TaxTMI 
TaxTMI 
2020 (8) TMI 93
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....f section 144A violated - Looking at the manner in which assessment proceedings were conducted, appellant perceived that the A.O. was proceeding with premeditated view prejudicial to her. She moved application before JCIT u/s. 144A. Ld. JCIT instead of giving directions to A.O., left the decision to A.O., defeating the purpose of section 144A. Appellant made further submissions and applications to JCIT on 26/12/2018. JCIT under the name direction evaded his responsibility under the law and transferred authority to make decisions to A.O. Provisions of section 144A stand violated rendering order bad in law. Detailed grounds attached. 3. Botched up investigation by ADIT and A.O. - Transactions between the appellant and Avron and Sarvottam took place in F.Y. 2010-11. Investigation by ADIT(lnv.) was done in F. Y. 2017-18. Further investigation was done by A.O. in the F.Y. 2018-19. Thus there was a gap of 7 years which is considerably long period during which many things can change. Cognizance of this possibility had to be taken into account while doing investigation. It seems that neither ADIT (Inv.) nor A.O. took these possibilities into consideration and drew inference prejudicial....
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.... disposed of objections filed by the assessee on 12/11/2018 and rejected the contentions of the assessee. 4. Thereafter, the case has been taken-up for scrutiny and notice u/s 142(1) was issued and called upon the assessee to file necessary evidences, including details of income earned from its proprietary business and expenses incurred against said income. In response to notices, the assessee has filed various details, including payments made to M/s Avrons Consultancy Services Pvt. Ltd. and M/s Sarvottam Advisory Pvt.Ltd. along with details of bills issued by the parties. During the course of assessment proceedings, the Ld. AO after considering relevant submissions of the assessee and also taken note of various facts brought out by the department during investigation carried out in the case of M/s Altius Finserve Pvt.Ltd., has came to the conclusion that expenditure incurred under the head business counseling charges and paid to M/s Sarvottam Advisory Pvt.Ltd and M/s Avrons Consultancy Services Pvt.Ltd is non genuine expenditure, which is booked to reduce profit for the year. The Ld. AO has discussed the facts of the case and the modus operandi of the assessee in detail, in ligh....
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....ancy Services "Pvt Ltd. and M/s. Sarvottam Advisory Pvt. Ltd., business counseling fees for introducing Altius Fin serve Pvt. Ltd, and for ensuring receipt of brokerage from M/s. Altius Finserve Pvt. Ltd. was paid. The Investigation Wing finally concluded that the payments have been made to entities who are not in existence and are shell entities, to reduce the tax liabilities of During the assessment proceedings, the assessee filed details relating to payments made to Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. by Banks and other details like invoice received from the parties, TDS details etc. However, no details were provided to the A.O, as to what services have been provided by the entities to the assessee, documentary evidence in support of services rendered and any correspondence between these two entities and the assessee. Notice u/s. 133(6) were issued to Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. (both located at Mumbai) to verify the services rendered by them. However, these notices were unserved and returned by the postal authorities which proves that these companies are shell companies and accommodation transactions ha....
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....ters were filed on alleged letter heads of these two entities signed by some unknown person who does not seem to be authorised persons of the company, requesting that notice issued u/s. 133(6) could not be served because office was locked and it was requested to send notices again. During the course of assessment proceedings, the JCIT Range 21(1), Mumbai issued direction u/s. 144A to carry out further investigation by conducting field verification in all the known addresses of Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd., located at Mumbai and also attempt to gather information from Kolkata whose address is mentioned in the file especially in view of the data submitted by the assessee. Further, as the assessee has produced the affidavit dated 28/08/2018 signed by Mr. Dipan Patel, his statement should be recorded to verify the said affidavit as Mr. Dipan Patel was neither an M.D. nor Principal Officer of either of the entities to whom payments were made. The nexus of Shri Dipan Patel with the two concerns should be examined. Promoters and Managing Directors of Avron Consultancy Services Pvt. Ltd. & Sarvottam Advisory Pvt. Ltd. should also be located and exam....
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....ission or referral fees. He further stated that he was not carrying any evidence for the same and could provide later on e-mail or by post. He stated that Shri Arun Kedia is Director in Avron Consultancy Services Pvt. Ltd. and Shri Tapan Doshi is a Director in Sarvottam Advisory Pvt. Ltd. but he was not having any current contact details of the two companies. He was not aware of the residential addresses of the Directors of the two companies. Shri Dipan Patel was C.A. and had declared the address of 704, Sairath CHS Kesar Kunj Building, Telly Gully Cross Lanes, Andheri (E) as his residential address which was also the billing address of the two concerns. He further stated that both the companies received the payments as he had done the canvassing on behalf of both the companies. He also stated that he does not know the exact amount of loans arranged by Finwiz Consultants through him but in the case of DLF {through Altius Finserve Pvt. Ltd.), it was approximately Rs. 1000 Crores. On the existence of any agreement it was stated by Shri Dipan Patel that there was no formal agreement but several e-mails and other communication with both the parties are available which he promised to or....
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....sesee to M/s Altius Finserve Pvt.Ltd. and also, for doing necessary work in connection with services rendered to M/s Altius Finserve Pvt.Ltd. 6. The Ld.CIT(A) after considering relevant submissions of the assessee and also by relied upon various judicial precedents rejected legal arguments taken by the assessee challenging validity of reopening of assessment by observing that the Ld. AO had correctly arrived at reasons to believe that expenses of Rs. 2.33 cores were prima-facie not genuine after applying his mind with reference to records of the assessee and on examining the information of the ADIT, which was based on survey/spot verification of M/s Altius Finserve Pvt.Ltd. and statement of Shri Vishwas Joshi. Therefore, he opined that the reopening of assessment in the given facts of present case is on sound footing and there is no merit in the arguments of the assessee that the Ld. AO has failed to apply his mind and mechanically reopened the assessment on the basis of information received from the ADIT. The relevant observations of the Ld.CIT(A) are as under:- 29. I have carefully gone through the findings given in the assessment order and the statement of facts and grounds o....
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..... Now, it is to be adjudicated as to whether the AO has complied with basic jurisdictional requirement under the law before issuing notice u/s 148 to the appellant. In this regard, the appellant has stated that the AO was not having any information/ tangible material before him warranting issuance of the notice. The AO had received a report from the ADIT (Inv.), Unit 3(1) on 26/02/2018 and the notice u/s 148 given by the AO on 31/03/2018 was only on the basis of that report. The report was mainly and almost wholly about M/s. Altius Finserve Pvt. Ltd. and contained only few lines about the appellant. A copy of report of the ADIT was not made available to the appellant. 30.1 I have examined the reasons for re-opening. The return of the appellant was processed u/s 143(1} and no scrutiny assessment u/s 143(3) had taken place earlier and hence it is not a case of change of opinion. Subsequently, the case was re-opened when the AO received information from ADIT(lnv.), Unit-3(1), Mumbai vide letter dated 26/02/2018. The AO has recorded his satisfaction and how he has formed belief on information from the ADIT. The reasons to believe has been reproduced at page 2 of the assessment order ....
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....me from M/s. Altius Finserve Pvt. Ltd. amounting to Rs. 2.33 Crores is not genuine as apart from the income from M/s. Altius Finserve Pvt. Ltd., no other income is shown by the assessee during the year under consideration. 6. In view of above narrated facts, I have reasons to believe that income chargeable to tax for A.Y. 2011-12 being Rs. 2.33 Crores has escaped from assessment. Since the income has escaped from assessment, notice u/s. 148 of the I. T. Act, 1961 is required to be issued for the above year and the time limit to issue such notice is 31/03/2018." 30.4 Thus, perusal of reasons for reopening clearly reveal that the A.O. has applied his mind on the information received from the ADIT and has incorporated his own view in the last two paragraphs of the reasons for reopening. The AO has referred to the accounts of the assessee and noted that apart from income from Altius Finserve Pvt. Ltd., no other income is shown by the assessee during the year under consideration. So this is the observation of the AO and not that of the ADIT. 30.5 So far the information received from the ADIT is concerned, the said information was very much specific, tangible and concrete based o....
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....i. In view of above, the re-opening is held as legally valid and the ground challenging its validity is dismissed. 7. Insofar as, merits is concerned, the Ld.CIT(A) observed that the facts gathered during the course of assessment proceedings coupled with information collected during survey proceedings u/s 133A in the case of M/s Altius Finserve Pvt.Ltd. and statement of assessee and other persons clearly indicates that the so called business counseling charges has been paid to two non existing entities to avoid or reduce tax liabilities. The Ld.CIT(A), further noted that although, the assessee claims to justify payment of business counseling charges to M/s Avrons Consultancy Services Pvt.Ltd. and M/s.Sarvottam Advisory Pvt.Ltd in light of affidavit of shri Dipen patel but, on perusal of facts brought out by the Ld. AO, it is clearly evident that affidavit filed by the assesee is only an afterthought and to circumvent findings recorded by the Ld. AO, in light of evidences collected during the course of survey proceedings. He, further noted that the enquiries and spot verification done by the investigation wing reveals that M/s Avrons Consultancy Services Pvt.Ltd and M/s Sarvottam A....
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....cture, the services rendered by them are not proved at all. 31.2 The role of Dipan Patel in the entire transactions is obvious. Shri Dipan Patel is a C.A. and had declared the address of 704, Sairath CHS Kesar Kunj Building, Telly Gully Cross Lanes, Andheri (E) as his residential address which was also the billing address of the two concerns. His wife Smt. Kavita Patel has been claimed to be one of the directors in the two companies who ceased to be director w.e.f. 16.12.2012, As per assessee, Shri Dipen Patel also ceased to be principal director of the companies at the same time. Thus , Shri Dipen Patel allowed his residential address to be used for the address of the two companies. Such type of arrangement clearly prove that the two companies were controlled and operated by Dipan Patel for providing accommodation entries as the field enquiry revealed that the two companies never operated from their stated addressees i.e. the same as residential address of Dipan Patel or the residential flat which was frequently visited by Shri Dipen Patel. 32. The appellant has enclosed a letter dated 20.11.2011 wherein it was mentioned that the assessee approached the two parties and obtaine....
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....f Mr. Vishwas Joshi which the assessee had requested the AO to do. Affidavit of Mr. Vishwas Joshi dated 17,12.2018 has been filed. 33.1 On the aforesaid claim of the appellant, it is found that Mrs. Jaee Vishwas Joshi in her statement u/s 131 dated 26.11.2018 made an effort to answer various questions. She claimed that Mr. Dipan Patel represented M/s. Sarvottam Advisory Pvt. Ltd and Avron's Consultancy Services Pvt. Ltd. and introduced Finwiz Consultants to Altius Finserve Pvt. Ltd. She also stated that they have rendered services of arranging loan facilities for corporates like DLF, Era Infra Engg. Ltd. ,Amtek Auto Ltd. But when she was asked to provide names of Directors of the two companies, she could not answer and stated that the Principal Officer of M/s. Finwiz Consultants Mr. Vishwas Joshi may be able to answer this question. When a further question as to whether any agreement was there for receiving or paying brokerage /commission or consultancy, she again could not answer anything and again stated that Principal Officer of M/s. Finwiz Consultants Mr. Vishwas Joshi may be able to answer this question. 33.2 On perusal of statement of appellant, it is apparent that sh....
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....g the assessment order. Further, there was no basis or evidence filed by him to prove that he was authorized to transact business on behalf of the two companies in AY 2010-11 and AY 2011-12. Further, it is found strange that in his affidavit dated 27/07/2018, how Shri Dipan Patel remembers and confirms the receipts by M/s, Sarvottam Advisory Pvt. Ltd and Avron's Consulatancy Services Pvt. Ltd. along with the cheque date and amount like cheque on 30th June 2010 Rs. 99,27,000/- plus TDS Credit of Rs. 11,03,0007- in case of M/s, Sarvottam Advisory Pvt, Ltd and cheque on 8Th July 2010 Rs, 132.37.654/- plus TDS credit of Rs. 14,70,8507- in case of Avron's Consultancy Services Pvt. Ltd. when he was not having any contact with the aforesaid two companies. It was his onus to tell about the current whereabouts of the two companies or their directors and such affidavits has no meaning as the two companies or their directors could not be traced during several rounds of enquiries attempted by the AO. 35. The enquiries and spot verification done by the Investigation wing reveals that f only a negligible profit of Rs. 2.30 Lakhs was shown by Avron Consultancy Pvt. Ltd. < during the rel....
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....) at their address 4A, Council House Estate, Kolkata -1. This notice has also been received back as unserved. 43. In view of aforesaid discussions, it is held that the appellant has booked bogus expenses of Rs. 2,33,35,000/- in the name of two bogus concerns namely M/s Avron's Consultancy Services Pvt. Ltd. and M/s Sarvottam Advisory Pvt. Ltd. who had no real existence and who did not render any service to the assessee. This was done by the assessee to reduce its taxable income and hence the disallowance of the expenses of Rs. 2,33,35,000/- made by the AO is confirmed. All the grounds on merits are dismissed. 8. The first issue that came up for our consideration from ground No.1 & 2 of assessee's appeal is validity of reopening of assessment. The Ld. AR for the assessee submitted that reopening of assessment is bad in law and liable to be quashed, because reasons recorded for reopening of assessment is invalid and completely contrary to facts, which is evident from the fact that in the assessment of M/s Altius Finserve Services Pvt.Ltd. payments to M/s Finwiz Consultants allowed as genuine and shri Vishwas Joshi in his statement have given details of transactions and not den....
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....y changes in facts, the Ld. AO has made a allegations that expenditure incurred in the name of above two companies is a bogus expenditure created to reduce profit of the year, ignoring fact that the assessee has filed complete details, including bills issued by the parties for having rendered services, payment against bills by cheque after deducting necessary TDS applicable as per law. The Ld. AO has also summarily rejected additional evidences filed by the assesee in form of affidavit of Shri Dipen Patel, where he has categorically admitted the fact of having rendered services to the assessee and also, accounted receipt of amount from the assesee in the books of M/s Avrons Consultancy Services Pvt.Ltd. and M/s.Sarvottam Advisory Pvt.Ltd. The Ld. AO has also rejected affidavit filed by Shri Vishwas Joshi, the chief operating officer of the company, where he has admitted the fact that fees has been paid to those companies for rendering services in connection with loan proposals. The Ld. AO has rejected all evidences filed by the assessee only on the basis of report of investigation wing and for the simple reasons that the parties were not responded to various notices issued during t....
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....tities. Further, the assessment in this case was reopened beyond four years, but within six years from the end of the relevant assessment year. The original assessment has been completed u/s 143(1) of the Act. Further, when original assessment has been completed u/s 143(1) of the Act, then the assessment can be reopened within a period of six years from the end of the relevant assessment year, if escapement of income is within specified limit. In this case, there is no doubt with regard to escapement of income as per reasons recorded by the Ld. AO, which is beyond the prescribed limit provided under the Act. Once, original assessment was completed u/s 143(1) of the Act, then reopening of assessment can be made on the basis of reasons to believe that prima-facie there is escapement of income. This principle is supported by the decision of Hon'ble Supreme Court, in the case of ACIT vs Rajesh Jhaveri Stock Brokers Pvt.Ltd.(supra), where it was clearly held that reasons to believe does not mean that the reasons for reopening should have been factually ascertained by legal evidence or conclusion before the reopening of assessment. We, further noted that the Hon'ble Supreme court, in th....
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....fore, from the case laws cited by the assessee, what we understood is that the reopening of assessment should be on the basis of fresh tangible material which suggest escapement of income, but not on the basis of reasons recorded without any nexus between reasons and escapement of income. In this case, on perusal of reasons recorded by the Ld. AO, it is abundantly clear that the Ld. AO has formed reasonable belief of escapement of income on the basis of tangible material which is came to his possession subsequent to completion of assessment u/s 143(1) of the Act and on that basis, he come to the conclusion that there is an escapement of income within the meaning of section 147 of the I.T.Act, 1961. Therefore, we are of the considered view that reopening of assessment in this case is on valid grounds and hence, the grounds taken by the assessee is rejected. 13. As regards, the issue involved on merits, we find that although, the assessee claims to have incurred business counseling expenditure with certain evidences, including bills submitted by the service provides, payment through banking channels and deductions of TDS as per law, but, fact remains that in any arrangement, even i....