sd. 12/4/2011 Sd. 12/4/2011 oath administered by oath taken by (Sonia Kumar) (Sanjay D. Sonawani) DDIT (Inv)-Unit VII(4), Mumbai Q 1. Please identify yourself ? Where are you currently located ? Ans. I .....

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onsequences of giving false statement on oath has been explained to me. Q 3. I request you to go through your own statement recorded at Pune on March 16, 2011 specially question No. 5 to question No. 11. From the answers, it appears, clear to me that there was no physical activity in M/s. Washington Softwares Ltd. after financial year 2003- 04. M/s. WSL has been virtually defunct. Despite this you have issued bogus bills for non-genuine transactions to several companies/parties as you have enume .....

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various softwares as stated in my answer to Q. No. 5 to Q. No. 11 in my statement recorded at Pune on March 16, 2011. I would further like to state that the answer to Q. No.7 in my statement recorded at Pune on March 16, 2011 was based on a misunderstanding and misinformation. In fact Mr. Parag Mehta did not approach me as stated in my answer. It was Mr. Rohidas Kumbharkar director of the company, who was approached, by a financial journalist Mr. Anil Roy who approached me with this proposal of .....

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ad 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 .....

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ke to state that it is true that the company has earned commission in cash from bogus billing of ₹ 32 lakhs from various parties. We have not received anything from Mr. Parag Mehta. Because of some internal dispute with Mr. Roy and the other directors I was misinformed that Mr. Parag Mehta was involved. In fact Mr. Parag Mehta was not involved in any of the bogus billing transactions of the company. Since he was not involved the question of the duping us does not arise. Q4. Do you want to .....

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esident of L/5, Mantri Park, Kothrud, Pune recorded under section 131 of the Income-tax Act, 1961, on, oath, May 12, 2011 at the office the Deputy Director of Income- tax (Inv) Room No. 234, Scindia House, Balklard Pier, Mumbai-400 038. "I swear in the name of God that whatever I speak, I will speak only truth and nothing but the truth" Sd. Sd. Oath administered by Oath taken by Sonia Kumar Sanjay D. Sonawani DDIT (Inv.) unit VI(4) Mumbai. Q.1. Please justify yourself ? Ans I am Sanjay .....

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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 .....

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some times 3 bills in a month and sometimes no bills for 3 to 4 months. Q. 7. Why did you say in the statement recorded in Pune or March 16, 2011 as follows : "As replied by you in the proceeding question. Please explain the actual modus operandi in respect of providing such accommodation entries to these corporate entities. Ans. My company was in deep financial crisis in year 2003 due to legal and other personal problems. During that period Shri Parag Mehta who is a chartered accountant ha .....

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accordingly he used to transfer with this. Mr. Parag Mehta used to send me the soft copies/hard copies of such bills which I after signing used to send to Mr. Parag Mehta. I would like, to confirm that I do 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 was kept in p .....

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or interested parties to you ? Ans. As stated earlier up to 2007, Mr. Rohidas Kumbarkar were all the parties and to the best of my knowledge. Mr. Rohidas Kumbarkar was, responsible for getting the parties. After 2007 only one party was there, i.e., Apeejay Group who was handled by me. Q 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 employ .....

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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. Q15. Where did they come and meet you ? Ans. We use to meet every d .....

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listed because we had issued bonus shares and preferential shares and these shares were listed on Pune Stock Exchange but were not listed on Mumbai Stock Exchange. Q. 18. What were the nature of financial crisis that your company were going through ? Ans. The financial crisis faced by the company was due to the fact that most of its capital and reserve were either locked up in software development expenses or long-term investments. We had developed various engineering education, finance and pers .....

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irector of Income-tax (Inv), Pune. On March 16, 2011 that Parag V. Mehta has master minded the entire projects, and that you simply signed on cheque books. Please state the truth. Also I see from mobile call data records that you have been constantly in touch with Shri Mehta on phone almost every day. Why so ? Please tell me. What did you discuss with him so frequently ? Ans. I again state that Mr. Parag Mehta has not master minded the entire project. He was not involved in any of the billing tr .....

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d 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, .....

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oks of account or documents) may not be invoked in your case ? Ans. In view of the fact that I have agreed to pay the tax on the income disclosed. You are requested to take a lenient view of the matter. Q 25 Why not section 278B (offences by companies) be invoked as you and other director are jointly and severally responsible for the offences of defrauding the Revenue by giving accommodation entries ? Ans. In view of the fact that I have agreed to pay the tax on the income disclosed. You are req .....

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eques with various parties in Zaveri Bazar and the cash received from them were given back to the billing party. Q. 28 Please tell met 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 Enter prises at Kalbadevi (contact person was Mukesh Jain mobile No. 9820263331. Q. 29. As you do not even have the proper address of the cheque discounting parties, why should I not conclude that you are n .....

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30, 2011 (APB 347-349) "Statement recorded under oath under section 131 of the Income- tax Act Statement of Shri. Sanjay D. Sonawani, son of Shri Devidas Sonawani, aged 47 years, occupation businessman, resident of L-5, Mantri Park, Kothrud Pune, recorded 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 ans .....

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ined 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. Pushpa Prakashan Ltd., 302, Narayanpeth, Pune and also royalty in lieu of books written by me. Q. 4 Do you know the concern-Apeejay Edu .....

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statement dated March 16, 2011. Q. 5 Do you still confirm that Washington Software Ltd. did not provide any services to outside parties from financial year 2003-04 onwards ? Ans. Yes, I still maintain that Washington Software Ltd. did not provide any services to the outside parties starting from financial year 2003-04 onwards apart from the issue of certain bills to them. Q. 6 If no services have been provided by you as claimed by you in your answer to question No. 5, then how come huge amounts .....

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parties as could be seen from the bank accounts of Washington Software Limited. I had no previous idea of this as I was completely under the influence of Shri. Parag Mehta. Accordingly, it must be Shri. Parag Mehta who must have issued cheques from Washington Software Ltd. to the concerns operated/influenced by him. I was told by Shri. Parag Mehta that the cash was withdrawn from the bank accounts of these concerns such as M/s. Stalk Securities P. Ltd. (company operated by Shri. Parag Mehta hims .....

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de 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 sh .....

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is third statement, he maintained his second statement. In his fourth statement, Sh. Sanjay D. Sonawani stated that as stated in his first deposition, Sh. Parag Mehta used to handle all the transactions with outside parties. In this statement, Sh. Sanjay D. Sonawani resiled from his retraction in his second and third statements and again put the blame of providing accommodation entries on Sh. Parag Mehta, as he had stated in his first statement. 23. Then, in his first statement, Sh. Sanjay D. So .....

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. The above undisputed discrepancies in the four statements of Sh. Sanjay D. Sonawani have been highlighted by the assessee in the chart filed. But these discrepancies apart, it is also seen that in his first statement, Sh. Sanjay D. Sonawani stated that it was Sh. Parag Mehta, who asked him to open a current account with ICICI Bank at Mumbai. In his second statement, however, he stated that the relevant accounts were opened by them (the company). 26. Then, in his first statement, Sh. Sanjay D. .....

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at it was not Sh. Parag Mehta, who approached him for the purpose, but it was Sh. Anil Roy, a financial journalist, who approached not him, i.e., the deponent, but Sh. Rohidas Kumbharkar, director, with the proposal of providing accommodation entries and that Sh. Parag Mehta, chartered accountant, a friend, let 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 .....

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anjay 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 depositio .....

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to this. It cannot be that a certain portion of a statement, which suits the convenience of a particular party, is accepted, whereas those which do not fit in, are rejected. Further, it is but common sense that the testimony of a shifty witness is not the least creditworthy. In CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal), it has been held that a shifty person as a witness is not trust-worthy ; that little value can be attached to the testimony of such a witness ; and that a m .....

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ble conclusion that he was not a truthful man as a witness at any stage and it is impossible to decide as to on which occasion he was truthful. His testimony, therefore, is not at all worthy of credence and acceptance, but his evidence has erroneously been accepted by the learned Commissioner of Income-tax (Appeals), much to the prejudice of the assessee, particularly when he alleges, in response to question No. 23 of his statement dated May 12, 2011 (see page 103 supra) a threat at the hands of .....

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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 tha .....

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ani, observing that such plea was being summarily rejected, as it was the fault of the representative of the assessee-society to not avail of the opportunity provided to them for cross-examination. 35. In this regard, the assessee has stated as follows : "Cross-examination of Shri Sanjay D. Sonawani was not allowed. 1. The assessee has specifically asked for cross-examination vide letter dated February 28, 2013 at page 790 of the paper book and has also deposited sum of Rs. Fifteen Thousand .....

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nt ADITs at Pune or Mumbai. In such situation, the Assessing Officer at Jalandhar being the adjudicating authority cannot deny the right of the assessee to cross-examine Shri Sanjay D. Sonawani before the adjudicating authority. 4. Order 16, rule 19 of the Code of Civil Procedure, 1908 provides that if there is air connectivity between two city then witness can be called even if the distance is more than 500 km. It does not require 'direct' air connectivity. It only requires for air conn .....

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d. v. Surindra Engineering and Trading dated July 10, 2002 (copy enclosed). It is held in the said judgment that Chennai and Khanna has air link because the Saniwal airport is 30 kms away from Khanna. It clearly proves that it is not the requirement of law that there should be airport in every town and city but what is required that it caters to that area. 6. Moreover the Order 16, rule 19 is applicable to the examination of witness and not to the requirement of cross-examination. Whereas the wi .....

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allowance. 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 Commission .....

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D. Sonawani : Sl. No. Particulars Pages of PB 1. 13.03.2014 686 2. 19.03.2014 687 and 725 3. 14.03.2014 794 4. 28.02.2013 790 38. Before the learned Commissioner of Income-tax (Appeals), vide submissions dated August 21, 2014 (APB 691 to 705, relevant portion at APB 697), the assessee submitted as follows : "B. Further, statement recorded ex-parte cannot be relied upon in the absence of cross-examination It is submitted that the statements of Sh. Sanjay D. Sonawani, was recorded by the Dep .....

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rial intended to be used against the assessee must have confronted to the assessee. (i) Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) (pages 42-50). (ii) Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 (SC). (iii) State of Punjab v. Bhagat Ram, AIR 1974 SC 2335. (iv) Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498 (SC). (v) CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal). (vi) Abdul Majeed (P. S.) v. Agrl. ITO and STO [1994] 209 ITR 821, 823 (Ker). ( .....

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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 .....

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detriment of the assessee. Even if the strict rules of evidence may not apply to assessment proceedings, the basic principles of natural justice would apply to the facts of the case." 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 opportu .....

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10) : 'As a matter of fact, the right to cross-examine a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination in chief. It is the necessary requirement of the process of taking evidence that the examination in chief is followed by cross .....

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e before the Assessing Officer, the assessee had deposited a sum of ₹ 15,000, towards travelling expenses of Sh. Sanjay D. Sonawani. A similar request was made by the assessee before the learned Commissioner of Income-tax (Appeals) also, which request was summarily rejected 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 .....

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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, who has the territorial .....

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the Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit, in respect of, inter alia, enforcing the attendance of any person and examining him on oath. Section 131(1)(b) (relevant portion) of the Act reads as follows : "131(1). The Assessing Officer . . . shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit in respect of the following matters, na .....

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ctions as the Central Board of Direct Taxes may issue for the exercise of the said powers. 44. Section 124(1) of the Income-tax Act provides, amongst other things, that where by virtue of any direction or order issued under section 120(1), the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have the jurisdiction in respect of any person carrying on a business or profession, if the place of such business or profession is situate within t .....

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ate 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 sugge .....

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issue summonses to persons whose attendance is required, either to give evidence, or to produce documents, or other material objects producible as evidence. For ready reference, section 30 of the Code of Civil Procedure, is reproduced hereunder : "30. Power to order discovery and the like.-Subject to such conditions and limitations as may be prescribed, the court may, at any time, either of its own motion or on the application of any party,- (a) make such orders as may be necessary or reaso .....

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Assessing Officer who has the power to enforce the attendance of witnesses in matters pending before him, in a manner similar to the powers vested in a court under the Code of Civil Procedure, when trying a suit. 48. The above would make it abundantly clear that the assessee is correct in contending that since it was the Assessing Officer at Jalandhar who was the adjudicating Assessing Officer qua the assessee, it was only the Assessing Officer at Jalandhar, before whom, the cross-examination o .....

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lea to render conducting of the cross-examination unworkable, whereas "the Assessing Officer perfectly made arrangement for his cross-examination as per the provisions of law" and that "it is the fault of the representatives of the assessee-society to not avail of the opportunity provided to them for cross-examination", is entirely unsustainable in law, as discussed. Firstly, the arrangement, as made by the Assessing Officer, was not as per the provisions of law. Then, the al .....

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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 .....

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e ordered to attend in person." 51. Thus, as per the proviso to Order XVI, rule 19, Code of Civil Procedure, if there is air connectivity between the place of residence of the witness and the locus of the court, then a witness can be called, even if the distance between such two places is more than five hundred kilometers. This provision of the law is, obviously, to facilitate the attendance of witnesses before the court even where the witness is located at a place far away from the court. .....

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; 52. Moreover, non-existence of an airport at Jalandhar was not detrimental to the claim of the assessee for cross-examining Sh. Sanjay D. Sonawani at Jalandhar. The connecting airport is situated at Amritsar. In Surana Industries Ltd. v. Surindra Engineering and Trading (supra), in similar circumstances, it has been held that Chennai and Khanna have an air-link ; and that the Sahnewal Airport being 30 kilometers away from Khanna, there is provision of transportation by way of air. Obviously, t .....

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5, that the provisions of Order XVI rule 19 of the Code 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 th .....

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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) is incorrect in holding the assessee's request for the cross-examination at Jalandhar to be merely a ploy to actually avoid the cross-examination. The learned Commissioner of Income-tax (Appeals), in holding so, remained oblivious of the applicable .....

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ed by strict rules of evidence, and, therefore, it might be said (regarding the facts of that case) that even without calling the manager of the bank in evidence to prove the letter dated February 18, 1955, it could be taken into account as evidence ; that however, before the Income-tax authorities could rely on it, they were bound to produce it before the assessee, so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of t .....

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man Timber Industries v. CCE, vide order (copy placed on record) dated September 2, 2015, passed in Civil Appeal No. 4228 of 2006 [2016] 38 GSTR 117 (SC), the hon'ble Supreme Court held, inter alia, that (page 120) : "According to us not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of .....

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ically 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 .....

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ntained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross- examination. Therefore, it was not for the adjudicating authority to pre-suppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above." 58. The learned Commissioner of Income-tax (Appeals) has als .....

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awani at Jalandhar was not happily worded, so to say, as stated by the learned Commissioner of Income-tax (Appeals), which has not been denied. However, the fact remains that as discussed hereinabove, the presence of Sh. Sanjay D. Sonawani for cross-examination, in accordance with law, was warranted only at Jalandhar before the adjudicating Assessing Officer, i.e., the Assessing Officer at Jalandhar and not before the ADIT(s) at Pune, who had recorded the statements of Sh. Sanjay D. Sonawani, si .....

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e-society failed to produce the original CD of the software, or the hard-disc of the computer where it was installed, though it was specifically asked for by the Assessing Officer ; that no evidence was ever produced with regard to the 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 ab .....

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irely 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 itself ; and that when asked as to whether the original CD of the softw .....

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been purchased from M/s. Washington Software Ltd., and that this software might have been installed at the head office of the assessee. The assessee has stated that Sh. Amitava Misra, employee of the assessee-society, head for implementation of the hardware, software, networking, internet bandwidth and some amount of website related implementation in the institutions of the assessee-society, vide his statement (APB 412A to 412D), dated March 29, 2011, recorded under sections 132(4)/133A of the A .....

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h. I have further been made aware of the fact that any false or untrue statement given by hereunder shall make me liable to prosecution under the Indian Penal Code and under the Income-tax Act, 1961. Sd. 29/03/2011 Sd. 29/03/2011 Oath taken by H. S. Dahiya Income-tax Officer (Inv.) Unit-VI(4), Room No. 290 Jhandewalan Extension, New Delhi Oath Administered by Q. 1 Please identify yourself. Ans. I, Anita Paul, aged 52 years wife of Sh. Sumeet Paul r/o Cii/ 602 Belvedere Apartments, Charmwood Vill .....

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on ? 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 .....

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twares ? Ans. No. Q.12 Who gives the financial approval for purchase of softwares from M/s. Washington Software Ltd. Ans. No, I have no idea. Q.13 Who is the person responsible for receiving these softwares in your school and please produce a copy of the delivery challan from M/s. Washington Software Ltd. ? Ans. I do not have the delivery challans and this software may have been installed at H. O. 14, Commercial Complex, Masjid Moth, GK-II, New Delhi. Q.14. Did you send any requisition for insta .....

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s were ever installed in your school or not ? Ans. No, they were never installed in our school. Q.17 You have made the payments of ₹ 20 lakhs per software from April 1, 2003 to March 25, 2008, which are not installed at your school till date. Have you ever asked the manager why these have not installed at your school ? Ans. In 2003, I was not working in this school. In 2006, I was not the signing authority and I have signed only two vouchers dated September 16, and March 26, 2008. I have n .....

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ated 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 .....

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.23. Is there any admission software or scholar software installed in the school ? Ans. No, no such type of softwares are installed at my school independently which I have again checked/confirmed up with I.T. professional named above. Q.24. A person named Amitabh Mishra, I.T. personnel or his team who is working at your head office has ever installed any software at your school ? Ans. He has visited the school for installing the Symantec antivirus software and monitoring the functioning of IT. D .....

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at the software may have been installed at the Head Office, 14 Commercial Complex, Masjid Moth, GK-II, Saket, New Delhi. Replying to Q. Nos. 16, 22 and 23, as to whether the software was ever installed in her school or not, she stated that the softwares were never installed in their school. 63. The statement of Sh. Amitava Misra is reproduced hereunder : "Statement of Sh. Amitava Misra son of Sh. P. K. Misra recorded on oath/solemn affirmation on March 29, 2011 at 4.38 p.m. during the cours .....

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e Q. 1 I am Amitava Mishra s/o Sh. P. K. Mishra, r/o J-2/63,Kalkaji, DDA New Delhi. I am shown my PAN 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 .....

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h 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 these were upgraded and when. Ans. The softwares were supplied over a period of 5-6 years. Basic requirement/framework was not prepared by myself or by my team. We were involved with the installation execution. We were given the s .....

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ould mentioned it or give us some of the CDs. Other than that I do not here any knowledge of my accounts of the softwares. Since I never involved in the purchase of the software other than the information from Dr. Satya Paul I do not have any evidence that the software is supplied by M/s. Washington Softwares Ltd. Q. 7. Please explain the exact particulars of software purportedly supplied by M/s. Washington Software Ltd. ? Ans. There were software related to admission (School) Talent Scholarship .....

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are : Delhi NCR Schools (All Schools) Fee Software : Apeejay Saket Other than these I am not aware of software from M/s. Washing ton Software Ltd. If there are any from the purchased department. Q. 9. Earlier you have stated that the erstwhile chairman late Sh. Satya Paul had given you the CDs of the softwares stating that these were from M/s. Washington Software Ltd. Please state when did he mentioned the above facts first time, how many time and when did he give you such CDs stating the same t .....

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tware 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 .....

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nce that the said Softwares were developed or conceptualised by any other entity other than your Apeejay Education Society. Ans. No. Q. 14. Other than your statement regarding M/s. Washington Softwares Ltd. from you discussed no evidence either in the form of purchased order, or in the form of purchase order, or in the name of the above company in any of the software, nor any documentary evidence regarding supply of the software by the above company or even existence of such original CDs could b .....

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information regarding the bills of the software or its purchase, as already mentioned in the earlier answers. Q. 15. Do you means to say that the upgraded softwares installed were supplied by M/s. Washington Software Ltd. ? Ans. Most of the upgradation, master entries has been done at our end and not by M/s. Washington Software Ltd. Q. 16. I have asked you that the upgraded softwares were supplied by M/s. Washington Software Ltd. or not ? Ans. No, the upgraded software were not supplied by the .....

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as to what kind of material/services were procured by the assessee-society from M/s. Washington Software 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 tim .....

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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 few softwares, which were only installed in Apeejay School, Delhi. Answering Q. No. 9, he confirmed that Sh. Satya Paul, erstwhile chairman of the assessee-society, had given him CDs of the softwares on .....

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e the original software CD of M/s. Washington Software Ltd. In Q. No. 13, it was stated that the survey team had been shown the softwares purportedly procured from M/s. Washington Software Ltd., but therein, the name of M/s. Washington Software Ltd. did not appear, whereas the name of Apeejay Education Society appeared. Sh. Amitava Misra was asked if he could show any evidence that the software had been developed or constructed by any entity other than Apeejay Education Society. To this, Mr. Mis .....

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ed in the system impounded by the survey team on that day during the survey proceedings. 65. The learned Commissioner of Income-tax (Appeals), while making his observation in this regard, has completely disregarded the above portions of the statements of Ms. Anita Paul, Principal, Apeejay School, J-Block, Gurudwara Road, Saket, New Delhi and Sh. Amitava Misra, head of implementation of hardware, software, networking, internet bandwidth and some amount of website related implementation in the ins .....

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rite 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 (Ap .....

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nse to Q. No. 17, he categorically deposed that the software had been installed in the server/system impounded by the survey team during the survey proceedings. 67. It is, therefore, totally incorrect on the part of the learned Commissioner of Income-tax (Appeals) to have observed that the assessee-society failed to produce the hard-disc of the computer where the software had been installed, though it was specifically asked for by the Assessing Officer during the assessment proceedings pertainin .....

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ot returned, as has not been rebutted, there remained no possibility of the same being produced before the Assessing Officer in the assessment proceedings. Too, when Sh. Amitava Misra had, in no uncertain terms, stated in response to Q. No. 12, that the softwares installed in the system of the office could be shown to the survey team, these softwares were, remarkably, not demanded to be shown. 68. The aforesaid relevant and important and inconvenient (to the Department) part of the statement of .....

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utilised to the detriment of the assessee, unsuitable portions of the statements of Ms. Anita Paul and Sh. Amitava Misra were omitted from consideration by the Assessing Officer This was entirely an unsustainable action of the Assessing Officer, either as investigator, or as adjudicator. 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 .....

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o 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 the stand that the softwar .....

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where it had been installed, the actual purchase thereof. In this regard, the assessee has stated that the "some printouts" were not merely some printouts, as dubbed by the learned Commissioner of Income-tax (Appeals). Rather, they were sample reports (APB 106 233) generated from the software, which reports were based on various modules of the softwares and there were thousands of papers of these reports from 2004 to 2011, which were produced before the Assessing Officer. It has been .....

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view of the factum of impounding of the central server of the assessee during the survey proceedings at the head office of the assessee. Noticeably, the Assessing Officer, at page 35 of the assessment order, has observed that during the survey, the assessee could not show any ERP software developed by M/s. Washington Software Ltd., as installed in the computer system. However, there is nothing on record to counter the aforesaid specific and precise testimony of Sh. Amitava Misra and nothing has .....

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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 .....

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Block Market, Greater Kailash Part II, New Delhi- 110048, India) undertook the verification of 'ERP Software for school" at the Apeejay Education Society's Central Office (located at Apeejay Satya House, 14 Commercial Complex, Masjid Moth, Greater Kailash II, New Delhi-110048) on September 10, 2012. Trident's verification team comprised Akbar Jafri, Software Test Engineer and Praveeen Sharma, Technical Consultant. During the verification visit, the Trident's team went throug .....

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onalities: Admission module Student admission Fee bill generation Providing facilities Generating receipts Receipts posting Discontinuing students Issuing TC Multiple reports Student development module Classes to be held Teachers assigned Subjects available and syllabus Optional subjects assignments (groups/streams) Recording roll No. and house details Attendance details Records of assessments Results and promotions School time-table Multiple reports Payroll module Keeping employees data Salary .....

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s 3. The examination of the software's user interface, screen messages and source code indicate that the software has been developed by "Washington Softwares Ltd.". 4. The software modules installed at the abovementioned central office of 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 h .....

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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-tax (Appeals) (page 74, 1st para of this order) tha .....

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nce and also print outs of the reports generated out of the Software for verification. Even we have provided a certificate from an independent agency as desired by you to certify that the software of WSL is installed. We presume that this is more than enough to prove that the software in question is duly installed in server of the central office in Delhi and purchase is genuine and why WSL is denying is best known to it and cannot be taken as evidence against us being devoid of any documentary e .....

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e learned Commissioner of Income-tax (Appeals) to hold that the statements of various key employees/persons employed by the assessee Group "unambiguously proved without any doubt that the entries reflected in the books of account are just accommodation entries and nothing else" and that the representative of the assessee-society never tried to prove the genuineness of the purchase of the software, and that the authorised representative of the assessee-society could not offer any satisf .....

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sioner 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 th .....

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. Deputy CIT vide order (authored by one of us, the Judicial Member) dated January 28, 2011 (copy placed on record) passed in ITA Nos. 1141, 1142 and 1773/Delhi/2008, for the assessment years 2001-02 and 2004-05, has held that addition made on suspicion or alleged statement, in view of direct evidence placed on record to the contrary, cannot be sustained. 85. Then, it has also been contended on behalf of the assessee that the money paid by the assessee Group to M/s. Washington Software Ltd., has .....

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opy 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 the said account from the assessee, the cheques were immediately issued to following parties : Date Cheque No. Narration Amount 11.05.2009 288640 Netania Shares and Securities P. Ltd. 55,00,000 12.05.2009 288641 Netania Shares and Se .....

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0,000 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 60025 Swati Spentose P. Ltd. 40,00,000 30.03.2010 60028 Swati Spentose P. Ltd. 35,00,000 From the description of the name of the parties itself like Netania Shares and Securities P. Ltd., Omega Life .....

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to certain concerns, is correct, the assessee being one of the major beneficiary of these bogus transactions." 87. Thus, the assessee is correct in contending that the money having been paid by M/s. Washington Software Ltd. to different parties, as tabulated in the various assessment orders, including that extracted above, obviously, the money cannot be said to have been ploughed back to the assessee. 88. Further, Sh. Sanjay D. Sonawani, in his statement, deposed that the cheques were disco .....

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rongly construed against the assessee by the learned Commissioner of Income-tax (Appeals) and the evidence brought on record by the assessee having erroneously been ignored by him, it is seen from the record that registration was granted to the assessee on the very same facts by the learned Commissioner of Income-tax on March 25, 2013. A copy of his order has been appended at APB 569 to 603. The Tribunal, in its order dated January 28, 2011, held that the registration was wrongly withdrawn/cance .....

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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. 9 .....

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ued under the registration. 92. However, it cannot be denied that while dealing with the exemption under section 11 of the Act, the Assessing Officer needs must go into the merits of the allowability or otherwise of the exemption claimed. In the case of M. Visvesvaraya Industrial Research and Development Centre v. CIT [2012] 26 taxmann.com 200 (Bom), on this issue, it has been held that compliance with section 12A does not entitle an assessee to the benefit of section 11, ipso facto ; that non-c .....

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h the provisions of section 12A 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. It would be apt to quote here the observations properly made by their Lordships : "21. Compliance with the provisions of section 12A is not the only requirement for the applicability of section 11. It is only one of the requirements. Section 12A merely provides that the provisions of sections 11 and 12 would not apply in .....

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on- compliance with section 12A bars an assessee from being granted the benefit of sections 11 and 12. The compliance with the provisions of section 12A only indicates that 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 est .....

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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 under section 11(1)(a) is in respect of the income derived from property held under trust wholly for charitable or religious purposes. Secondl .....

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consideration are reproduced hereinbelow : Apeejay Education Society New Jawahar Nagar, Bhagwan Mahavir Marg Jalandhar City Status : Society PAN : AAATA3534F Year ended : 31.03.2008 Assessment year : 2008-09 Ward : Range-III, Jalandhar Computation of income 1. Receipts : (Amount in Rs.) Revenue receipt 968,098,761.98 Capital receipt 62,344,558.00 1,030,443,319.98 2. Amt. incurred for educational purpose Revenue expenses 570,353,445.88 Capital expenses 322,483,011.70 Depreciation 111,325,090.55 1 .....

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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 Assessment year : 2010-11 Ward : Range-III, Jalandhar Computation of income 1. Receipts : (Amount in Rs.) Revenue receipt 1,262,014,0738.13 Capital receipt 314,486,456.00 1,576,500,534.13 2. Amt. incurred for educational purposes Revenue expenses 1,054,192,938.68 Capital expenses 197,019,771.24 Deprec .....

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,002,329.24 Net income Nil Tax due Nil Tax paid (TDS) 814,062.23 Refund due 814,062.23 Apeejay Education Society New Jawahar Nagar Bhagwan Mahavir Marg Jalandhar City Status : Society PAN : 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 apa .....

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se, as evident from the above, all the above-conditions of section 11 of the Act stand fully satisfied by the assessee cumulatively. Section 12 is not applicable to the facts of the case. Firstly, the income is derived from property held wholly for charitable purposes. Hence, the mandate as per "M. Visvesvaraya Industrial Research and Development Centre" (supra), as to whether the assessee has satisfied the conditions stipulated in section 11 stands complied, as all the three condition .....

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