No.- I. T. A. Nos. 706-709 and 712-714/Asr/2014

A. D. Jain (Judicial Member) and T. S. Kapoor (Accountant Member)

Salil Kapoor, Advocate, Nirmal Mahajan, Chartered Accountant, Samit Lal Chandani, Advocate, and Brij Kishore Nandan for the appellant.
Umesh Takkyar, Departmental representative, for the respondent.

ORDER

The order of the Bench was delivered by

A. D. Jain (Judicial Member)- Partial Index

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 assessee's appeals for the assessment years 2008-09, 2010- 11 and 2011-12 in ITA Nos. 712 to 714(Asr)/2014, respectively, and the assessee's appeals for the assessment years 2007-08, 2008-09, 2010-11 and 2011-12 in ITA Nos. 706 to 709(Asr)/2014, respectively, in the cases of M/s. Apeejay Education Society and M/s. Rajeshwari Sangeet Academy, Jalandhar. The issues involved being common, they are being disposed of by this composite order. The arguments have been addressed with reference to ITA No. 713(Asr)/2014, i.e., the assessee's appeal for the assessment year 2010-11 in the case of M/s. Apeejay Education Society.

2. The following are the revised grounds of appeal raised by the assessee :
"1. That the assessment order passed is bad in law, without jurisdiction and barred by time limitation.
2. That the Commissioner of Income-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 11 of the Act by the Assessing officer.
3. That the Commissioner of Income-tax (Appeals) has erred in confirming the assessment order framed by the Assessing Officer, in gross violation of settled position of law that once registration under section 12A of the Act was granted to the assessee, it was thereafter not open to the Assessing Officer to make any enquiry regarding the exemption under section 11 of the Act.
4. That the Commissioner of Income-tax (Appeals) has erred in confirming the action 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 Commissioner of Income-tax (Appeals) has erred in law by upholding the contention of the ACIT, Circle III, Jalandhar in assessing the income as business income instead of assessing the same under sections 11 to 13 of the Income-tax Act, 1961.
7. Without prejudice and in the alternative, the Assessing Officer/ Commissioner of Income-tax (Appeals) has wrongly held that the whole income is taxable and not restricting the taxability to the amount which is allegedly covered under section 13(1)(c) of the 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/disallowance made are uncalled for.
11. That interest under sections 234A, 234B, 234C and 234D of the Income-tax Act, 1961 has been wrongly and illegally charged and has been wrongly worked out.
12. That the applicant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing."

3. As stated at the bar by the learned counsel for the assessee and not disputed by the learned Departmental representative and as also discerned from the record, ground Nos. 1 to 6 concern the main issue, ground Nos. 7 and 8 are with regard to the first without prejudice challenge and ground No. 9 is the second alternative argument. Ground No. 11 is consequential, whereas the ground Nos. 10 and 12 are general.

4. The sole issue raised by way of ground Nos. 1 to 6 is the assessee's challenge to the denial of exemption under section 11 of the Income-tax Act, 1961 (hereinafter, referred to also as "the Act") by invoking the provisions of section 13(1)(c) thereof and assessing the assessee's income as business income, instead of assessing the same under sections 11 to 13 of the Act.

5. The brief facts of the case are that the assessee-society, which is stated to be engaged in the activity of running of educational institutions, filed its return of income for the year under consideration on September 27, 2010, declaring therein nil income. The assessee-society is registered with the Registrar of Societies under the Societies Registration 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 Tribunal, Amritsar, vide order in ITA No. 228(Asr)/2013 dated May 8, 2014. The Tribunal order was confirmed by the hon'ble High Court vide judgment dated March 10, 2015.

5.1 The assessee-society is stated to be running many educational/ management institutions under its management and control, which include the following institutions :
i. Apeejay School, Jalandhar.
ii. Apeejay School, Noida.
iii. Apeejay School, Faridabad.
iv. Apeejay Institute of Management, Rama Mandi, Jalandhar.
v. Apeejay 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 companies, which did not actually transact any business, but were engaged in providing accommodation entries to needy persons/concerns and which helped these persons/ concerns to claim bogus expenses. Such companies included M/s. Washington Software Ltd., which is stated to have been run by one Sh. Sanjay D. Sonawani. The fact that M/s. Washington Software Ltd. was a bogus company was also stated to have been admitted by Sh. Parag V. Mehta in his statement recorded during the course of search and seizure 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 and he was also stated to have accepted the fact that he had provided accommodation entries to the Apeejay Group of cases through his company, M/s. Washington Software Ltd. The statement of Sh. Sanjay D. Sonawani S/o Sh. Devi Dass Sonawani, chairman and director of M/s. Washington Software Ltd., under section 131 of the Act, was stated to have been recorded by the Deputy Director of Income-tax (Inv.) Unit-I(I), Pune, on March 16, 2011, in which, he had particularly admitted to have provided accommodation entries to the Apeejay Group of cases, including the assessee-society. The relevant portion of the said statement of Shri Sanjay D. Sonawani has also been reproduced by the Assessing Officer in the assessment order.

5.2 During the course of post-search investigations in the case of Sh. Parag V. Mehta, the beneficiary parties were stated to have been identified and information was stated to have been passed on to various field officers by the Investigation Wing, Mumbai for taking further necessary action at their end. As a result of this information, survey operations were stated to have been conducted under section 133A of the Act by the Department at the premises of various institutions and head office of the Apeejay Group of Institutions on March 29, 2011, which included the assessee-society, i.e., Apeejay Educational Society. During the course of the survey operations at the abovementioned premises, the genuineness of purchase of software by the assessee group from M/s. Washington 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, Head of IT Department and Sh. Vijay Berlia (trustee), General Secretary and Authorised Signatory of the assessee-society was stated to be recorded. During the course of assessment proceedings, the copies of the statements of Ms. Anita Paul, Principal of Apeejay School, Saket, Shri Alok Saklani, Director, Deepankar Chakarborti Dean and IT Head and Sh. Nagendra Nautiyal, Accountant, ApeejaySchool of Management, Dwarka, Shri Amitava Misra, Head of IT Department and Sh. Vijay Berlia (trustee), General 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 assessment order.

5.3. During the course of assessment proceedings, the Assessing Officer examined the statements given by Sh. Sanjay D. Sonawani and other persons, as well as the various submissions filed by the assessee-society to the contrary and he came to the conclusion that no software was ever purchased by the assessee from M/s. Washington Software Ltd. The Assessing Officer came to such a conclusion, as on physical verification during the course of survey operations under section 133A of the Act, conducted at various premises of the assessee group, including its head office, the software alleged to have been purchased from Washington Software Ltd. was not found, whereas bogus bills from M/s. Washington Software Ltd. were found to have been entered in the books of account of different entities of the group. The Assessing Officer has further pointed out that persons of various entities of the assessee group had admitted that they received only bills for entering in the books of account and no software was ever installed, or received by them. The Assessing Officer has further mentioned that all the payments made to M/s. Washington Software Ltd., were personally approved by Sh. Vijay Berlia, General Secretary and Authorised Signatory of the assessee-society, he being a trustee and a specified person covered under the definition given under section 13(3) of the Act. The Assessing Officer has also observed that a perusal of the statement of Shri Vijay Berlia, as reproduced in para 6(vi) of the order, clearly shows that Shri Vijay Berlia gave evasive replies to 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 Rs. 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 several opportunities to consult various IT professionals and purchase and accounts persons, who were stated to have been present during the survey operation 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", has not been considered believable, since this is not a case of a single transaction, but of a series of transactions running into Rs. 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 payments given to M/s. Washington Software Ltd. were received back in cash after paying some commission in respect of the accommodation entries. In view of all these observations, the Assessing Officer has concluded that the assessee-society has violated the provisions of sections 13(1)(c)/13(3) of the Act and it is not entitled for exemption of its income under sections 11 and 12 of the Act. He, therefore, disallowed the deduction claimed by the assessee-society under sections 11 and 12 of the Act 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 Rs. 10,05,35,645 and brought it to tax. Apart from this, the Assessing Officer has also disallowed the depreciation of Rs. 1,91,69,549 on alleged bogus purchases of ERP Software claimed by the assessee during the year under consideration, as well as in earlier years. Apart from this, expenses stated to be incurred on bogus purchase of software amounting to Rs. 38,60,900 from M/s. Washington Software Ltd. and claimed as revenue expenses have also been disallowed and added to the taxable income of the assessee-society. The deduction claimed by the assessee-society under section 80G of the Act has also been restricted to Rs. 3,50,53,564, as against that claimed by the assessee-society at Rs. 25,00,00,000. The assessment in this case was ultimately completed by the Assessing Officer under section 143(3) of the Act vide order dated March 28, 2013, at an assessed income of Rs. 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 Rs. 33,85,12,530.

7. In the assessment order, dated March 28, 2013, the Assessing Officer held as under :
"The assessee has filed return of income on September 27, 2010 declaring total income of Rs. nil and the same was processed under section 143(1) of the Income-tax Act, 1961 and the assessee's case was selected for scrutiny and notice under section 143(2) was issued on September 15, 2011 and served upon assessee on September 19, 2011. Notices under section 143(2)/142(1) along with questionnaire were issued on 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., Apeejay School of Management, Sh. Gopal Krishan, Sr. Acctt., Apeejay School Noida and Sh. Maheshwar Jha Acctt., Apeejay School Faridabad, attended the assessment proceedings from time to time and furnished requisite information/details. The case has been discussed with them. Books of account/bills/vouchers have been produced and examined by test check.

3. The assessee-society is registered with the Registrar of Societies under the 'Society Registration Act, (XXI of 1860) and as amended by Punjab 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 of Income-tax (Investigation)-II, Mumbai, at the premises of one Sh. Parag V. Mehta located at 114/114A, Jolly Bhawan No. 1, 10 Marine Lines, Mumbai. During the course of search and seizure operation, it was found that Sh. Parag V. Mehta had given table space to various bogus companies in his premises which do not actually transact any business but are engaged in providing accommodation entries to certain persons/ concerns. Such companies included M/s. Washington Software Ltd., (WSL) which was being 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, 2011, April 12, 2011 and May 12, 2011 also admitted that his company M/s. Washington Software Ltd. was involved in providing accommodation entries and also accepted the fact that he has provided accommodation entries to the Apeejay Group through his company, M/s. Washington Software Ltd.

5. A statement under section 131 of the Income-tax Act, 1961 of Sh. Sanjay D. Sonawani S/o Sh. Devi Dass Sonawani, chairman and director of M/s. Washington Software Ltd. was recorded by the Deputy Director of Income-tax (Inv.) Unit- I(I), Pune on March 16, 2011, the relevant portion of which is reproduced as under :
Q. 5 What are the various business activities of M/s. Washington Softwares Ltd. ?
Ans. Till 2003 this company was actually developing various kind of 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 to the day-to-day affairs of the company. All the other directors of the company namely i) Shri Abhay Anant Shashtri, Pune ii) Late Rohidas Kumbharkar, Pune and iii) Shri Vinod Sonawane deserted the company. The employees also left the organisation and the source code was also stolen by some of the employees. To add to this, the development credit bank attached personal as well as company properties and the office premises was also attached. Thus, virtually there is no physical activity of any software development after financial year 2003-04. The company since financial year 2003-04 is neither having the necessary 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 financial year. The details of such sales made are given below in a tabular manner :

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 Rs. 5,70,00,000 however in a sound state of mind I am making a responsible statement whereby I in the capacity of chairman of Washington Software Ltd. confirm that all these sales are non-genuine sales (bogus sales). There are no actual delivery challans in the case of any of these sales as the physical sale of any software has never taken place. All the sales bills raised are non-genuine and bogus sale bills. The delivery challan numbers mentioned on the bills are false since such delivery challans are non-existent. I confirm that all these sales are in the form of accommodation entries provided to various corporate entities in order to help them inflating their expenses. My company M/s. Washington Software Ltd. was never the direct beneficiary of the huge amounts received towards these non-genuine sales and my company used to only get 1 per cent. commission on the sale bill value of each bill.

Q. 7 As replied by you in the preceding question, please explain the actual modus operandi in respect of providing such accommodation entries to 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 accommodation entries in the form of bogus sales as stated above for a consideration of 1 per cent. commission on such bills. He had asked me to open a current account at ICICI Bank, Nariman Point, Mumbai. I had only signed the documents in this regards 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 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, I was in prison for some time, the bills and invoices issued in this period are not in my knowledge and not the company has received any money for that.

Q.8 After going through the balance-sheet of your company for various financial year it seems that you have debited software development related expenses. Please give 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 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-Metal Power Ltd., Amity Interlinked Steel P. Ltd., Angarika Investment and Financial Pvt. Ltd., Ashish Fashions Pvt. Ltd., Begani Dyeing Mills Pvt. Ltd., C. S.Components Pvt. Ltd., etc.

Ans. I hereby confirm that all these transactions pertaining to investment used to be taken care by Sh. Parag Mehta, he used to send me blank share application forms as well as share transfer forms which after signing I used to send him by post/courier. To the best of my knowledge he used to utilise the funds available in the bank accounts of WSL for payment towards these investments.

Q.10 Please give details of all the entities (corporate and non- corporate) to whom such accommodation entries have been provided by your company M/s. Washington Software Ltd., Pune.
Ans. The entities in respect of whom the accommodation entries in the form of bogus sales have been provided by M/s. Washington Software Ltd., Pune for a period between financial year 2003-04 to the current financial year are as follows :

I once again confirm that 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 Rs. 32 lakhs during the abovementioned period from time to time in cash from Sh. Parag Mehta. Over the turnover of Rs. 52 crores company was due for getting a commission of Rs. 52 lakhs but Sh. Mehta duped for Rs. 20 lakhs and the company so far has got only Rs. 32 lakhs. This commission of Rs. 32 lakhs has not 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 Rs. 32 lakhs for various assessment years, the year wise breakup of this will be submitted to your 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 Rajeshwari Sangeet Academy Trust. During the course of the survey operations, genuineness of purchase of software by assessee from M/s. Washington Software Ltd. was examined from different aspects. Also the statements of various persons actively involved in the management and running of Apeejay Group of Institutions were recorded like Ms. Anita Paul, Principal of Apeejay School Saket, Sh. Alok Saklani Director, Deepankar Chakarborti, Dean and IT Head and Sh. Nagendra Nautiyal, Accountant, Apeejay School of Management Dwarka, Sh. Amitava Misra, Head of IT Department and Sh. Vijay Kumar Berlia, General Secretary and authorised signatory of assessee. None of these persons including Sh. Vijay Berlia, (who has personally approved all the bills of WSL) could give any satisfactory reply regarding the purchase and installation of software stated to be bought from M/s. Washington Software Ltd. Copies of all these statements were provided to the assessee's authorised representative during assessment proceedings. The relevant portion of these statements is reproduced as under :

(i) Statement on oath dated March 29, 2011, of Smt. Anita Paul, Principal of Apeejay School, Saket.
Q.22 I am again-asking you that the software purchased vide vouchers dated March 25, 2008, September 16, 2006, February 11, 2006 and March 9, 2004 are not installed at your school. In this regard, I am giving you another opportunity to check and confirm through your I.T. professionals at your school.

Ans. No, they are not installed. I have checked up with the I.T. professionals whose signatures are attested below

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 above.

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 above.

Q. 24. A person named Amitava Misra, I.T. person 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 Symentec Antivirus Software and monitoring the functioning of I.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 impugned company for this institute.
Q. 12 Did the head office ever purchased any software from M/s. WSL for any of your requirement either on your requisition or on their own ?
Ans. As far as I know, there was no software ever purchased by head office from this company for our requirement on our requisition or on their own.

(iii) Statement on oath dated March 29, 2011 of Deepankar Chakarborti, Dean of ApeejaySchool of Management, Dwarka.

Q. 10 Did you buy any software ever from M/s WSL ? If yes, please tell
1. The year of transaction.
2. The purpose for which it was purchased ?
3. Name of software module.
4. Whether fresh version or updated version of any previous Software.
5. If a standard version of any software or tailor made catering to your specific requirements.
6. Whether only onetime purchase or regular transactions in the form of annual maintenance contract (AMC). Please explain ?

Ans. No, we did not have any transaction with M/s. WSL financially or otherwise. I am hearing this name for the first through you, hence, the need to reply to all the six points mentioned in question above does not arise at all.

Q.11 I am giving you opportunity to think again whether your Institute had any relationship with M/s. WSL ever in the past ?
Ans. I cannot recall because I have heard this name for the first time, hence, my reply to this question is also the same as that to the question No. 10.

Q. 16 I am showing you Annexures- 'B', 'C' and 'D' made part of 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 Rs. 1,83,15,408, Rs. 30,00,000 and Rs. 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 these softwares. Please also explain how the requirement of these softwares was identified, who took the decision to purchase these softwares and where these softwares have been installed ?

Ans. As far as I remember, since 2006, I am looking after the work as I.T. Head however, since 2006 no new software has been purchased. And also as per my knowledge no new software has been installed during this period only the old softwares were updated/ renewed during this period. Therefore, in view of this 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 :

Please explain for what purposes these amounts have been paid to this company and also provide the bills of the same ?

Ans. These papers containing the entries related to M/s. Washington Software are sent to us by the head office just to record these entries in our regular books of account. Beyond that I know nothing about these entries. Also we do not have any bill related to M/s. WSL and for the matter of fact, as already mentioned by me, we have no bills for any of the entry sent to us through 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 School of Management for the period 2003-04 to 2010- 11. Few of these ledger accounts are blank, however in other ledger accounts specific narrations have been given against the entries made on 31st March of the relevant period. These narrations are reproduced as per the details given below :

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 recording of them in the books as per their directions at the instruction of head office.

Q.14. I am showing you Annexure-B to this statement which is a trial balance of ApeejaySchool of Management for the period April 1, 2009 to March 31, 2010 containing one to three (1 to 3) pages. As per this annexure-B at first page under the sub-head outer software of fixed assets it is seen that an amount of Rs. 1,83,15,408 has been made on purchase of computer software. Please explain which computer software 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 Rs. 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 Rs. 30,00,000 and Rs. 30,50,489 have been spent on purchase of computer softwares for the respective periods. Please also explain which computer software have been purchased during the period May 20, 2006 and 2006-07 and produce their bills also ?

Ans. Bills of only three softwares purchased during the financial year 2009-10 are found and we are producing the same, i.e., amounting to Rs. 10,200, Rs. 9,880 and Rs. 2,95,328. All other are only entries which have been made in the end of the respective financial year at the direction of the head office as I have already mentioned in my statement earlier. The entries of purchase of softwares amounting to Rs. 1,80,00,000, Rs. 30,50,489 and Rs. 30,00,000 have been made only at the directions of the head office during the period from April 1, 2009 to March 31, 2010, April 1, 2005 to March 31, 2006 to March 31, 2007. No bills are available for these entries.

(v) Statement on oath dated March 29, 2011 of Sh. Amitava Misra, Head of the I.T. Department of Apeejay Educational Society.

Q.12. Please produce the software CDs purportedly supplied by M/ s. Washington Softwares Ltd.

Ans. We can show you the software installed on the system of the office. However, we do not have the original software CDs of M/s. Washington Softwares Ltd.

Q. 13. We have searched for the above CDs along with you and with your team and could not find the original CDs purportedly supplied by the above company. Your people have also shown us the softwares purportedly procured from the above company. However, nowhere 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. Washington Software Ltd. ?

Ans. I do not know much about the transaction but they are regularly suppliers of our software as I was not involved directly to deal with the parties.

Q. 6 What is the normal procedure followed in purchase of any commodity for any of the school/institution of the society ?
Ans. I am not fully aware of the procedure as I am not looking the day-to-day affairs of all the transactions.

Q. 9 It is learnt that you have endorsed cheques/payment advices to the bank for making 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 bunch of loose papers mentioned as annexure A-1, impounded from your Apeejay School, Saket. These are bills of M/s. Washington Software Ltd. and their respective vouchers. In all the vouchers your signatures are there. In the bills also your signature along with the word 'approved' is mentioned in your handwriting. Please comment in the light of your above reply.

Ans. I approved the above bills for payment only assuming that the material must have come. It is the normal course.

Q. 12 Who authenticate the actual receipt of such goods ?
Ans. I have no knowledge.

Q. 13 It is brought to your notice that Smt. Anita Paul principal of your Saket School has stated on oath that the softwares mentioned in the above bills were never received in the school or installed in the computers systems of the school. She also categorically stated that payment to the above company was made on your approval only. It is not out of place to mention here that no receipt (actual) of any Software from the above company could be ascertained from the premise also even with the help of your I.T. people, purchase and accounts people. Please comment on this.

Ans. I cannot comment on the subject as I am not a technical man and I have approved the bills in the normal course.

Q. 14 You are once again accorded an opportunity to consult the relevant persons as they are available in the premises.

Ans. I have consulted them but at present I am not in a position to explain the same.

Q. 15 From the records of the society available in the office, it is seen that several 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 Rs. 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 Paul. Please explain.

Ans. This order must have been placed when he was alive. Invoices must have come which is not available/traceable at the moment.

Q. 19 In reply to several above question you have made evasive replies saying that you were not aware, you were not in a position to comment, etc. You being the person at the helm of the affair at the society besides the person being making huge payments to non- descript company without actually receiving any commodity or services. All the relevant 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 the answer. I am not in a position to answer the question that who can reply all such question.

6.1 It is seen from the above statements, that no software were ever purchased from WSL. Moreover, on physical verification by survey team, software alleged to have been purchased from M/s. Washington Software Ltd. were not found to be installed and even the original CD could not be located though the head of IT Department was present. However, bogus bills from M/s. Washington Software Ltd. were found 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/office bearer, is a specified person and covered under definition given under section13(3). Perusal of his statement as reproduced in para 6(vi) above, clearly shows that he gave evasive replies to almost all the questions. He is the person at helm of affairs at the society besides being the person who has approved huge payments totalling over Rs. 15 crores from the financial years 2003-04 to 2010-11, to a company without receiving any product or service in return. As seen from the statement, Sh. Berlia was accorded several opportunities to consult various IT professionals, purchase and accounts person, who were present during survey and also through telephone, and even after consulting all of them, he failed to give any explanation and could not produce any evidence as to where the alleged software was installed. His assertion that 'he approved bills for payment only assuming that material must have come', is not at all believable, since this is not a case of single transaction but a series of transactions running into more than Rs. 15 crores over a period of eight years. All these enquiries indicate and proves beyond any doubt that the asses see-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.

7. Violation under section 13 of the Income-tax Act, 1961.

In view of the above discussion, it is clear that no actual procurement of 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. In this statement, in addition to other aspect of the case, questions related to issuance of fictitious bills and routing of money were specifically asked. Sh. Sonawani categorically stated that he used to send fictitious bills to Apeejay Group through an employee of the group and that the amount used to be deposited in his account either through cheques or RTGS transactions. Regarding routing back of amount, Sh. Sonawani stated that he used to discount those cheques from some parties of Zaveri Bazar, 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 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 contract 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 employee of the Apeejay Group.

Q. 10. Did you give these bills talking to any important persons of the interested companies ?
Ans. Since we were already giving bills to Apeejay Group prior to 2007, the requirement was never there.

Q. 26. How were you generating cash to give back to parties ?

Ans. We were inflating expenses and also discounting cheques with various parties in Zaveri Bazar and the cash received from them were given back to the billing parties after deducting the commission.

Q. 27. How did you ensure the flow of funds back to the beneficiary who have taken an entry from you. Describe the procedure in details ?

Ans. We would issue the bills to the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with parties in Zaveri Bazar and cash received from them was given back to the billing party.

Q. 28. Please tell me the name and addresses of various parties (5 to 10) atleast through which you used to discount cheques ?

Ans. We were doing it through one major party Deepika Enterprises at Kalbadevi (contact person was Mukesh Jain mobile No. 9820263331).'

Perusal of bank accounts of society reveals that all the payments for software has been made by cheques or bank drafts (i.e. Rs. 1,80,00,000 from Dena Bank account of society, Rs. 50,00,000 from HDFC Bank account of Apeejay School, Noida and balance Rs. 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 of assessee, meaning thereby, the income derived from the property of trust was misutilised by the beneficiaries/members of the assessee-society over a continuous period for many years. As per section 13(1)(c) read with section 13(3) of the Income-tax Act, 1961, this is a clear violation of exemption granted to the assessee-society under section 12AA.

7.1. In this case, on the basis of evidences, gathered during survey operation dated March 29, 2011, a report was sent by my predecessor (which has 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 provisions of section 12AA(3) with the following observation :

' . . . I am satisfied that the activities of the assessee-society are not genuine, as its-
funds are being misutilised continuously for many years as mentioned above and hence the registration granted to it under section 12AA(1) of the Income-tax Act, 1961 is liable to be withdrawn and cancelled. I am also satisfied that the funds of the assessee-society are also not being utilised for the objects of the society from the past many 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 12 of the Income- tax Act, 1961. In addition to this, the registration granted to the asses see under section 12AA has also been cancelled by the Commissioner of Income-tax, Jalandhar II, with effect from the assessment year 2004-05 vide his order passed under section 12AA(3) dated March 25, 2013 and therefore, the income of the assessee-society shall be computed as an association of persons, under the provisions of sections 28 44 of the Income-tax Act, 1961 without giving any effect to section 11.

During the course of assessment proceedings, vide order sheet noting dated December 12, 2012 the assessee's authorised representative was required to explain as under :

'It has been found that Apeejay School and Apeejay School of Marketing run by the society have shown following purchases of Software from M/s. Washington Software Ltd. in the financial year 2009- 10 relevant to the assessment year 2010-11 :

As per information available in this office, a statement under section 131 of the Income-tax Act, 1961 of Sh. Sanjay 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 expertise required in the company. Thereafter a survey under section 133A was conducted in your case at New Delhi on March 29, 2011 and statement of Ms. Anita Paul, Principal of Apeejay School, Saket, New Delhi was recorded wherein she stated that there was no admission or scholar software was installed in the school. She stated that software purchased from M/s. Washington Software Ltd. whose bills were found from the school were never installed in their school. She said that the payments were approved 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 why not the expenses of Rs. 2,68,59,000 in the name of purchase of software be treated as bogus and added to the total income. Case adjourned to December 31, 2012.'

On December 31, 2012, the authorised representative of the asses see attended but no reply was furnished, on his request case was adjourned to January 8, 2013. On the said date neither anybody attended nor was any written explanation furnished. Therefore, notices under sections 143(2) and 142(1) were issued on January 9, 2013 fixing case for January 15, 2013.

8.1 In response thereto, the assessee's authorised representative vide reply dated January 15, 2013 submitted as under :

"The, detailed reply to point raised at the time of last hearing is as under :

This query is based on the statement of Mr. Sanjay D. Sonawani which has been recorded behind our back. Before moving further, we may clarify that the company Washington Software Ltd. is a listed company and under the control of SEBI. It is not a closely held company that the directors can work at their whims and fancies. Here the public at large is interested and rides and regulations of the SEBI along with provisions of the Indian Companies Act, 1956 apply. The statement of Mr. Sanjay D. Sanowani is nothing but misleading and bundle of lies. For example he in reply to question No. 4 of the statement has stated that the board of directors of the company consisted of Sanjay D. Sonawani, Sh. Mahesh Kadu and Sh. Prafful Mehta, whereas as per information 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 Sonawani is holding 90,000 shares and as per last record available at the site of MCA there are 1,480 shareholders. So here at the first instance itself he has totally misled the Department even after taking oath. How the statement of such person can be trusted.

In reply to question 5 he has admitted that the company was carrying on the business of software development up to financial year 2003-04. Further, he is claiming that he was imprisoned but for what offence he was imprisoned, he has not 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 he is not aware of composition of board of directors and even that of shareholding pattern. If he is saying that no accounts were being maintained but still audited, did the Department try to examine the auditors of the company on oath to find out the sanctity of the person who is telling nothing but lies to cover his misdeeds.

Otherwise also the statement recorded behind the back of the assessee cannot be used against the assessee unless he is given an opportunity to cross-examine the person who has deposed against him. Reliance is being placed on the honourable Punjab and Haryana High Court in ITA No. 638 of 2007 decided on January 16, 2009 in the case of CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P&H). We may be given the opportunity to cross-examine Mr. Sanjay D. Sonawani.

As regards the purchase of software is concerned, it has duly been purchased and even Sanjay D. Sonawani has admitted that during the financial year 2003-04, he was doing the business of software development. Further, the desired software is being used in head office at Delhi and same has been told to the official visiting the assessee's office in Delhi and also later on in the office of DDI concerned a demonstration was also given.

As regards the statement of Anita Paul is concerned, she has clearly admitted that the software may have been installed in head office. Here we may clarify that this is specialised software being used for majority of the schools for various jobs and monitoring at head 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 that the statement of Mr. Sanjay D. Sonawani is nothing but bundle of lies and cannot be relied on. Keeping in view the above it is prayed that purchase may not be treated as bogus on the basis of a false statement by a person who himself is man of dubious character.

In case any further information/clarification is required or you want to hold a contrary view, further opportunity to explain, may please be given. To further elaborate, we may be provided the copies of balance-sheets and also bank 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 alleged software was actually installed. From the statements of key persons including I.T. heads of the assessee-society, it is clear that none of these persons ever heard the name of company M/s. Washington Software Ltd. The Dean/IT head even stated that no new Software is installed since 2006 and that only old software were updated. The I.T. head of society, Sh. Amitava Misra was specifically asked to produce original CD from WSL which he failed to produce and CD could also not be traced on physical 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 Rs. 2,68,60,900 which includes only one bill of Rs. 50,00,000 in the name of Apeejay School of Management, whereas Rs. 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 representative was specifically asked vide order sheet entry dated February 14, 2013 to explain as under :

'During the course of survey, it was found that no actual deliveries of any services or software, etc., were provided by M/s. Washington Software Ltd. to the assessee-society, though bills were received and claimed in your accounts. Statements of key persons like Principals, Directors, I.T. personnel and General Secretary and Authorised Signatory of the society were recorded on oath.

In their statements on oath, they all have stated that they have never heard the name of M/s. Washington Software Ltd., they have also accepted the fact that no software was purchased from M/s. Washington Software Ltd. They have never ordered or recommended any software from the abovementioned company. In almost every institution they have provided the list of the software installed in their institutions/schools along with the name of the companies, which did not include the name of software purchased from M/s. Washington Software Ltd.

Sh. Alok Saklani, director of Apeejay School of Management, sec. 8 Dwarka, New Delhi categorically stated that on requisition made by concerned department of his institution, he either directly seek quotations from prospective vendors or with the prior approval of head office or send requisition to head office. He further admitted that no software from Washington Software Ltd. have ever been purchased by his institution. Your attention is invited to his replies 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 new software has been purchased.

Further, Sh. Nagender Nautiyal, Accountant in Apeejay School of Management, Dwarka was specifically asked to explain the process of accounting and entries pertaining to payment made to M/s. Washington Software Ltd., in books of account. He categorically stated that he records these entries in his books on the instructions of head office and that no related bills of Washington Software Ltd. were ever provided to him. Your attention is invited to replies given by him 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 question Nos. 22, 23 and 24 of her statement dated March 29, 2011.

Furthermore, statement of Sh. Amitava Misra, head of the IT Department of Apeejay Educational Group, was recorded on oath on March 29, 2011 and he was asked to produce the software CDs, purportedly supplied by M/s. Washington Software Ltd. as developer of software. He accepted that they do not have any original software CDs from Washington Software Ltd. and was unable to show the name of "Washington Software Ltd." as developer of the software installed on the computer. Your attention is invited to replies given by him to question Nos. 12 and 13 of his statement dated March 29, 2011.

Statement of Sh. Vijay Kumar Berlin, General Secretary and authorised signatory of the assessee-society was also recorded under section 131 by Deputy Director of Income-tax (Inv.) Unit VI(3), New Delhi on Sh. Vijay Kumar Berlia, could not give satisfactory reply regarding the purchase and installation of software statedly bought from M/s. Washington Software Ltd. His replies to question Nos. 5, 6, 9, 10, 11, 12, 13, 14, 15, 16 and 19 of said statement clearly shows that he gave evasive replies and tried to escape his responsibility of being General Secretary and authorised signatory of the assessee-society, though all the payments to M/s. Washington Software Ltd. were approved by him. He were given enough opportunities to reply after consulting the relevant persons but he failed to produce anything in support of transaction with M/s. Washington Software Ltd. (copies of all the statements separately handed over).

You are 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 from Washington Software Ltd. should not be treated as bogus.

Please furnish complete details of software purchased and payment made to Washington Software Ltd. as per your books and furnish copies of bills and vouchers for verification.

Also furnish evidence that software was actually received and were installed on computer systems of various institutions from where payment has been made. Also show entries of software, respective CDs and their licence in the stock register of all institutions. As per bills issued by Washington Software Ltd. available in this office, software of Rs. 50,00,000 was purchased in ApeejaySchool of Marketing (now Management) Dwarka whereas as per books impounded from above institution during survey, it is seen that Software of Rs. 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 Washington Software Ltd. debited in various institutions of society.

Produce complete books and bills for verification and copy of bank account statements from which payment was made to M/s. Washington Software Ltd. During the course of survey operations under section 133A of Income-tax Act, 1961 on March 29, 2011 certain documents and computer hard disc were impounded as per impounding order dated March 29, 2011, it is requested that the authorised person should be present at next date of hearing 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 the judgment of the hon'ble Punjab and Haryana High Court in ITA No. 638 of 2007 decided on January 16, 2009 (CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P&H)) and requested that the opportunity to cross-examine Mr. Sanjay D. Sonawani may be provided to the assessee.

9.1. Sh. Sanjay D. Sonawani is a resident of Pune, Maharashtra, and therefore, in the view of request for cross-examination made by the assessee's authorised representative, a commission under section 131(1)(d) was issued vide this office letter No. 6754-59 dated February 18, 2013 to the Deputy Director of Income-tax (Inv.) Unit I(I), Pune requiring him to cross-examine Sh. Sonawani on March 4, 2013 in the presence of principal officer of the assessee-society.

9.2 The authorised representative of the assessee-society appeared on February 27, 2013 and stated that he shall file reply to various observations given vide order sheet dated February 14, 2013, after cross-examining Sh. Sanjay D. Sonawani on March 4, 2013 at Pune, and therefore, confirmed that he shall be going to Pune on March 4, 2013 to avail the opportunity of cross-examining Sh. Sanjay D. Sonawani. The entire arrangement was made by the Deputy Director of Income-tax (Inv.) Pune for cross-examination on March 4, 2013. However, the assessee-society vide its letter submitted on the receipt counter of Range-III, Jalandhar on March 1, 2013 submitted as under:
'We acknowledge the receipt of your letter number ACIT/CIT/JAL/ 2012-13/6758 dated 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 his cross- examination.

No doubt he is witness of the Department and we have right to cross-examine him at Jalandhar. However, keeping in view your limitations and we being law abiding citizens are ready to bear all the expenditure of Mr. Sanjay D. Sonawani for travelling to Jalandhar as witness. For this purpose we are enclosing herewith demand draft No. 652343 dated February 27, 2013 drawn on OBC Pune for Rs. 15,000 in the name of Mr. Sanjay D. Sonawani.

You are requested to call him to depose 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 his office on the specified date, i.e., on March 4, 2013 for cross-examination of Sh. Sanjay D. Sonawani and therefore, cross-examination could not be materialised in the absence of cross- examinee.

9.4. The assessee's authorised representative vide his letter filed on March 1, 2013 had requested that Sh. Sanjay D. Sonawani may be called to Jalandhar for cross-examination. In this respect, it is pertinent to mention here that this office is Quasi-Judicial Authority/Court of Law as per section 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 (where there is railway or steamer communication or other established public conveyance for five-sixths of the distance between the place where he resides and the place where the court is situate) less than five hundred kilometers distance from the court house.

Provided that where transport by air is available between the two places mentioned in this rule and the witness is paid the fare by air, he may be ordered to attend in person.'

High Court amendments Allahabad. In Order 16, rule 19(b) :

Insert the words "or private conveyance run for hire" between the words "public conveyance" and "for five-sixths" and
Punjab-Add the following proviso to rule 19(b) :

"Provided that any court 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 State of Punjab, a witness who is not residing in Punjab or Delhi, can be ordered to attend in person only if transport by air is available between the two places. Now, Sh. Sanjay D. Sonawani, is a resident of Pune and distance between Pune and Jalandhar is 1,828 kms, and further the cities of Pune and Jalandhar are not at all connected by air, since there is no airport at Jalandhar. There is no direct air connectivity even between cities of Pune and Amritsar (i.e. the airport nearest from Jalandhar), 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 afforded to the assessee to cross-examine Sh. Sonawani before Deputy Director of Income-tax (Inv.) at Pune, vide this office's letter No. 7099 dated March 11, 2013 which is reproduced as under :

Last and final opportunity
To,

M/s. Apeejay Education Society,
Apeejay School Building, Bhagwan Mahavir Marg,
New Jawahar Nagar, Jalandhar
PAN : AAATA3534F
Sir,
Sub : Assessment proceedings in the case Apeejay Education Society, Jalandhar for the assessment year 2010-11-reg.

Ref : Your letter dated 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 the undersigned is a quasi judicial authority/court of law as per the provisions of section 131 of the Income-tax Act, which draws its powers from the Code of Civil Procedure. However, your assertion that, all the proceedings, inter alia the cross-examination of Shri. Sanjay Sonawani, has to be necessarily conducted in the office of the undersigned at Jalandhar, is based on faulty understanding of the provisions of law.

As per the Code of Civil Procedure, summons can be issued to a per son only if he is within 500 kms of the distance from the issuing authority. Where the person/witness is more than 500 kms away from the summons issuing authority, commission has to be issued by such authority, authorising other authority to cause/carry out such necessary examination/cross-examination/re-examination, on his/her behalf.

4. In the instant case, the person you wish to cross-examine, namely Shri. Sanjay D. Sonawani, is a resident of Pune and as such, the undersigned is not empowered to issue summons to him so as to accord an opportunity of cross-examination to you. Therefore, the undersigned has no other alternative but to issue commission to Departmental officer in Pune to make you available an opportunity of cross-examining Shri. Sanjay D. Sonawani.

5. Accordingly, the undersigned has issued commission under section 131(1)(d) of the Income-tax Act to the Deputy Director of Income-tax, Inv, U-I(I), Pune vide this office's letter No. 6754-59 dated February 18, 2013 for conducting 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 opportunity granted to you for cross-examination of Sh. Sanjay Sonawani. The Deputy Director of Income-tax, Inv, U-I(I), Pune was been requested again and he has accordingly conveyed me his availability on March 20-21, 2013. Therefore, you are requested to camp in Pune between March 20-21, 2013 and present yourself in the office of Deputy Director of Income-tax, Inv, U-I(I), Pune, so as to avail the opportunity of cross-examination of the Departmental witness Shri. Sanjay Sonawani.

6. In case, you 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. Sanjay Sonawani and that you agree with the factual position narrated by him in his statements that he has only issued sales bills and no actual sales took place, on which reliance is placed by the Department, and resultantly survey operation was conducted at your different premises wherein it was seen that no software has ever been received and installed at any of your institutes and head office.

8. Your reply in this regard should reach the office of the under signed on or before March 15, 2013 by 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,
Circle III, Jalandhar
Encl : Original demand draft

9.6 In response to the above letter, the assessee's authorised representative vide letter dated March 14, 2013 stated as under :

'We acknowledge the receipt of your letter number ACIT/CIII/JAL/ 2012-13/7099, dated March 11, 2013. In response to same it is sub mitted as under :

As already replied vide earlier letter, we would like to cross-examine Mr. Sanjay D. Sonawani at Jalandhar. Mr. Sonawani is the witness of the Department and the onus to bring/ensure presence of its own witness squarely lies with the Department and the same cannot be relegated to the assessee. Further there is no bar for distance under amended provisions of the Civil Procedure Code. Hence it is prayed that he may please be called to Jalandhar.'

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, within the provisions of law, the assessee-society preferred not to avail of the opportunity and rather it avoided to carry out cross-examination of Sh. Sonawani. Thus, it is concluded that the assessee did not wish to cross-examine Sh. Sanjay D. Sonawani, for the reasons best known to it, therefore, now it has no ground and justification to object to the contents of statement given by Sh. Sanjay D. Sonawani.

10. On the next date of hearing, i.e., March 6, 2013, again no reply to the observations 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 where each such software for what purpose same are used. (Institute-wise).

iii) Produce fixed asset registers and stock register where the Software have been entered after purchase.

iv) Produce books along with bank statements of the following institutions.
a) Apeejay School, Noida.

b) Apeejay School, Greater Noida.

c) Apeejay School, Faridabad.
d) Apeejay School, Jalandhar.
e) Apeejay School of Marketing (now Management), Dwarka.'

10. On the next date of hearing, i.e., March 7, 2013, again 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 Rs. 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, Jalandhar. The perusal of said bill further reveals that the payment of Rs. 50,00,000 has been approved by Sh. Vijay Berlia, General Secretary of society and no other details whatsoever was found to be mentioned on the said bill, i.e., when the software was received, whether installed/working, entered on which page number of stock register/fixed assets register, etc., as is done in the case of all other software purchased by the school (copies of certain bills of software other than purchased from WSL have been taken, signed by accountant and are placed on record). These facts have been duly noted vide order sheet of same date (March 7, 2013) signed by the assessee's authorised representative and accountant and the authorised representative was required to further explain as under :

'(1) From where payment of this Rs. 50 lakhs has been made.

(2) Produce stock register/fixed assets register for verification along with IT Manager of the assessee school.

(3) Reply to queries raised vide order sheet dated January 15, 2013, February 14, 2013 and March 6, 2013.

(4) Produce books of other institutes as per order sheet dated March 6, 2013.'

10.2 On the next date of hearing, i.e., March 8, 2013, again no reply was furnished. The authorised representative of the assessee attended along with Sh. Yogesh Gupta, IT (Manager) of Apeejay School Jalandhar (all branches). Sh. Yogesh Gupta is specifically asked about how software is purchased. To this, he explained that requirement 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 Jalandhar. Photocopy of relevant pages of stock register, signed by IT (Manager) are taken and placed on record. Sh. Yogesh is working with society since year 2003 and he has categorically stated that ERP software from M/s. Washington Software Ltd. is never installed at any school of Jalandhar since 2003. Further, he stated that he has never heard name of M/s. Washington Software Ltd. All these proceedings are recorded vide order sheet dated March 8, 2013 duly signed by the assessee's authorised 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 with books of account of Apeejay School of Management (earlier Apeejay Institute of Marketing), Dwarka reveals that entry of Rs. 1,80,00,000 has been taken from head office on March 31, 2013, however, there was only one bill amounting to Rs. 50,00,000 related to purchase of software from WSL in the name of this institute. The relevant documents out of impounded record have been photocopied, signed by the accountant, Sh. Nagendra Nautiyal and are placed on record. Further, perusal of statement 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 Rs. 1.80 crores on March 31, 2010, (the copy of voucher signed by accountant is placed on record.) Sh. Nautiyal is shown his statement recorded during survey on March 29, 2011, especially question Nos. 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16, wherein he has categorically stated that he recorded these entries on the instructions of head office and no bill or ledger account of WSL was available with them. When this statement is confronted to Sh. Nautiyal, he stated that he stands by the replies given by him and that bills from WSL were never provided to the institute, only entries were made in books at the instructions of head office. Further perusal of stock register produced during hearing also shows that ERP software was never received or installed at this institute. Copy of relevant page of stock register is taken, signed by accountant, Sh. Nautiyal and is placed on record. Further, from the perusal of the invoices raised by M/s. Washington Software Ltd. in the name of various schools/institutes of the assessee-society, it is seen that the description of the item refers to 'Multiple User ERP Software' in most of the cases. Therefore, the assessee's authorised representative was specifically asked to provide following information related to alleged ERP software vide order sheet entry dated March 11, 2013, the relevant part of which is as under :

'In respect of ERP Software purchased from M/s. WSL, please furnish following details :
a) What is the name of ERP Software. Mention unique name given to it by its developer ?
b) On which platform it is based, whether oracle or some other ?
c) What are different modules of this ERP ?
d) Who had been 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 in detail, how the ERP software from M/s. Washington Software Ltd. is being purchased, i.e., whether the society called quotations, how order is placed, how bills raised/received and how payment is being made. How the delivering of software is received and how it is installed on computer.'

To furnish replies to order sheet entries dated January 15, 2013, February 14, 2013, March 5, 2013, March 8, 2013. To produce some authorised person from Apeejay Education Society so that the material and 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 for Rs. 2,68,59,500. Even though the purchase is debited in various institutions taking them as cost centres, the software in question is installed in head/central Office of the society in Delhi. The bills of software supplied by WSL are enclosed herewith. (Annexure A1 A14). As regards the statement of Mr. Sanjay D. Sonawani is concerned, it is nothing but bundle of lies. He has got no legs to stand. During the year he has given four statement, two each before Deputy Director of Income-tax, Pune and Mumbai. If you go through all those statements that he was retracted from major points in his subsequent statement recorded by Deputy Director of Income-tax, Mumbai but again when he appeared before the Deputy Director of Income-tax, Pune, for the second time, he retracted from his statements in Mumbai and confirmed the contents of first statement given in Pune. How reliance can be made on the statement of the person, who has claimed to be giving statement on oath, but there is a huge difference in his statements before two authorities on same matter. If we see his statement, he has discussed about his shareholding, if we compare the same with the information filed with the Registrar of Companies regarding shareholding and directorship it totally differs. A person who does not know about his shareholding and directorship how can he tell about huge transactions for a number of years that too without following books of account which he claims he has never maintained. He himself 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 that. The Department has started the proceedings against the innocent customers who have purchased software relying on an unreliable person and has not bothered to verify from auditor or inform the SEBI for violations and to verify sanctity of his statement. Relying on a part of the false statement and not bothering about the facts of the other part of the statement is nothing but against the justice. Otherwise also it has been held by the hon'ble Madras High Court that statement under section 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 has been given to sale shown by him ? We have full right to know about that. Hence this act of Department of acting on one part of statement and not taking any action on other part of statement is nothing but injustice. It is like punishing the innocent and not taking any action against guilty. Hence this statement of Mr. Sonawani has got no value. Otherwise also the statement of Mr. Sonawani has been recorded behind our back and we have not been provided any opportunity to cross-examine him in your 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 Ltd. While institution staff makes use to their own softwares for their day-to-day use, they need not know about software which was admittedly installed at the head office. As the head office in Delhi is well equipped to install and maintain especially since the softwares are for management information/control purposes to which school staff is not fully privy to. As the software was installed at the head office she also stated that the Software may have been installed at head office. As already mentioned, the cost of the software is debited to different cost centres but same is installed at head office. As regards Mr. Amitava Misra, even though he showed ignorance about the availability of original CD's but he at no stage admitted that WSL software is not installed. He may not have been able to show any printing at that time due to confusion. Various reports generated from the software are being produced herewith for your verification and for your record. Being voluminous, the same are being provided separately and not being attached with this reply.

As regards Mr. Vijay Berlia, he did not have the complete back ground on academic issues of the institutions and software decisions that had been made by the Chairman Dr. Satya Paul (since deceased) who directly handled and was responsible for all matters including academics, software and day-to-day administration of the institutions. Mrs. Berlia was following his directions. Further it was late evening when he faced the survey 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 the reports are being produced herewith for your verification and also for perusal at your end. From these reports you will be satisfied that the software has duly been installed in real sense and it contains source key generated by Washington Software Ltd., which the party is now trying to deny due to reasons best known to him.

In addition to above reply to your queries it is further submitted that regarding no supply of software by the vendor, it seems to be a concocted story by the vendor to 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 company and we are sure that company in India was working in collaboration with it. May be as stated by us earlier, it lost contract with that company and it started selling software illegally and when caught, with a fear of prosecution it denied having supplied any software. Pages 69 to 99 contain various documents which show that SEBI has also taken action against the company and its directors a number of times. Further it is a listed company and audited accounts cannot be taken as false and fabricated as claimed by Mr. Sonawani. . . .

As regards query pertaining to some points regarding ERP software, it is submitted as under :

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, we feel it will not serve any purpose as the hard disk copies by the officials is from different server and not from main server containing reports generated out of WSL software.

11. The replies of assessee as submitted from time to time have been carefully considered in the light of material impounded during survey dated March 29, 2011 as well as books of account and other documents produced during the course of assessment proceedings. The arguments given by the assessee's authorised representative vide his submissions have been closely gone through and it is seen that the authorised representative has taken up the following issues :

a) That the statement of Sh. Sanjay D. Sonawani, is nothing but bundle of lies and that he himself is of doubtful character and was imprisoned. Further that he has been changing his stance in various statements. Also that SEBI has taken action against the WSL.

b) That the statement of Sh. Sanjay D. Sonawani has been recorded under section 133A and it is not a statement on oath and has no evidentiary value.
c) That the statement of Sh. Sanjay D. Sonawani, has been recorded behind the assessee's back and the same cannot be used against assessee unless opportunity to cross-examine him is provided to assessee.
d) That accounts of WSL are audited and the Department has not examined the auditor concerned. Further, that the assessments of WSL must have been reopened.
e) Regarding statements of Smt. Anita Paul, Sh. Alok Saklani and Sh. Deepankar 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 Misra, even though he showed ignorance about the availability of original CD's but he has not admitted that WSL software is not installed. Further, that he may not have been able to show any printing due to confusion. The authorised representative also produced certain reports allegedly generated from software as an evidence for its installation.
g) Regarding statement of Sh. Vijay Berlia, the authorised representative has stated that he did not have the complete background of academic issues of 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 found to be acceptable due to reasons mentioned below :
a) The general conduct of Sh. Sanjay D. Sonawani has no bearing on the present case as this does not justify the alleged bogus purchases made by the assessee from M/s. Washington Software Ltd. Sh. Sonawani might have undergone imprisonment but it would not negate the fact that he has actually given accommodation entries to the assessee-society and that based on these entries the expenses of the assessee were inflated and its funds were misutilised. 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 in all the statements given by him. He has retracted only on the version that whether Sh. Parag V. Mehta, chartered accountant was instrumental in all the bogus activities of WSL or he himself conducted all the affairs of his company, WSL and this has no bearing on the present case because the fact remains that the assessee was procuring bogus bill without actual receipt of Software and thereby, misutilised the income derived from the property of trust. In this way, the assessee has been claiming 100 per cent. utilisation on account of purchase of software and further 60 per cent. on account of depreciation on said software in the year of purchase and balance during next years. Thus, it was claiming double benefit under section 11 on account of alleged software, though the software were never received and the money paid through cheques/drafts was routed back to the persons managing affairs of assessee-society. This has been discussed in detail vide para 7 of this order. The argument of the authorised representative that SEBI has taken action against WSL further shows that all was not well with the affairs of said company, and given the circumstances, the admission made by Sh. Sonawani, that his company resorted to giving accommodation entries from the year 2003-04 onwards because its financial health was not good, all the more proved to be correct.

b) Further, the argument that statement of Sh. Sonawani has no evidentiary value, since it is recorded under section 133A, is also 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 and letter dated March 11, 2013, which has been refused by the asses see for the reasons best known to it. This has already been discussed in detail vide paras 9 to 9.7 of this order.

d) It is wrong on the part of the assessee to allege that the Department has not examined the auditor of WSL, as the necessary examination has been carried out in this respect. The audit report of WSL has purportedly been signed by one Sh. K. Sampath, chartered accountant having registration No. 14457 and address at 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.)U-1(1), Pune in this respect is placed on record). This proves that the statement (reproduced in paragraph 5 of this order) dated March 16, 2013 of Sh. Sonawani is true, when in reply to question No. 8, he stated that no actual audit took place.

Secondly, the assessee's authorised representative has argued that the assessments of WSL should have been reopened and action should have been taken against it. In this respect, it is clarified that WSL is being assessed at Mumbai/Pune and the required assessments/reassessments, etc., are being made by the Departmental Officer who has jurisdiction over WSL. As such the assessments/ surrender of WSL would have no impact on the assessment of asses see-society, which has artificially inflated its expenses and thereby misutilised the funds, by procuring bogus sales bills from WSL.

e) The argument of the assessee's authorised representative that Smt. Anita Paul, Sh. Alok Saklani and Sh. Deepankar Chakrabarti are academicians and does not have computer knowledge is also not acceptable because these people are head of institutions and the bills/ vouchers, etc., are entered in books only after their approval. Further, they were allowed to consult the I. T. professionals, purchase and accounts persons of institutions who were present during survey. All of them and Sh. Nautiyal, accountant, categorically stated that the bills related to purchase of software were entered in books only on the directions of head office and that no software 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 societybesides being the person who has approved huge payments totalling over Rs. 15 crores from financial years 2003-04 to 2010-11, to a company without receiving any product or service in return. Question 16 of his statement (as reproduced in paragraph 6(vi) of this order) proves it beyond doubt that even after demise of Dr. Satya Paul, payment of Rs. 2.60 crores were approved and by Sh. Berlia to WSL, and that too without receipt of any bill or product/software from and not from Pune. On enquiries in this respect, Sh. K. Sampath informed that he is not aware of WSL. Otherwise also it cannot be said that purchase/payment 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 to explain about various modules of ERP software and as to who all installs, handles, manage, and operate each such module and overall software. The perusal of submission reveals that the authorised representative gave very insufficient and incomplete information and failed to produce any evidence in support of his reply. It is incorrect to say that the software have been purchased and installed in the central office. The investigation carried out by the Department during the course of survey clearly 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 that institute from the perspective of various users carrying different roles and responsibilities such as students, teachers, staff, principal, management, parents, alumni, etc. All the data is managed in a time sensitive manner along with the rules and policies applicable at that time, so whenever required, the exact information can be reproduced as it is.

An ERP software consists of many enterprise software modules. Each ERP module is mostly focused on one area of business processes, such as student attendance, payroll, library management, etc. ERP software package is designed right from the beginning to incorporate most of the information an organisation needs into one program. This means that the system is designed to integrate all departments. All the information is in one system, so managers and owners have access to the data they need when they need it. The basic goal of ERP is to provide one central repository for all information that is shared by all the various ERP facets in order to smooth the flow of data across the organisation. In short, ERP is a comprehensive system which manages the entire information of an organisation at one place. It is seen from reply dated March 18, 2013 that the assessee has mentioned following modules of ERP software :

• Attendance
• Finance
• Inventory
• Fees payroll
• Library
• Admission
• Student development
• Time-table
• E-learning

The authorised representative has further stated that the 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 have been provided to the respective institutions/ colleges for data entry and usage but the same has not been done, which is very strange. The reply given by the assessee that ERP is installed centrally to safeguard data and maintain confidentiality is also not acceptable because even at head office of the assessee no such ERP software was found to be installed during the course of survey operation on March 29, 2011. During survey, the IT head/ computer experts of the society could not show any 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 licence of software. However, the assessee failed miserably on all these counts and even after repeated opportunities, he could not show any entry regarding receipt of software at central office/schools, etc., in the stock register/fixed asset register and further he also failed to produce original CD or licence of the alleged software. This proves that the alleged software were actually never purchased/received/ installed at any premise of assessee, only the bills were received and entered in books.

Further, the reports submitted during assessment and alleged to have been generated through ERP software have been perused but the same could nowhere establish that these have been generated through the same ERP software, for which huge bills are entered in books every year. It may be a case where the assessee has installed a similar kind of software after survey because during survey operation on March 29, 2013, no such software was found to be installed at any premise of the assessee.

h) It is pertinent to mention here that perusal of record reveals that during the year under consideration, the assessee has procured bills amounting to Rs. 2,68,59,000 from WSL, the delivery address mentioned on these bills shows that the software has been delivered to the respective institutes/schools and not the head office as alleged by the assessee. For example perusal of certain bills shows following delivery address :

a) Invoice date April 21, 2009, Multiple user ERP software for Rs. 50,00,000 Deliver to : Apeejay School, Noida (U.P.)
b) Invoice date April 27, 2009, Multiple user ERP software for Rs. 50,00,000 Deliver to : Apeejay School of Marketing, Dwarka, New Delhi
c) Invoice date May 5, 2009, Multiple user ERP software for Rs. 30,00,000 Deliver to : ApeejaySchool, Greater Noida (U.P.)
d) Invoice date May 14, 2009, Multiple user ERP software for Rs. 50,00,000 Deliver to : Apeejay School, Faridabad
e) Invoice date May 26, 2009, Multiple user ERP software for Rs. 50,00,000 Deliver to : Apeejay School, Jalandhar.
f) Invoice date December 28, 2009, ERP Software for nursery classes for Rs. 12,02,400 Deliver to : Apeejay School, Pitampura.

g) Invoice date January 18, 2010, ERP Software for nursery classes for Rs. 2,35,000 Deliver to : Apeejay School, Faridabad. etc. . . . .

The perusal of bills show that during the year the assessee has procured a number of ERP software (i.e. 5 Multiple user ERP software and 5 ERP software for nursery classes) and 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 Rs. 50 lakhs as per invoices mentioned at Nos. "a, b, d and e" above, and for Rs. 30 lakhs as per invoice at No. "c" above and the same has been the case with ERP software for nursery classes. The reason for this variation in rate could not be ascertained. Further that, had the assessee actually purchased and installed the ERP software at its head office, the bill should have mentioned delivery address of head office and there was no need to procure many software of same kind for this purpose because one multiple user ERP software and one ERP for nursery classes would have served the purpose of assessee.

Furthermore, as per normal procedure followed by the assessee during procurement of any software, 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 obtain licence and original CD even in case of software worth few thousand rupees, could not be considered as an innocent customer who has purchased the software worth several crores of rupees just relying on an unreliable person, as stated by the authorised representative, without bothering to obtain original CD and licence for the said software. Actually, the fact is that no software has ever been purchased ; only bogus bills are obtained to inflate expenses.

i) During the course of assessment proceedings, it was seen that the assessee-society has paid money through cheques/bank drafts which have been credited in the Axis Bank account No. 104010200005128 of WSL (Copy of bank statement is placed on record). The fact as narrated by Sh. Sonawani in his statement that his company WSL was actually not developing any software and was issuing only bogus sale bills is further corroborated from the fact that after credit of amount in said account from the assessee, the cheques were immediately issued to the following parties :

From the description of the name of the parties itself like Netania Shares and Securities P. Ltd., Omega Lifestyles and Technologies, Topsun Rim Iron Ore Industries, A to Z Alloy P. Ltd., Karma Ispat Ltd. and Swati Spentose P. Ltd, it is clear that the subsequent payments have been made to parties other than those involved in software development services. Therefore, it is proved beyond any doubt that the statement given by Sh. Sonawani that his company did not develop software from financial year 2003-04 onwards and that it was providing only accommodation entries without actual delivery of software to certain concerns, is correct, the assessee being one of the major beneficiary of these bogus transactions.

12. Taking into account the entirety of facts, circumstances, observation and evidences, it is concluded that the assessee-society has been procuring bogus bills of software from WSL since financial year 2003-04, and the money has been routed back to the persons managing affairs of assessee-society. Thus, the assessee is clearly hit by the provisions of section 13(1)(c) read with section 13(3), and exemption claimed under section 11 of the Income-tax Act, 1961 is denied for the year under consideration. Therefore, the income of assessee-society is being computed under the provisions of sections 28-44 of the Income-tax Act, without giving any effect to the provisions of sections 11 and 12.

In addition 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 under the provisions of the Income-tax Act, therefore, in order to compute the actual amount of profit/surplus for the year under consideration, all the reserves and provisions debited to income and expenditure account are being added back as per following computation :

Thus, the surplus/excess of income over expenditure of Rs. 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 concealment as well as furnishing of inaccurate particulars are being separately initiated.

13. Bogus bills for software from WSL
From perusal of record as well as details provided by assessee, it is seen that the assessee has procured bogus bills of software from M/s. Washington Software Ltd. from financial year 2003-04 to financial year 2009-10, as per the following details :

Table-1 Purchase of software from WSL

13.1 Out of total amount of Rs. 2,68,60,900 paid during the year under consideration, software worth Rs. 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 Rs. 38,60,900 has not been added to fixed assets but has been claimed as revenue expenses by either debiting to 'other expenses under activity expenses' or by writing off against the income shown under 'other fees'. In fact it is wrong to treat expense on purchase of software as revenue as the same is a capital asset as per New Appendix I to rule 5 of the Income-tax Rules and depreciation rate is prescribed for it. In this case, the assessee has wrongly claimed the same as revenue expenditure. Further, these software are also purchased from WSL and during assessment proceedings, the asses 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 Rs. 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 expenses, penalty proceedings under section 271(1)(c) of the Income-tax Act are being separately initiated.

13.2 In case of multiple user ERP software worth Rs. 2,30,00,000, the assessee has taken the same to fixed assets under the block 'Computer' and has been claiming depreciation on the alleged Software, as mentioned in Table 1 given above, since financial year 2003- 04. The same requires to be disallowed, since this ERP software, was never really installed at any of the premise of the assessee-society. Perusal of schedule of fixed assets reveals that the total depreciation of Rs. 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 2003-04 to 2009-10 as per Table-2 given below. Depreciation on alleged software, which is required to be disallowed for the financial year 2009-10 relevant to the assessment year 2010-11 is computed as under :

Table - 2 Block-"Computer Software"

As per above table, out of total depreciation of Rs. 3,53,21,395 debited under the Block-'Computer', depreciation of Rs. 1,91,69,549 pertaining to ERP software purchased from WSL is being disallowed for the year under consideration and the same is being added to the total taxable income of assessee. Since, the assessee has concealed and furnished inaccurate particulars of its income and expenses, penalty proceedings under section 271(1)(c) of the Income-tax Act are being separately initiated.

14. Donation to Apeejay Society a education foundation

During the course of assessment proceedings, it was seen that the assessee has debited Rs. 25,00,00,000 on account of 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 Rs. 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 vide his reply dated March 18, 2013 stated as under :

'2. In order sheet entry dated March 6, 2013 you have raised a query asking 'justify the payment of donation of Rs. 25,00,00,000 to Apeejay Society a education foundation, also explain whether this foundation is registered under section 80G. In response to same it is submitted as under :

Apeejay Society a education foundation is a section 25 company duly registered under section 12AA and also under section 80G. The donations has 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 12AA for the year under consideration, thus, the donation paid of Rs. 25 crores to Apeejay Society a education foundation is not an allowable expense, as the money has not been used for the purpose of business of assessee. Further, in view of provisions of section 13(1)(c) read with section 13(3), the assessee is not eligible for exemption under section 11 for the year under consideration. Therefore, out of this donation, deduction can only be allowed to assessee under the provisions of section 80G, maximum deduction being restricted to ten per cent. of gross total income under section 80G(4). Therefore, the donation paid of Rs. 25 crores is being disallowed and out of this, deduction allowed under section 80G is computed as under :

Thus, out of total donation paid of Rs. 25,00,00,000, after allowing deduction of Rs. 3,50,53,564 under section 80G, net amount of Rs. 21,49,46,436 (i.e. 25,00,00,000 3,50,53,564) is being added back to taxable income of assessee. Penalty proceedings under section 271(1)(c) for furnishing of inaccurate particulars of income are being separately initiated in this regard.

15. In view of above discussion, the total income of the assessee for the year under consideration is computed as under :

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 Income-tax Act. Issue penalty notice as per paragraphs 12.1, 13.1, 13.2 and 14, demand notice and Challan along with a copy of this assessment order."

8. Before the learned Commissioner of Income-tax (Appeals), the assessee raised the following grounds of appeal :

"1. That the order of the learned Assistant Commissioner of Income-tax is against the law and facts of the case.

2. That the learned Assistant Commissioner of Income-tax is not justified in treating the software purchase as accommodation 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 that the onus to produce/bring its own witness for cross-examination is squarely on the Department.
4. That the learned Assistant Commissioner of Income-tax is not justified in holding that the appellant has violated the provisions of section 13 of the Income-tax Act, 1961.

5. That the learned Assistant Commissioner of Income-tax has failed to apply her independent mind and pass the quasi-judicial order. Instead he has been influenced by the administrative order of worthy Commissioner of Income-tax-II Jalandhar.

6. That the learned Assistant Commissioner of Income-tax is not justified in assessing the income as business income instead of assessing the same under sections 11 to 13 of the Income-tax Act, 1961.

7. That the learned Assistant Commissioner of Income-tax though admitting that the appellant is running 24 educational institutions which is as per the objects of the society and is carrying out genuine educational activities yet ignored it and assessed the same under sections 28 44 of the Income-tax Act instead of assessing the same under sections 11 to 13 of the Income-tax Act, 1961.

Without prejudice to the aforegoing and in the alternate :
8. The learned Assistant Commissioner of Income-tax has legally erred in treating capital receipts as revenue receipts.

9. The learned Assistant Commissioner of Income-tax has legally erred in disallowing the donation made by the appellant to the eligible entity under section 80G.
10. The learned Assistant Commissioner of Income-tax has 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, Jalandhar, under section 143(3) of the Income-tax Act, 1961. When the assessment proceedings were going on the registration under section 12AA was withdrawn by the worthy Commissioner of Income-tax-2, Jalandhar with retrospective effect. However the same has duly been restored by the honourable Income-tax Appellate Tribunal, Amritsar Bench vide order dated May 8, 2014.

The assessee is an educational society, duly registered under section 12AA and running various educational institutions. It is 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 supplied any software and put the burden on Mr. Parag Mehta. Consequent to that our premise was also surveyed and later on assessment made as association of persons. It is against this assessment that the assessee is in appeal.

In this case whole of the statement is based on the statement of Mr. Sanjay D. Sonawani whom the Assessing Officer has treated as word of Bible. So it is better if first of all we see how true and reliable the statement of Mr. Sonawani is. Mr. Sonawani has given 4 statements before 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 :

 

On perusal of the aforesaid four statements, it would be noted that there were certain glaring contradictions, as mentioned under :

a. In the first statement, Mr. Sonawani stated that it was Mr. Parag Mehta, who was doing the accommodation entry business and Mr. Sonawani was acting in accordance with latter's directions.

In the second and third statement, Mr. Sonawani completely retracted from his above stand and took the onus on himself and said that Mr. Parag Mehta had no role to play. In the fourth statement, Mr. Sonawani took complete U-turn and again, put the onus on Mr. Parag Mehta.

b. In the first statement, in response 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 . . .'
However, in the third statement, in response to Q. Nos. 4 and 8, Mr. Sonawani had replied that answer to Q. No. 4
Up to 2007, the business was handled by Mr. Rohidas Kumbharkar and after his death the business was drastically reduced. . .
Ans. to Q. No. 8
'As stated earlier up to 2007, Mr. Rohidas Kumbharkar brought all the parties and to the best of my knowledge Mr. Rohidas Kumbharkar was responsible for getting the parties. After 2007 only one party was there, i.e., Apeejay Group who was handled by me.'

On perusal of the above, the appellant fails to understand that as to how Mr. 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 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.'

d. In the first statement, in response to Q. No. 7 Mr. Sonawani had replied that 'my company was in deep financial crisis in the year 2003 due to legal and other personal problems.'

On perusal of audited accounts of WSL for the financial year 2003- 04, it will be observed that in the beginning of the year, WSL was having share capital and reserves and surplus aggregating to Rs. 20.50 crores. Further during the said year, WSL had recorded sales revenue aggregating to Rs. 20.12 crores and earned the net profit of Rs. 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 and no actual audit took place.'

The appellant fails to appreciate as to how being a listed company, the accounts were not maintained. Further, even presuming accounts were not maintained, then, how was the audit done by the auditors and audited financial statements were prepared.

As per the Assessing Officer the auditor of the company has denied having done such audit. (Para 11.1(d) page 25 of assessment order).

In the third statement, in response to Q. No. 11, Mr. Sonawani had replied that 'cheques/RTGS were directly by Apeejay Group in our bank.'

Further, in the very same statement, in response to Q. No. 27, Mr.Sonawani had replied that
'We would issue the bills to the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with the party, the party would deposit the cheque/RTGS in our account and then we would discount cheques with parties in Zaveri Bazar and cash received from them was given back to the billing party.'

On perusal of the above, the appellant fails to directly deposit by the parties into the bank account of WSL, then, how the same can be discounted to payback the cash to the billing parties.
Even if it is assumed that the cheques/RTGS were given to WSL first and then they were discounted, it would be pertinent to mention that this exercise is impossible since the cheques/RTGS cannot be discounted unlike normal bills of exchange.

In the third statement, in response to Q. No. 8, Mr. Sonawani had replied 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 understand that which part of the statement is reliable and which is unreliable. It is submitted that apart from the aforesaid contradictions, not much of credence could be given to statements of Mr. Sanjay D. Sonawani who is man of no standing for the reason that :

He has been imprisoned in the past, as admitted by him in the first statement ; and
SEBI had launched penal proceedings against him as director of WSL due to some irregularities in the trading of shares.

In the first statement at Pune 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 innocent person can be punished on the basis of the statement of a person who is changing his statement time and again and has no legs to stand. Such statements are absurd and have no evidentiary value. The same view has been held by the honourable Calcutta High Court in the case of CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal). (pages 36-41) The honourable court has held as under (page 109) :

'It is true that Shri Sukla has proved to be a shifty person as a witness. At the earlier stages, he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that Shri Sukla is not a trustworthy witness and little value can be attached to what he stated either in his affidavits or in his examination by the Assessing Officer. His conduct neutralises his value as a witness. A man indulging in double speaking cannot be said by any means a truthful man at any stage and no court can decide on which occasion he was truthful.'

From the above it is clear that Mr. Sonawani on whose statement the Assessing Officer has relied on and treated the same as word of Bible is not society worthy and cannot be used against the assessee. Even the fact that he was discounting the cheques and returning cash to the assessee has been refuted by the Assessing Officer in paragraph 11.1 (i) of her order. She has herself admitted that cheques paid by the assessee were duly deposited in the account of WSL and further invested in various securities. From the above it is clear that 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 same by any corroborated evidence brought on the record.

Reference, in this regard, may be made to the following decisions wherein it has been held that no addition/disallowance could be made merely on during the course of survey, if there is no corroborative evidence :

(i) CIT v. Dhingra Metal Works [2010] 328 ITR 384 (Delhi) ;
(ii) CIT v. Subhash Chand ITA No. 875/2010 ;
(iii) Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker) ;
(iv) CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad) SLP dismissed 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 appellant's repeated specific requests. It is respectfully submitted that in the following judicial precedents it has been consistently held that ex- parte statements/recorded behind the back of the assessee cannot be relied on without allowing opportunity of cross-examination of the witness/author of such document to the assessee and that material intended to be used against the assessee must be 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, 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 (P&H) ;
(ix) Anupam Agencies v. State of Punjab 98 STC 338 (P&H);
(x) Prakash Chand Mehta v. CIT [1996] 220 ITR 277, 279 (MP) ;
(xi) Sona Electric Co. v. CIT [1985] 152 ITR 507 (Delhi) ;
(xii) CIT v. D. M. Joshi [1999] 239 ITR 315 (Guj) ;
(xiii) Amarjit Singh Bakshi (HUF) v. Asst. CIT [2003] 263 ITR (AT) 75, 151 (Delhi) (TM) ;
(xiv) Mahes Gulabrai Joshi v. CIT (Appeals) [2005] 95 ITD 300 (Mum) ;
(xv) Monga Metals (P) Ltd. v. Asst. CIT [2000] 67 TTJ (All) 247;
(xvi) Sarita Devi Kajaria v. ITO [2005] 276 ITR (AT) 34 (Kol) ; [2004] 89 ITD 109 (Kol) (TM) ; and
(xvii) ITO v. Pukhraj N. Jain [2005] 95 ITD 281 (Mum).

The Assessing Officer in her order has stated that the assessee was given opportunity by issuing commission to go to Pune and cross- examine the witness but the same was not availed of by the assessee. It is wrong to say on the part of the Assessing Officer. From the day one we made request to give us opportunity to cross-examine the witness with a condition that he being witness of the Department be called to Jalandhar and assessee should not be put to hardship to go to Pune. Being a law abiding citizen the assessee even offered to pay for the expenses of the witness forgetting that he is witness of Department and it is for the Department to produce him at its own cost. The honourable Calcutta High Court in CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) has held as under (page 110) :

'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 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 Officer has rejected the request of the assessee citing the reason that Pune and Amritsar are not having direct flight. Hence it is clear that statement was recorded behind the back of the assessee and no opportunity was given to cross-examine that being basic right of the assessee. No addition can be made on the basis of such statement.

In the impugned order, the Assessing Officer had alleged that the software purchased by the appellant from WSL had not been installed since the same was not found 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 appellant had allocated the cost of the above software to various cost centres like schools, institutes, etc. The appellant had repeatedly requested the Assessing Officer to deploy some technical expert to visit head office to verify the installation of the above software.

All the above facts have been reproduce credence and just relied on the false statement of the WSL. As regards office bearers and employees of the assessee is concerned no one has denied the purchase of software and concerned person has confirmed the installation of the software at the central server.

If the Assessing Officer feels that it is not genuine purchase but just accommodation, the Assessing Officer has failed to prove that how the money has travelled back. WSL has stated that he used to discount cheques and return the cash. However the Assessing Officer in her order herself has given the findings that amount received from the assessee was duly invested in securities. So how the cash has exchanged hands and from where WSL has given cash. As there is no source of returning the cash, it is clear that the assertion of WSL and the Assessing Officer is without any basis.

Keeping in view the above it is prayed that justice may please be done to the assessee by reversing the order of the Assessing Officer and restoring the assessment as society to be assessed under sections 11 and 12.

Without prejudice to our above arguments and not admitting but for the sake of arguments, in case the Department feels that the purchase of software is not genuine and expenditure is to be disallowed, the whole of the received cannot be assessed as association of persons 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 Act 1961, states as under :

'164. (1) Subject to the provisions of sub-sections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate 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 association of persons or is a beneficiary under another society; or

(ii) the relevant income or part of relevant income is receivable under a society declared by any person by will and such society is the only society so declared by him ; or

(iii) the relevant income or part of relevant income is receivable under a society created before the 1st day of March, 1970, by a non testamentary instrument and the Assessing Officer is satisfied, having regard to all the circumstances existing at the relevant 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 created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, tax shall be charged on the relevant income or part of relevant income as if it were the total income of an association of persons :

Provided further that where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of or includes, profits and gains of business, the preceding proviso shall apply only if such prof its and gains are receivable under a society declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such society is the only society so declared by him.

(2) In the case of relevant income which is derived from property held under society wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons :

Provided 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.

(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 receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the income so applicable are indeterminate or unknown, the tax chargeable on the relevant income shall be the aggregate of-

(a) the tax which would be chargeable on that part of the relevant income which is applicable to charitable or religious purposes (as reduced by the income, if any, which is exempt under section 11) as if such part (or such part as so reduced) were the total income of an 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 charitable or religious purposes has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under any other society ; or

(ii) the relevant income is receivable under a society declared by any person by will and such society is the only society so declared by him ; or

(iii) the relevant income is receivable under a society created before the 1st day of March, 1970, by a non-testamentary instrument and 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 maintenance, tax shall be charged on the relevant income as if the relevant income (as reduced by the income if any, which is exempt under section 11) were the total income of an association of persons :

Provided further that where the relevant income consists of, or includes, profits and gains of business, the preceding proviso shall apply only if the income is receivable under a society declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such society is the only society so declared by him :

Provided also that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-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 clause (iii) and clause (iv) of sub-section (1) of section 160 are liable as representative assessee or any part thereof shall be deemed as being not specifically receivable on behalf or for the benefit of any one person unless the person on whose behalf or for whose benefit such income or such part thereof is receivable during the previous year is expressly stated in the order of the court or the instrument of society or wakf deed, as the case may be, and is identifiable as such on the date of 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, instrument or deed.'

Proviso to section 164(2) is absolutely clear that in case of applicability of section 13(1)(c) or 13(1)(d), only the income which has violated the provisions is to be taxed at the higher rate and whole of the income cannot be taxed.

The reliance is being placed on :
(i) DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust [2001] 249 ITR 533 (Bom).

(ii) CIT v. Fr. Mullers Charitable Institutions [2014] 363 ITR 230 (Karn), ITA No. 588 of 2007, decided by the honourable 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 registration revoked by worthy Commissioner of Income-tax has been restored hence it is to be assessed under sections 11-13. Even if we presume (not admitting), that purchase is not genuine, only disallowed portion is to be charged at higher rate and registration is not to be disturbed.

Keeping in view the above, it is prayed that justice may please be done to the assessee by quashing the illegal order passed by the Assessing Officer and assess the assessee as association of persons."
10. The learned Commissioner of Income-tax (Appeals) asked for a remand report from the Assessing Officer. The Assessing Officer's remand report dated September 15, 2014 is reproduced as under :

"Kindly refer to the letter No. CIT(A)/Jal/2014-l5/1020, dated August 20/25, 2014 on the subject cited above.

2. Submissions of the assessee received along with the above referred letter have been gone through. It is submitted that the contents of the submissions are by and large repetition of the sub missions made at the time of assessment proceedings. Assessments were framed after considering these submissions. Accordingly, reliance is placed on the assessment orders passed for the assessment years 2006-07, 2007-08, 2008-09, 2010-11 and 2011-12."

11. The assessee furnished the following counter comments dated September 22, 2014 to the Assessing Officer's aforesaid remand report :

"Apeejay Education Society The appellant under reference acknowledges receipt of your notice dated 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 addition to arguments filed before the Assessing Officer during the course of assessment proceedings. Main crux of the case is based on statement of Mr. Sonawani and the Assessing Officer has relied upon that, whereas, in assessment order the Assessing Officer has extracted the statement of Mr. Sonawani. For example :

Sonawani has stated that he used to discount the cheques and return the cash to the assessee. However the Assessing Officer has mentioned that it was RTGS or cheques were being deposited 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 Officer in the order, the sale is much more than the sale made to Apeejay Group. No reply on this from the Assessing Officer.

The Assessing Officer has failed to clarify which statement of Mr. Sonawani is reliable as he has given contradiction in all his statements.

These are some the examples. From the above it is clear that the Assessing Officer has nothing to rebut our contentions and has relied upon his order which itself contradicts the statement of Mr. Sonawani. Hence the statement of Mr. Sonawani 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 please be done to the assessee by quashing the illegal order passed by the Assessing Officer."

12. The following written submissions, dated September 26, 2014 were also filed by the assessee before the learned Commissioner of Income-tax (Appeals) :

"This is in continuation to our earlier submissions in the appeal under reference. As already stated the whole of the assessment is based on the statements of Mr. Sanjay D. Sonawani of Washington Software Ltd. (WSL). The statement is nothing but bundle of lies and is a shifting one. The value of shifting statement has been discussed by the honourable Calcutta High Court in Eastern Commercial's case and the same has already been filed with you along with submissions dated August 13, 2014. Even the Assessing Officer has applied section13(1)(c) read with section 13(3) just on basis of that false statement 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.

Once the Assessing Officer makes up his/her mind to apply section13(1)(c) read with section 13(3) and proposes cancellation of registration, onus lies on him/her to support the same with cogent and tangible evidence and it should not be based on surmises or imagination. The honourable Lucknow Bench of the Income-tax Appellate Tribunal in ITO v. Virendra Singh Memorial Shiksha Samiti [2009] 18 DTR (A.T.) 502 (Lucknow) (1-15) has held as under :

'It is an undisputed fact that various expenses claimed 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 acceptable. There is no material evidence collected by the Assessing Officer to prove the expenditure, if inflated, has resulted in the benefit to the founder member of the society. Therefore, the provisions of section 13(2) could not be invoked. There has to be direct nexus of out flow of money with the interested members.'

The honourable Agra-Bench of the Income-tax Appellate Tribunal in Shri Amol Chand Varshney Sewa Sansthan v. Addl. CIT [2013] 25 ITR (Trib) 211 (Agra) ; [2013] 95 DTR (Agra-Trib) 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 goods purchased was used by the managing trustee for his personal benefit. . . .'

The honourable Rajasthan High Court in Deputy CIT v. Cosmopolitan Education Society [2000] 244 ITR 494 (Raj) (30-32) has held as under (page 495) :

'The Commissioner of Income-tax (Appeals) has recorded a finding of fact. It was not known that any part of the income of the asses see-society was misutilised. For so saying, the appellate authority referred to the balance-sheet. The appellate authority further noticed that the assessee-society is a registered society under the Rajasthan Societies Act and that it is also recognised by the CBSE. If there was any misutilisation or mismanagement, action could be taken against the members of the society, but, from the records and facts, it is not possible to say that any amount of funds of the society was not utilised for educational purposes.'

Further reliance is also being placed on :
(i) CIT v. Sri Baldeo Ji Maharaj [1996] 84 Taxman 448 (All) (33-34).
(ii) Saveetha Institute of Medical and Technical Sciences v. Asst. CIT [2011] 12 ITR (Trib) 376 (Chennai) (35-48)

In our case while applying section 13(1)(c) read with section 13(3) the worthy Assessing Officer has just relied upon the statements of Mr. Sonawani, who has shifted his stand in every statement that too under oath. The various shifting stances have been explained in our submissions dated August 7, 2014. Even falsity of the statement has duly been confirmed by the Assessing Officer in 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 cash has been returned to the appellant. The enquiry by the Assessing Officer is one sided and he/she has not bothered to confirm the same from WSL and also to enquire that which statement is reliable. Complete investigation by the Assessing Officer is not based on any tangible material and is based on false statement of Mr. Sonawani. The pre-requisite for initiating action under section 13(1)(c) read with section 13(3), i.e., tangible materials and proper evidence is missing.

On the contrary the 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 material. No doubt it is the duty of the Assessing Officer to collect revenue, but being quasi-judicial authority, the Assessing Officer is supposed to act in a judicial manner and do justice to the assessee. The honourable Gujarat High Court in Surat City Gymkhana v. Deputy CIT [2002] 254 ITR 733 (Guj), (49-59) has referred to a citation of the honourable Supreme Court (CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC)) which states as under (page 747) :

'The taxing authorities exercise quasi-judicial 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 the assessee, they should be deemed not to have exercised it in a proper and judicious manner.'

Here in the case of the appellant, the Assessing Officer has acted in a biased manner with revenue in mind and has made his opinion on statement which is false and shifting and has not considered the genuine submissions of the appellant.

Even when a judicial authority when he takes some decision as administrative head keeping in view the revenue, he/she should come out of the shell of predetermined notions, and follow the law based on evidence as judicial officer. In case he feels difficult to come out of that shell, he should recluse himself from the case. In case he feels like continuing, he should analyse every evidence afresh and apply his judicious mind to deliver justice. The decision taken by your honour while deciding 12AA(3) was as administrative head and now you have to act as a judicial officer and your decision should be on the basis of evidence available before you and appellant can expect justice.

Now coming to section 13 reproduced below :
13. Section 11 not to apply in certain cases.-(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-. . .
(c) in the case of a society for charitable or religious purposes or a charitable or religious institution, any income thereof-
(i) if such society or institution has been created or established after the commencement of this 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-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), if such use or application is by way of compliance with a mandatory term of the society or a mandatory rule governing the institution :

Provided further that in the case of a society for religious purposes or a religious institution (whenever created or established) or a society 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 the provisions of clause (c) and clause (d) of sub-section (1), the income or the property of the society or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),-
(a) if any part of the income or property of the society or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both ;

(b) if any land, building or other property of the society or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation ;

(c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the society or institution for services rendered by that person to such society or institution and the amount so paid is in excess of what may be reasonably paid for such services ;

(d) if the services of the society or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation ;
(e) if any share, security or other property is purchased by or on behalf of the society or institution from any person referred to in sub- section (3) during the previous 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 income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees ;
(h) if any funds of the society or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971) in any concern in which any person referred to in sub-section (3) has a substantial interest.
(3) The persons referred to in clause (c) of sub-section (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) of the institution ;
(d) any relative of any such author, founder, person, member, trustee or manager as aforesaid ;
(e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. . .'

From the above it is absolutely clear that section 13(1)(c)(ii), 13(2) and 13(3) are relevant in this case. However the Assessing Officer has failed to prove that how the property of the society has been used for the benefit of the person referred in 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 the violation of Act lies on the Assessing Officer and in this case he/she has completely failed to prove the same with any tangible material/ evidence and his/her views are just based on surmises and mere assumptions which have no legs to stand in the eyes of law. Hence it is prayed that the relief may please be given to the assessee by directing the Assessing Officer to make the assessment restoring provisions of section 11 and section 12.

With prejudice for the sake of arguments but not admitting, even if it is presumed that there is violation as per Act, and registration is to be denied, the question arises, which income is to be taxed and at what rate. That is the time when section 164 comes into play. The CBDT vide Circular No. 387, dated July 6, 1984 ([1985] 152 ITR (St.) 1), (60-82) has clarified this controversy in paragraph 28 of the circular and has clearly held that tax at maximum marginal rate is to be charged only on the income which has not been used for charitable purposes and has forfeited the exemption due to section 13(1)(c) read with section 13(3). Hence in case it is presumed (but not admitted) that the assessee has not purchased the software and comes within the ambit of section 13(1)(c) and section 13(3), only that amount of software will be presumed to have not been used for charitable purpose and only that amount will forfeit exemption and will be taxed at maximum marginal rate.

Keeping in view the above, it is prayed that justice may please be done to the assessee by quashing the illegal order passed by the Assessing Officer and assess the assessee as association of persons."
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 tax by the Assessing Officer is not exigible to tax.

14. The learned Commissioner of Income-tax (Appeals), vide the impugned order dated September 26, 2014 held as under :

"6.6. I have considered the observations of the Assessing Officer as made by him/her in the assessment order as well as in the remand report. I have also considered the written submissions filed by the learned authorised representative of the assessee-society vide letters dated August 13, 2014 and September 26, 2014. I have 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 section 13(1)(c)/13(3) of the Act. The Assessing Officer has categorically held that the assessee-society has not purchased any software from M/s. Washington Software Ltd. and the entries reflected in the books of account in respect of purchases in the books of account of different entities of Apeejay Group of cases are bogus and in fact represent accommodation entries provided by Sh. Sanjay D. Sonawani through his company namely M/s. Washington Software Ltd. The Assessing Officer has further observed that Shri Vijay Berlia (trustee) was instrumental in arranging all these accommodation entries and has been directly benefitted by entering into such bogus purchase transactions. It was also observed by the Assessing Officer that in spite of enormous opportunities provided to the asses see-society during the course of survey operation at its various premises and also during the course of assessment proceedings, the assessee-society could not produce the original software CD or the hard disc of the computer where the software has been installed. On the other hand, the learned authorised representative of the assessee- society has submitted that the statement given by Sh. Sanjay D. Sonawani should not have been relied upon by the Assessing Officer while denying the deduction claimed by the assessee-society under sections 11 and 12 of the Act as he has given different statements at different occasions and being a shifty person his statement cannot be relied upon.

6.7. On careful consideration of the assessment order, remand report, written submissions filed on behalf of the assessee-society and its counter comments as 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 regard to providing accommodation entries to Apeejay Group of cases. He in his statement has tried to put blame on Sh. Parag V. Mehta with regard to providing accommodation entries but he has never turned back from his admission that the accommodation entries have actually been provided by him through his company M/s. Washington Software Ltd. It has also been noticed that the representatives of the assessee-society have also denied cross-examination of Sh. Sanjay D. Sonawani on one pretext or other. 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 representatives of the assessee-society. On one hand they want to cross-examine Sh. Sanjay D. Sonawani and on the other hand do not avail the opportunity on frivolous grounds. In fact the representatives of the assessee-society do not want to cross-examine Sh. Sanjay D. Sonawani and put blame on the Assessing Officer who has perfectly made arrangement for his cross-examination as per provisions of law. So the plea regarding not allowing cross-examination of Sh. Sanjay D. Sonawani is summarily rejected as it 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 during survey operations conducted at various premises of the group. Providing some print outs with the plea that these have been taken from the software will not prove that the software has actually been purchased in the absence of original software CD and hard disc of computer where it has been installed. Moreover, Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries and everything was done on his directions, the statements of various key employees/persons employed by the assessee group unambiguously prove without any doubt that the entries reflected in the books of account are just accommodation entries and nothing else. Onus entirely lies on the representatives of the assessee-society to produce original software CD and hard disc of computer where it has been installed. It is also interesting to note that the representatives of the assessee-societywho were present during survey operations have never taken the stand that the software has been installed in central server in head office otherwise the survey team would have found the truth at that time itself. Moreover, the Assessing Officer has dealt with each and every argument advanced by the learned authorised representatives of the assessee-society on its behalf and rejected each claim with solid reasoning in the representatives of the assessee-society (never tried to prove the genuineness of the purchase of the Software by producing original CD or hard disc or any other evidence but kept themselves 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-society is not having any CD or hard disc in its possession to prove that the software purchases are genuine.

6.8 The submissions made during appellate proceedings by the learned authorised representative of the assessee-society are no more different from that of the submissions made during assessment proceedings which have already been dealt with in detail assessment proceedings. I would also like to make it clear that the assessment framed by the Assessing Officer is not based only on the statement 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 discussed in the assessment order. The judicial pronouncements relied upon by the assessee-society are also distinguishable on facts. Moreover, the learned authorised representative of the assessee-society absolutely failed to demonstrate that as to how the facts of the judicial pronouncements relied upon by him are similar to that of the facts of the case of the assessee-society.

6.9 In view of the above stated facts and in the circumstances of the case, I concur with the findings of the Assessing Officer 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 accommodation entries. I further concur with his findings that the assessee-society has certainly violated the provisions of section 13(1)(c)/13(3) of the Act and is not eligible for deduction under sections 11 and 12 of the Act.

6.10 I do not find any force in the alternate plea taken by the learned authorised representative of the assessee-society that only that amount should be taxed at maximum marginal rate which has allegedly been misappropriated and corresponding depreciation expenses claimed thereon. The judicial pronouncements relied upon by the learned authorised representative of the assessee-society are also distinguishable on facts. In those cases there was not any misappropriation of society funds but violation was with regard to the provisions of section 11(5) of the Act. The reliance placed by the 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 about entire disallowance claimed under sections 11 and 12 of the Act and do not talk about part disallowance. My view is further supported by the following judicial pronouncements of various honourable High Courts/Income-tax Appellate Tribunals and the honourable Supreme Court :

1. DIT v. Bharat Diamond Bourse [2003] 259 ITR 280 (SC).
2. DIT v. Bharat Diamond Bourse [2004] 192 CTR (SC) 506.
3. CIT v. Shree Eklingji Trust [1985] 155 ITR 383 (Raj).
4. CIT v. Nagarathu Vaisiyargal Sangam [2000] 246 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. CIT v. Muthoottu Charitable Trust [1997] 227 ITR 203 (Ker).
13. CIT v. 21st Society of Immaculate Conception [2000] 241 ITR 193 (Mad).
14. CIT v. Gurukul Ghatkeswar Trust [2011] 332 ITR 611 (AP).
15. Action for Welfare and Awakening in Rural Environment (AWARE).

6.11 In view of the various judicial pronouncements as mentioned above, I am of the considered opinion that the Assessing Officer is fully justified in disallowing whole of the exemption claimed by the assessee-society under sections 11 and 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 Rs. 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 of the Act and thereafter bringing to tax the income of the assessee-society under normal provisions of sections 28 to 44 of the Act is, therefore, upheld. In the result, grounds Nos. 2 to 11 of appeal taken by the assessee-society are dismissed.

6. The ground No. 12 of appeal taken by the assessee-society is consequential in nature and do not require and adjudication as per settled position of law.
7. The ground No. 13 of appeal taken by the assessee-society is general in nature and do not require any adjudication at all.
8. As a result, the appeal filed by the assessee-society is dis missed."
15. Before this Bench, the assessee has filed written submissions, which have been reiterated in the oral arguments advanced by the learned counsel for the assessee. These written submissions are reproduced/referred to in respective succeeding paras.

16. The learned Departmental representative, on his part, has placed strong reliance on the impugned order. It has been contended that as rightly observed by the learned Commissioner of Income-tax (Appeals), the Assessing Officer was fully justified in disallowing the whole of the exemption claimed by the assessee-society under sections 11 and 12 of the Act, by invoking the provisions of section 13(1)(c)/13(3) thereof.

17. We have heard the parties and have perused the material placed on record. The learned Commissioner of Income-tax (Appeals) has upheld the disallowance of the deduction claimed by the assessee-society under sections 11 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 through his company, M/s. Washington Software Ltd., to the assessee.
(ii) The assessee-society had refused to cross-examine Sh. Sanjay D. Sonawani, on one pretext or the other.
(iii) The assessee had failed to produce the original CD of the Software, or the hard-disk of the computer where it was installed, though specifically asked for by the Assessing Officer.
(iv) Even in the survey at various premises of the Group, no evidence regarding purchase of software was produced.
(v) Mere providing of some 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.
(ix) The authorised representative of the assessee could not offer any satisfactory explanation, when asked as to whether either the original CD, or the hard-disc was available with the assessee.
(x) The assessment order was not based merely on the statement of Shri Sanjay D. Sonawani.
(xi) The case law cited by the assessee were distinguishable on facts.
(xii) The assessee's alternative plea that only the amount allegedly misappropriated and corresponding depreciation expenses claimed ought 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 providing accommodation entries to the Apeejay Group. He, in his statements, has tried to put the blame on Sh. Parag V. Mehta with regard to providing accommodation entries, but he has never turned back from his admission that the accommodation entries have actually been provided by him through his company, M/s. Washington Software Ltd.
19. The assessee has maintained in the written submissions, as under :

(i) The basis of reopening and the addition/disallowance is the statement of Sh. Sanjay D. Sonawani, which is relied on by the Revenue. There are patent contradictions in the statements of Sh.Sanjay D. Sonawani. Some of the contradictions have been mentioned at pages 615-617 of the paper book, which is the copy of the synopsis filed by the assessee before the Income-tax Appellate Tribunal in the appeal against cancellation of registration under section 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 statement of Sh. Sanjay D. Sonawani that cheques received from assessee were discounted from the market and cash was given to the assessee, whereas at pages 129-130 of the appeal paper book for the assessment year 2010-11, the Assessing Officer has recorded that cheques received by assessee were credited in the bank account of M/s. Washington Software Ltd. and were used by the said company to make investments in other companies. Similar finding is there in other years also.

(iii) At page numbers 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, whereas the chart reproduced by the Assessing Officer, of sales made by M/s. Washington Software Ltd., at page 88 of the appeal papers for 2006-07, shows that the sales are much more than the purchases made by the Apeejay Group. This shows that the statement of Sh. Sanjay D. Sonawani is incorrect.
(v) The Income-tax Appellate Tribunal, in its order dated May 8, 2014, while allowing registration under section 12AA, at pages 664- 665 of the paper book, noted the fact that the statements of Sh. Sanjay 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 separately. Not only there are glaring contradictions, but there are retractions also. Detailed sub missions were filed before the Commissioner of Income-tax (Appeals), which were forwarded to the Assessing Officer for his comments and remand report. The Assessing Officer has nowhere denied these facts in his remand report (paragraph 6.2 of the Commissioner of Income-tax (Appeals)'s order). In paragraph 6.3. of the Commissioner of Income-tax (Appeals)'s order, the rejoinder of the assessee has been noted, in which, these facts have again been highlighted.

(ix) The Commissioner of Income-tax (Appeals) has deliberately ignored these contradictions and has upheld the validity of the statement only for the reason that Sh. Sanjay D. Sonawani had retracted other parts of the statement, but with regard to the transactions with the assessee, he has not retracted.

(x) It is an admitted fact that there are glaring contradictions in the statements of Sh. Sanjay D. Sonawani and these contradictions go to the root of the matter. It is also an admitted fact that Sh. Sanjay D. Sonawani has been retracting and changing his stands in different statements. In such a situation, no evidentiary value can be attached to the statement given by Sh. Sanjay D. Sonawani. Reliance is placed on CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (pages 80 to 83 of CLC).

20. A comparative chart of the four statements of Sh. Sanjay D. Sonawani, recorded under section 131 of the Income-tax Act, has 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 :

21. The crux of the argument of the assessee is that since Sh. Sanjay D. Sonawani has taken mutually contradictory stands in his four statements, reliance on such statements by the authorities below is unsustainable in law. For this proposition, the assessee has sought to place reliance on CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) (copy placed at case law PB 80-83). For ready reference, all the said four statements of Sh. Sanjay D. Sonawani are being reproduced hereunder :

(i) Statement dated March 16, 2011 (APB 328 to 332)
Statement of Shri Sanjay D. Sonawani son of Shri Devidas Sonawani age 46 years occupation businessman resident of L-5, Mantri Park, Kothrud, Pune, recorded under section 131 of the Income-tax Act on oath on March 16, 2011 at the office of Deputy Director of Income-tax (Inv.), Aayakar Bhavan, 12 Sadhu Vaswani Chowk, Pune-411001.

Q. 1 Please identify yourself
Ans. I am Sanjay D. Sonawani son of Shri Devidas Sonawani 'aged 46 years occupation, businessman', resident of L-5 Mantri Park, Kothrud, Pune. My educational qualification is M.Com. (Master of Commerce).
Q.2 Please confirm that oath has been administered to you and the consequences of giving false statement on oath have been explained to you.
Ans. Yes I do confirm that an oath has been administered to me and the consequences of giving false statement on oath have been explained to me.

Q.3 Are you assessed to Income-tax ? Please provide your PAN and also brief about your sources of income.
Ans. Yes I am assessed to tax my PAN 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 Rs. 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 in lieu of my services as director. I have filed my return of income for the assessment year 2009-10. As far as M/s. Washington Softwares Ltd. is concerned return of income up to the assessment year 2010-11 have been filed.

Q.4 Please give the details regarding date of incorporation, board of directors, shareholding pattern of Washington Software Ltd.
Ans. This company was incorporated in the year 1995. The board of directors consists of :
01. Shri Mahesh Kadu, 02. Prafful Mehta and 03. Sanjay D. 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 account of which I was not in a position to pay attention to the day-to-day affairs of the company : All the other directors of the company namely (i) Shri Abhay Anant Shashtri, Pune, (ii) Late. Rohidas Kumbharkar, Pune and (iii) Shri Vinod Sonawane deserted the company. The employees also left the organisation and the source code was also stolen by some of the employees. To add to this the Development Credit Bank attached personal as well as company properties and the office premises was also attached. Thus, virtually there is no physical activity of any . . . . software development" after, financial year 2003- 04. The company since financial year 2003-04 is neither having the necessary set up for developing any software nor the man power and expertise required. As on date the company is virtually defunct with no activity since last seven years.

Q.6 Your authorised representative before undersigned on March 2, 2011 and March 11, 2011 had furnished the details of sales made by M/s. Washington Software Ltd. (WSL) from financial year 2003-04 up to current financial year. The details of such sales made are given below in a tabular manner.

Kindly refer to your reply to question No. 5 above whereby you have mentioned that there was no software development 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 Rs. 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 sale bills raised are non-genuine and bogus sale bills. The delivery challan numbers mentioned on the bills are false since such delivery challans are non-existent. I confirm that all these sales are in the form of accommodation entries provided to various corporate entities in order to help them inflating their expenses. My company, M/s. Washington Software Ltd. was never the direct beneficiary of the huge amounts received towards these non-genuine sales and my company used to only get 1 per cent. commission on the sale bill value of each bill.

Q.7. As replied by you in the preceding question, please explain the actual modus operandi in respect of providing such accommodation entries to these corporate entities ?

My company was in deep financial crisis in the 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 accommodation entries in the form of bogus sales as stated above for a consideration of 1 per cent. commission on such bills. He had asked me to open a current account at ICICI Bank, Nariman Point, Mumbai. I had only signed the documents in this regard and rest of the formalities were done by him. The cheque book of this account in which all the cheques, were signed by me, was kept in his personal custody and, accordingly he used to transact with this. Mr. Parag Mehta used to send me the soft copies/hard copies of such bogus sales bills, which I after signing used to send to Mr. Parag Mehta. I would like to confirm that I did not know to whom or to which parties these cheques were given or issued by Mr. Parag Mehta. In 2005 this account was closed and a new account was opened at Axis Bank, Kothrud Branch, Pune and in this case also the cheque book of this account in which all the cheques were signed by me, was kept in personal custody of Shri Parag Mehta and accordingly he used to transact with this. However, during the period of 2004-05, I was in prison for some time, the bills and invoices issued in this period are not in my knowledge and nor the company has received any money for that.

Q.8 After going through the balance-sheet of 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 stated above there was no any actual activity with regard to development of software. As such the figures debited are adjusted figures to 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 main investments the non-trade shares of various companies such as Ishu Software Ltd., Suryoda Allo Metal Powder Ltd., Amit Interlinked Steel P. Ltd. Angarika Investment and Financial 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 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 :

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 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 Rs. 32 lakhs during the abovementioned period from time to time in cash from Shri Parag Mehta. Over the turnover of Rs. 52 crores company was due for getting a commission of Rs. 52 lakhs but Shri Mehta duped for Rs. 20 lakhs and the company so far has got only Rs. 32 lakhs. This commission of Rs. 32 lakhs has not 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 Rs. 32 lakhs for various assessment years, the year-wise break up of this will be submitted to your honour shortly.

Q. 12 Do you want to say anything more.
Ans. No
Whatever stated in the above statement is true and correct to the best of my knowledge and belief. I have given this statement on oath in sound state of mind without any coercion, threat or undue influence. I have read over the statement and found it has been recorded correctly.

(ii) Statement dated April 12, 2011 APB 336-337

"Statement recorded under section 131 of the Income-tax Act, 1961. Statement of Shri Sanjay D. Sonawani son of Shri Devidas Sonawani age 46 years occupation businessman resident of L-5, Mantri Park, Kothrud, Pune, recorded under section 131 of the Income-tax Act on oath on April 12, 2011 at the office of Deputy Director of Income-tax (Inv.), Room No. 234, Scindia House, Ballard Pier, Mumbai-400038.

"I swear in the name of God that whatever I speak, I will speak only truth and nothing but the truth".

Q 1. Please identify yourself ? Where are you currently located ?
Ans. I am Sanjay D. Sonawani, son of Shri Devidas Sonawani, aged 46, occupation businessman, resident of L/5 Mantri Park, Kothrud, Pune. My educational qualification is M.Com (Master of Commerce). I am currently having a small space at 114/114A, Jolly Bhavan No. 1, 10 Marine Lines, Mumbai.

Q 2. Please confirm that oath has been administered to you and the consequences, of giving false statement on oath have been explained to you.
Ans. Yes, I do confirm that an oath has been administered to me and the consequences of giving false statement on oath 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 enumerated in answer to question No. 10. Also it appears clear to me that Shri Parag Mehta has been instrumental in issuing these cheques to sales parties from the accounts of M/s. WSL for the last seven years. From the above I can also conclude that you and Shri Parag Mehta have been issuing cheques to sales parties without any genuine transactions/sales. Please give your detailed comment on the same.

Ans. I would like to state that up till financial year 2003-04 the company was actually developing 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 bogus billing. Since I was in prison during this time, i.e., March 4 till June 2004 and my company was going through tough times as all our capital and reserves were locked up for the long-term investments, I had no option but to accept Mr. Anil Roy who approached me with this proposal to bogus billing. Since I was in prison during this time, i.e., March 4 till June 2004 and my company was going through tough times as all our capital and reserves were locked-up for the long-term investments. I had no option but to accept Mr. Anil Roy's and the other director's proposal to bail out the company from financial crisis.

We requested Mr. Parag Mehta who is a friend to let us use a table space in his office as we did not have an office in Mumbai. The relevant bank accounts were opened by us. We have used this office for our company purposes. The cheque books and slip books were kept with his office employees for ease of transaction as lot of our parties were from Mumbai.

In respect of Q. No. 6. I would like to make a slight correction to the answer. There are some sales which are genuine. The percentage of genuine sales would not be higher than 3 per cent. to 4 per cent.
In respect of Q. No. 9, I would like to state that the investments have been made from the capital and reserves of Washington Softwares Ltd. and are genuine in nature. All the investments were made directly by us. In some cases, we have sought Mr. Parag Mehta's advice.

In respect of Q. No. 11, I would like to state that it is true that the company has earned commission in cash from bogus billing of Rs. 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 say anything more ?
Ans. I promise to file revised returns of M/s. WSL for the relevant years distributing the income of Rs. 32 lakhs proportionate to the turnover and pay tax accordingly.
Whatever stated above is true to my knowledge and belief. This statement is given without any coercion, pressure or promise and on free will."

(iii) Statement dated May 12, 2011 (APB 343-346)
"Statement of Shri Sanjay D. Sonawani son of Shri Devidas Sonawani aged 46 years occupation businessman-resident 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"

Q.1. Please justify yourself ?
Ans I am Sanjay D. Sonawani, son of Shri Devidas Sonawani aged 46 years occupation businessman, resident-L/5, Mantri Park Kothrud, Pune. My educational qualification is M.Com (Master of Commerce).

Q. 2. Please confirm that oath has been administered to you and the consequences of giving false statement on oath have been explained to you ?
Ans. Yes, I do confirm that an oath has been administered to me and the consequences of giving false statement on oath have been explained by you.

Kindly refer to answer No. 3 given by you on April 12, 2011 under oath before me, wherein you have said that the cheque books and slip books, kept with his (Parag V. Mehta) employees. Please keep the cheque books slips ?

Ans. The cheque books and slip books were kept with Mr. who is the employee Mr. who is the employee Mr. Parag Mehta

Q4. How often did you come and sit in the office of Mr. Parag Mehta in order to transact the business ?
Ans. Up to 2007, the business was handled by Mr. Rohidas Kumbarkar and after his death, the business was drastically reduced and only one was there, i.e., Apeejay Group. However, to take care of routine and sit in Mr. Parag Mehta office once in 3 to 4 months.
Q. 5.
Q. 6. On whose directions did you issue bills and what was the frequency. Whether it was once a month, 15 days or every day ?
Ans. Up to 2007, the bills were been issued under the instructions of Mr. Rohidas Kumbarkar who was the director of the company and after that I have issued the bills and the frequency would be 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 having his office at 115, Jolly Bhawan No. 1, 10 New Marine lines, Churchgate, Mumbai, approached me and made an offer of providing accommodation entries in the form of above for a consideration of 1 per cent. commission on such bills. He had asked me to open a current account at ICICI Bank, Nariman Point, Mumbai. I had only signed the documents in this regard and rest of the form come by him. The cheque book of this account in which all the cheques were signed was kept in his personal custody and 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 personal custody of Shri Parag Mehta and accordingly he used to transact with this. However during the period of 2004-05 I was in prison for sometime, the bills and invoices issued in this period are not in my knowledge and nor the company has received any money for that.

Ans. 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.

Q 8. Who brought the clients 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 employer of the Apeejay Group.
Q 10. Did you give these bills after talking to any important persons of the interested companies ?
Ans. Since we were already giving bills to Apeejay Group prior to 2007, the requirement was never there.
Q 11. How were the cheques in respect of accommodation bills collected by you ?
Ans. Cheques RTGS were directly deposited by Apeejay Group in our bank.
Q12. How do you know Mr. Rohidas Kumbarkar ? And where did you meet him ?
Ans. Mr. Rohidas Kumbarkar was a director in our company since 2002 and he was a personal friend. He was well known businessman in Pune.
Q13. How do know Mr. Anil Roy and where did you meet him ?
Ans. Mr. Anil Roy was a financial journalist and I knew him since 2002 when we met during the share placement of our company.
Q14. How often did they, that is the directors, talk with you, say during the day ?
Ans. Between the period 2002 to 2007, we use to talk on a daily basis.
Q15. Where did they come and meet you ?
Ans. We use to meet every day in the office of the company in Pune.
Q16. Where do they live ? Kindly furnish their residential address and telephone/mobile number.
Ans. Mr. Rohidas Kumbarkar is no more. However his residential address is as under Vaishnavi Construction (Pvt) Ltd. Dhayri Phata, Sinhagad Road Pune-51.
I have no contact with Mr. Anil Roy since 2007 hence I am not able to furnish his mobile number and address. However I will try to get the same.

Q. 17. Why was your company de-listed ?
Ans. Our company was de-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 personal home software which we felt would sell in the market. However the software product market was very competitive and hence we could not sell enough to cover our expenses.

Q. 19. Where did you meet Mr. Parag V. Mehta ?
Ans. I had met Parag Mehta at the time of my public issue.
Q. 20. Please furnish residential address and telephone number ?
Ans. I do not have Parag Mehta's residential address. However his mobile number is 9821153776.

Q. 21. You have stated in your statement before Deputy Director 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 transactions of the company. I was mis-informed that he was involved and hence I have clarified the facts. I used to discuss my investments and future plans on mobile.

Q. 22. Which of the statements can I rely upon ? i.e. whether you are stating the truth in your statement before Pune Deputy Director of Income-tax (Inv.) on March 16, 2011 or before me (DDIT Inv. Mumbai) on April 12, 2011 ?
Ans. My statement given to you on April 12, 2011 is correct and it clarifies some misunderstanding which I had about Mr. Parag Mehta This statement dated April 12, 2011, should be taken final.

Q. 23. I am making you aware of the provision under section 277 of the Income-tax Act, 1961 (false statement in verification) and also provision of CRPC and CPC. Which I am reading to you right now. Why it should not be construed that you are making a false statement and prosecution may be launched against you ?
Ans. I have not made false statement in Pune on March 16, 2011. In fact at that time I was told that, I would have a heavy liability of 100 crores, so I got frightened and I took Mr. Parag Mehta's name thinking that he being a chartered accountant would be able to help me out. Further that retracted my statement dated March 16, 2011 in respect of the income disclosed by the company. I still reiterate and stand by the fact that we will be offering Rs. 32,00,000 as income of the company in respective years and pay tax thereon.

Q 24. Why not provision under section 277A (falsification of books 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 requested to take a lenient view of the matter.

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 detail ?
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 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 not aware of the facts and that Shri Mehta himself is guiding you.
Ans. I have never said I do not know the names of the parties. I use to contact Mukesh Jain and get the cheques discount through Deepika Enterprises and the question of Mr. Mehta guiding me does not arise. . .
Q. 30 Do you want to state anything more ?
Ans. No.

The above statement is given in my free will without any threat, coercion and the above information is true to the best of my knowledge."
(iv) Statement dated December 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 answers to the questions being asked hereunder, I shall speak the truth, nothing but truth and the only truth.

Q. 1 Please identify yourself.
Ans. I am Sanjay D. Sonawani son of Shri Devidas Sonawani aged 47 years, occupation businessman, resident of L-5, Mantri Park, Kothrud, Pune. My educational qualification is M.Com (Master of Commerce).

Q. 2. Please confirm that oath has been administered to you and the consequences of giving false statement on oath have been explained to you.
Ans. Yes I do confirm that an oath has been administered to me and the consequences of giving false statement on oath have been explained to me.

Q. 3. Are you assessed to Income-tax ? Please provide your PAN and also brief about your sources of income.
Ans. Yes, I am assessed to tax my PAN is ACZPS9915M. My source of income is salary drawn from M/s. Pushpa Prakashan Ltd., 302, Narayanpeth, Pune and also royalty in lieu of books written by me.

Q. 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. As far as my transactions as a director of Washington Software Ltd. are concerned, I would like to state that all the transactions of Washington Software Ltd. from financial year 2003-04 onwards without side parties were handled by Shri. Parag Mehta, chartered accountant based in Mumbai. All the details, regarding my dealing with Shri. Parag Mehta have been given in my earlier 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 of money have been deposited in the bank accounts of Washington Software Ltd. ?

Ans. As I told earlier in my statement dated March 16, 2011, Shri. Parag Mehta, chartered accountant, used to handle all the transactions with outside parties. I was told that Washington Software Ltd. issues bills to these outside parties. Subsequently cheques are deposited in the bank accounts of Washington Software Limited based on the bills issued to the outside parties. Further, this money was diverted to other 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 himself), M/s. Aashumi Chemicals P. Ltd. (company operated by the relative of Parag Mehta) etc. and handed over to the outside parties to whom we had earlier issued the bills. I must once again reiterate that no services against the issue of bills have ever been provided by M/s. Washington Software Limited since financial year 2003-04. In fact, no records of the same were maintained by me.

Q. 7 If it is to be believed that you do not posses any documents pertaining to the transactions with the outside parties, how come the details of sales made by M/s. Washington Software Limited to Appejay Education Society were filed by you vide your letter dated December 20, 2011 ?

Ans. Sir, in this regard, I contacted the office of Shri Parag Mehta, who sent me the requisite details by e-mail. I can show you my e- mail account to confirm this fact.

(As claimed by the assessee and as further requested by him, the e-mail account was allowed to operate the assessee. The mail was traced out and a screen shot of this mail is copied and pasted below after the permission received by Shri. Sonawani.)"

22. A perusal of the afore-quoted four statements of Sh. Sanjay D. Sonawani shows that in his first statement, Sh. Sanjay D. Sonawani stated that it was Sh. Parag Mehta, chartered accountant, who approached him and made an offer of providing accommodation entries. In his second statement, however, Sh. Sanjay D. Sonawani retracted this stand and stated that Sh. Parag Mehta did not approach him. In his 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. Sonawani said that in 2003, Sh. Rohidas Kumbharkar, director, deserted the company. In his third statement, however, he stated that the business of the company up to 2007 was handled by Sh. Rohidas Kumbharkar and that it was Sh. Rohidas Kumbharkar, who brought all the parties.

24. In his first statement, Sh. Sanjay D. Sonawani stated that all the sales were non-genuine (bogus) sales. However, in his second statement, he changed his stand and stated that there were some sales which were genuine.

25. 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. Sonawani stated that the cheque book was kept by Sh. Parag Mehta in his personal capacity and, accordingly, he used to transact with it, whereas in the second statement, it was deposed by Sh. Sanjay D. Sonawani that the cheque book was kept by Sh. Parag Mehta's official employees, for ease of transaction.

27. Therefore, whereas in the first statement, Sh. Sanjay D. Sonawani blamed Sh. Parag Mehta as the master-mind behind providing accommodation entries, in his second statement, he stated that 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 his third statement, in answer to question No. 3, Sh. Sanjay D. Sonawani stated as follows :
"The cheque books and slip books were kept with Mr. who is the employee of Sh. Parag Mehta." (stress supplied by us)

29. From the above, it is evident that all the four statements of Sh. Sanjay D. Sonawani are riddled with discrepancies. There are assertions and retractions and re-assertions and re-retractions, not only on one point, but with regard to numerous issues. The deponent, i.e., Sh. Sanjay D. Sonawani, has taken mutually intrinsically inconsistent and contradictory stands in all his statements. He was continually and continuously shifting his stand. He is, thus, decidedly, a very shifty and inconsistent person as a witness.

30. The learned Commissioner of Income-tax (Appeals) has concluded that the retraction by Sh. Sanjay D. Sonawani in his statements was that of the blame he had put on Sh. Parag Mehta in his original statement, but he had never withdrawn from his deposition of having provided accommodation entries to the assessee group. Thus, according to the learned Commissioner of Income-tax (Appeals), there was no inconsistency in this stand of Sh. Sanjay D. Sonawani and on this count, his statements were to be accepted.

31. While doing so, however, the learned Commissioner of Income-tax (Appeals) has failed to take into consideration the basic legal tenet that a statement has either to be accepted in full, or it has to be rejected in toto. There is no mid-way 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 man indulging in double speaking cannot be said, by any means, to be a truthful man at any stage and no court can decide as to on which occasion he was truthful. In the present case, in view of the above examination of the four statements of Sh. Sanjay D. Sonawani, it cannot be gainsaid that Sh. Sanjay D. Sonawani was definitely and clearly a shifty witness, whose conduct neutralised and negated his value as such a witness. He indulged in double speak in all his statements, leading to the inexorable 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 the Department.

32. Then, even in the remand report furnished by the Assessing Officer, the objection of the assessee in this regard has not been met, much less denied or controverted by the Assessing Officer.

33. Accordingly, the learned Commissioner of Income-tax (Appeals)'s observation accepting the statement of Sh. Sanjay D. Sonawani is ill founded and the same is struck down.

34. The learned Commissioner of Income-tax (Appeals) has further observed that "the representatives of the assessee-society have also denied cross-examination of Sh. Sanjay D. Sonawani on one pretext or the other". It was the learned Commissioner of Income-tax (Appeals)'s opinion that the representatives of the assessee-societydid not want to cross-examine Sh. Sanjay D. Sonawani, as they knew the truth ; that the Assessing Officer had made proper arrangement for cross-examination at Pune, but the representative of the assessee-society insisted on his presence at Jalandhar on the ground that he was the witness of the Department and he ought to be produced at a place where the assessee wanted ; and that in fact, the representative of the assessee-society did not want to cross-examine Sh. Sanjay D. Sonawani and instead, put the blame on the Assessing Officer, who had perfectly made arrangement for his cross-examination, as per the provisions of law. The learned Commissioner of Income-tax (Appeals) rejected the assessee's plea for allowing cross-examination of Sh. Sanjay D. Sonawani, observing that such plea was being summarily rejected, as it was the fault of the representative of 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 for the travel expenses of said person.

2. The assessee has asked for cross-examination before the Assessing Officer who has to adjudicate the matter. The said letter is also reproduced by the Income-tax Appellate Tribunal order of granting registration under section 12AA at pages 652-653 of the paper book. Reliance is placed on CIT v. Bhanwarlal Murwatiya [2008] 215 CTR (Raj) 489 para 7.

3. All the statements referred by the Assessing Officer are not recorded by him but are recorded by different 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 connectivity. Moreover, Pune is connected with Amritsar by air and Amritsar caters to the whole region including Jalandhar.

5. It is not the requirement that there should be airport in every small place. But what is to be seen that there is airport nearby which caters to that area. The purpose to this proviso to rule 19 is to procure the attendance of witness as far as possible to satisfy the requirement of law. Reliance is placed on the Punjab and Haryana High Court judgment in Surana Industries Ltd. 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 witness was examined by different officer at Pune/Mumbai and the assessee is being assessed at Jalandhar and adjudicating authority is also at Jalandhar.

7. The Revenue cannot ask the assessee to travel to Pune, when the Assessing Officer who has to adjudicate is at Jalandhar and statement is not recorded by him. The assessee has the right in asking right of cross-examination. The denial of cross-examination goes to the root of matter can such statement cannot be made basis for making addition/disallowance. Reliance is placed on the following decisions :

a) Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) ; and
b) Andaman Timber Industries v. CCE-Civil Appeal No. 4228 of 2006 (SC) [2016] 38 GSTR 117 (SC) (copy enclosed)."

36. On the other hand, the learned Departmental representative has supporting the learned Commissioner of Income-tax (Appeals)'s order, contended that the assessee has not been able to rebut the categorical finding of fact recorded by the learned Commissioner of Income-tax (Appeals), to the effect that it was the assessee, who had been avoiding cross-examining Sh. Sanjay D. Sonawani on one specious pretext or the other, which ploy was seen through by the learned Commissioner of Income-tax (Appeals), who rightly rejected the assessee's request for cross-examining Sh. Sanjay D. Sonawani.

37. Here, it is seen that the assessee filed the following letters of request before the Assessing Officer, asking for being allowed to cross-examine Sh. Sanjay D. Sonawani :

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 Department behind the back of the appellant and such person was not made available for cross-examination by the Assessing Officer, even after the appellant's with repeated specific requests. It is respectfully submitted that in the following judicial precedents, it has been consistently held that the ex-parte statements/ recorded behind the back of the assessee cannot be relied without allowing opportunity of cross-examination of the witness/author of such document to the assessee and that material 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).
(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 (P&H).
(ix) Anupam Agencies v. State of Punjab 98 STC 338 (P&H).
(x) Prakash Chand Mehta v. CIT [1996] 220 ITR 277, 279 (MP).
(xi) Sona Electric Co. v. CIT [1985] 152 ITR 507 (Delhi).
(xii) CIT v. D. M. Joshi [1999] 239 ITR 315 (Guj).
(xiii) Amarjit Singh Bakshi (HUF) v. Asst. CIT [2003] 263 ITR (AT) 75, 151 (Delhi) (TM).
(xiv) Mahes Gulabrai Joshi v. CIT (Appeals) [2005] 95 ITD 300 (Mum).
(xv) Monga Metals (P) Ltd. v. Asst. CIT [2000] 67 TTJ (All) 247.
(xvi) Sarita Devi Kajaria v. ITO [2005] 276 ITR (AT) 34 (Kol) ; [2004] 89 ITD 109 (Kol) (TM).
(xvii) ITO v. Pukhraj N. Jain [2005] 95 ITD 281 (Mum).

The honourable Delhi High Court in CIT v. Dharam Pal Prem Chand Ltd. [2007] 295 ITR 105 (Delhi) has held that (headnote) :

". . . the Assessing Officer had based his assessment order on the report obtained from the research institute. The correctness of that report itself having been under challenge by the assessee who had not only filed objections thereto but also sought permission on several occasions to cross-examine the analyst even agreeing to pay the necessary expenses, the report could not automatically have been accepted. Since the Assessing Officer did not permit the correctness or otherwise of the report to be tested, there was a clear violation of the principles of natural justice by him in relying upon it to the 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 opportunity to cross-examine the witness with a condition that he being witness of the Department be called to Jalandhar and the assessee should not be put to hardship to go to Pune. Being a law abiding citizen the assessee even offered to pay for the expenses of the witness forgetting that he is witness of Department and it is for the Department to produce him at its own cost. The honourable Calcutta High Court in CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) has held as under (page 110) :

'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-examination and re-examination, if necessary.'

The Assessing Officer has rejected the request of the assessee citing the reason that Pune and Amritsar are not having direct flight. Hence it is clear that statement was recorded behind the back of the assessee and no opportunity was given to cross-examine that being basic right of the assessee. No addition can be made on the basis of such statement."

39. Along with request dated February 28, 2013 for cross-examination made by the assessee before the Assessing Officer, the assessee had deposited a sum of Rs. 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, want to cross-examine Sh. Sanjay D. Sonawani at all, as this suited the assessee's nefarious designs. The learned Commissioner of Income-tax (Appeals) has harboured the view that the assessee actually wanted to do away with and forego the genuine opportunities provided to it by the Assessing Officer to cross-examine Sh. Sanjay D. Sonawani, on one pretext or the other. Is it so ?

41. The impasse which ensued was that whereas the assessee wanted to cross-examine Sh. Sanjay D. Sonawani before the Assessing Officer at Jalandhar, the Assessing Officer at Jalandhar was of the opinion that the cross-examination ought to be conducted at Pune. Now, the four statements of Sh. Sanjay D. Sonawani were recorded by the ADITs, at Pune and Mumbai. The adjudicating authority, on the other hand, is undeniably the Assessing Officer at Jalandhar. This is so, obviously because all the assessees are located in Jalandhar and, therefore, it is the Assessing Officer at Jalandhar, who has the territorial jurisdiction over the assessee, and the Assessing Officer at Jalandhar being the adjudicating authority, it is he who was to record the evidence relevant to such adjudication. It is in pursuance of this, that it was only logical and legal that the cross-examination of Sh. Sanjay D. Sonawani be got conducted by the Assessing Officer at Jalandhar, before himself only and not at Pune, or elsewhere.

42. As per section 131 of the Income-tax Act, 1961, the Assessing Officer shall, for the purposes of 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, namely : . . .

(b) enforcing the attendance of any person . . . and examining him on oath."
"Assessing Officer", as per section 2(7A) of the Income-tax Act, 1961, means, inter alia, the Assessing Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1).

43. Section 120(1) of the Act states that the Income-tax authorities shall exercise all or any of the powers assigned to them by or under the Act, in accordance with such directions 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 the area, and in respect of any other person residing within the area. Section 124(1) reads as follows :

"Section 124(1). Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction-

(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and

(b) in respect of any other person residing within the area."

45. From the above provision, it is evident that the Assessing Officer of an area has jurisdiction over the persons either carrying on business or profession within such area, or residing therein. Such Assessing Officer, as the designation itself suggests, assess the income of the residents of his area. Therefore, he is the adjudicating authority of his area. For such adjudication, the Assessing Officer would require the attendance of persons, for examining them as witnesses. It is for enforcing such attendance of witnesses, that the Assessing Officer has been vested with the same powers as are vested in a court under the Code of Civil Procedure, when trying a suit.

46. Now, as per section 30(b) of the Code of Civil Procedure., the court may issue summonses to persons whose attendance is required, 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 reasonable in all matters relating to the delivery and answering of interrogatories, the admission of documents and facts, and the discovery, inspection, production, impounding and return of documents or other material objects producible as evidence ;
(b) issue summonses to persons whose attendance is required either to give evidence or to produce documents or such other objects as aforesaid ;
(c) order any fact to be proved by affidavit."

47. In accordance with the above, it is the adjudicating 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 of Sh. Sanjay D. Sonawani ought to have been allowed to have been undertaken by the assessee. True, the four statements of Sh. Sanjay D. Sonawani were recorded by the ADIT(s), at Pune and Mumbai. This, however, would not alter the afore-elaborated legal position.

49. In this regard, the observation of the learned Commissioner of Income- tax (Appeals), that the plea of the assessee that the cross-examination of Sh. Sanjay D. Sonawani be allowed at Jalandhar and not at Pune, was merely a specious plea 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 alleged "fault" of the assessee to not avail of the opportunity provided for cross- examination was not a fault at all, but was wholly as per a correct construction of the relevant provisions of law, as above.

50. In furtherance of the assessee's request to cross-examine Sh. Sanjay D. Sonawani at Jalandhar, the assessee had duly deposited travel expenses/ diet money amounting to Rs. 15,000. Then, the assessee has sought to place reliance on the provisions of Order XVI, rule 19 of the Code of Civil Procedure, contending that even the law applicable provides for a situation where the witness to be examined is located far away from the court. Order XVI, rule 19 of the C.P.C. provides as under :
Order XVI Summoning and attendance of witnesses

"Rule 19. No witness to be ordered to attend in person unless resident within certain limits.-No one shall be ordered to attend in person to give evidence unless he resides-
(a) within the local limits of the court's ordinary original jurisdiction, or

(b) without such limits but at a place less than one hundred or (where there is a railway or steamer communication or other established public conveyance for five-sixths of the distance between the place where he resides and the place where the court is situate) less than five hundred kilometers distance from the Court-house :

Provided that where transport by air is available between the two places mentioned in this rule and the witness is paid the fare by air, he may be ordered to attend in person."

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. In this regard, in Surana Industries Ltd. v. Surindra Engineering and Trading, vide order dated July 10, 2002 (copy placed on record on behalf of the assessee), it has been held by the hon'ble jurisdictional High Court, as follows :

". . . the object of the proviso appears to be to procure the attendance of witnesses as far as possible to appear before the court to satisfy the requirement of ordinary procedure which is followed in every case. It has ramblings of best evidence rule."

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, therefore, it is nowhere the requirement of law that there should be an airport in each and every city. What is required is that the catering airport must be within reasonable reach, as is the case with the Amritsar Airport, so far as regards Jalandhar (Amritsar being about 80 kms away or, at a stone's throw, so to say, from Jalandhar).

53. In Surana Industries Ltd. v. Surindra Engineering and Trading (supra), it has also been held, following Indrajeet Roy v. Bank of Baroda, AIR 1991 Orissa 45, 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 the assessee.

54. The observation of the learned Commissioner of Income-tax (Appeals) is that it was the fault of the assessee, who repeatedly avoided the cross- examination of Sh. Sanjay D. Sonawani at Pune. In this regard, it remains undisputed that the statements of Sh. Sanjay D. Sonawani were recorded by the ADIT(s) at Pune and Mumbai. However, the cross-examination requested by the assessee was required for the purposes of the assessment of the assessee, which was to be made at Jalandhar. It is, therefore, that the cross-examination was required to be conducted before the adjudicating Assessing Officer, i.e., the Assessing Officer at Jalandhar, and not before the ADIT(s) at Pune. Hence, the learned Commissioner of Income-tax (Appeals) 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 provisions of law, as discussed hereinabove.

55. Then, once the cross-examination of Sh. Sanjay D. Sonawani was disallowed to the assessee, the statement of Sh. Sanjay D. Sonawani could not in law have been utilised against the assessee, as has wrongly been done, transgressing the natural justice principle of audi alterem partem.

56. In Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC), it has been held, inter alia, that it is true that the proceedings under the Income-tax law are not governed 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 the bank with reference to the statements made by him ; and that there was neither any explanation regarding what happened when the manager appeared in obedience to the summons referred to in the letter, nor what statement he had made. In the present case too, the Income-tax authorities were bound to allow the assessee to cross-examine Sh. Sanjay D. Sonawani before the adjudicating Assessing Officer, i.e., the Assessing Officer at Jalandhar, which was illegally not done, as discussed.

57. In Andaman 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 principles of natural justice because of which the asses see was adversely affected. It is to be borne in mind that the order of the learned Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that the rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.

As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail of the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained 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 also observed that the representatives of the assessee-society insisted for the presence of Sh. Sanjay D. Sonawani at Jalandhar on the ground that he was the witness of the Department and he should be produced at a place where the assessee wants. This, according to the learned Commissioner of Income- tax (Appeals), amounts to a frivolous insistence for cross-examination of Sh. Sanjay D. Sonawani. Now, may be that the reason given by the assessee to ask for the cross-examination of Sh. Sanjay D. Sonawani 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, since the assessment of the assessee was to be finalised by the Assessing Officer at Jalandhar. Mis-comprehension and non-comprehension of an applicable mandatory statutory provision of law cannot result in denial of the benefit of the prescription thereof to one legitimately entitled to it. Accordingly, this observation of the learned Commissioner of Income-tax (Appeals), is also not sustainable and it is rejected.

59. The learned Commissioner of Income-tax (Appeals) has observed that the assessee-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 absence of the original software CD and the hard-disc of the computer where it had been installed ; that moreover, Sh. Vijay Berlia was directly instrumental in arranging the accommodation entries and everything was done on his direction ; that the statement of various key employees/ persons employed by the assessee-Group unambiguously proved without any doubt that the entries reflected in the books of account of the assessee were just accommodation entries and nothing else ; that the onus lay entirely on the representatives of the assessee to produce the original software CD and hard-disc of the computer where it had been installed ; that the representatives of the assessee-society, who were present during the survey operations, had never taken the stand that the software had been installed in the central server in the assessee's Head Office, otherwise, the survey team would have found out the truth at that time itself ; and that when asked as to whether the original CD of the software, or the hard-disc of the computer was available with the assessee-society, the authorised representative of the assessee-society could not offer any satisfactory explanation.

60. The assessee, in this regard, has submitted that Ms. Anita Paul, Principal, Apeejay School, J-Block, Gurudwara Road, Saket, New Delhi, of the assessee-society, had, in her statement (APB 373A-373C) dated March 29, 2011, recorded under sections 132(4)/133A of the Income-tax Act, 1961, confirmed that the software had 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 Act, had confirmed that the software had been supplied by M/s. Washington Software Ltd. The assessee has contended that the computer software was installed at its head office and the payment made therefor was made by the different schools, as decided by the managing committee.

61. The aforesaid statement of Ms. Anita Paul is reproduced hereunder for ready reference :

"I have been administered the oath by Sh. H. S. Dahiya, Income- tax Officer, that I shall speak the truth and nothing but truth. 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.

Q. 1 Please identify yourself.
Ans. I, Anita Paul, aged 52 years wife of Sh. Sumeet Paul r/o Cii/ 602 Belvedere Apartments, Charmwood Village, Faridabad. I am showing you my driving licence No. DL No. 338509Y (photocopy enclosed) as my proof of identity.

Q. 2 Please confirm that oath has been administered to you and the consequences of giving false statement on oath have been explained to you.
Ans. Yes.

Q. 3. In what capacity you are present here ?
Ans. I am present here in the capacity of Principal, Apeejay School and have been working here since March 1, 2007 as Principal.
Q. 4 Who are persons in the management of this institution ?
Ans. There are many persons in the management and I am providing a list of the same.
Q. 5 How many schools/institutions are there in India/abroad ?
Ans. I am giving a list of schools/institutions in India/abroad.
Q.6 Do you use any software for use of this school ?
Ans. Yes.
Q.7 What are the different softwares that you use, please explain ?
Ans. I cannot name the software which are used in this school.
Q.8. Which are the companies from whom these softwares were brought.
Ans. The list is as under :
1) Softlink Asia Pvt. Ltd.
2) Tally Software
3) Integrated Solutions
4) Microworld
5) Taarak India P. Ltd.
6) Washington Software Ltd.
Q.9. Do you purchase the software from M/s. Washington Software Ltd. ?
Ans. Yes.

Q.10. How you come into contract with the company, M/s. Washington Software Ltd. ?
Ans. I have not got in touch with M/s. Washington Software Ltd.

Q.11. Do you know the person in Apeejay Management who got in touch with M/s. Washington Software Ltd. for purchase of these softwares ?
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 installing these softwares to the head office ?
Ans. No, we did not send any requisition for the same.

Q.15. On whose directions you make the payments to M/s. Washington Software Ltd. ?
Ans. As per the signature on the invoice, the payments have been approved by Sh. Vijay Kumar Berlia, General Secretary, Apeejay Edu cation Society, the payments were made to M/s. Washington Software Ltd.

Q.16. As per the purchase bills of softwares bought from your school office, please confirm which of these softwares 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 Rs. 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 never asked about the installation of the softwares.

Q.18 Do you know the authorized signatory for M/s. Washington Software Ltd. ? On whose invoice you have signed the vouchers ?
Ans. No, I do not know the authorized signatory.

Q.19 Which are the other expenditure for which you make the payment and not installed/received at your school ?
Ans. The details will be submitted as I do not remember right now.

Q.20 During the survey proceedings it was seen from computer stock register that 2 softwares dated 16/06--. What you say in this regard ?
Ans. In the year 2003-04, I was not working in this school, voucher for 2006, the entry has not been made inadvertently but the entry has been made in the balance-sheet.

Q.21. Are you filing your Income-tax return, please give your PAN or copy of Income-tax return filed.
Ans. Yes, I am filing my Income-tax return regularly with PAN AECPP505. At present I do not remember the exact ward/circle.

Q.22. I am again asking you that the software purchased vide voucher dated March 25, 2008, September 16, 2006, February 11, 2006 and March 9, 2004 are not installed at your school. In this regard, I am giving you another opportunity-check and confirm your IT professional at your school ?

Ans. No, they are not installed. I have checked up with the IT professionals whose signatures are attested below :

Q.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. Department of the school.
Q. 25 Do you want to say anything more ?
Ans. No.

62. A perusal of Ms. Anita Paul's statement shows that in response to Q. No. 9, she confirmed that they (the assessee) purchased the software from M/s. Washington Software Ltd. Answering a part of Q. No. 13, i.e., as to who the person responsible for receiving the software was, she stated that 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 course of search/survey proceedings at Apeejay Satya House, 14, Commercial Complex, New Delhi.

I have been administered the oath by Sh. S. K. Chatterjee, Deputy Director of Income-tax (Inv), that I shall speak the truth and nothing but the truth. I have further been made aware of the fact that any false or untrue statement by me hereunder shall make me liable to prosecution under the Indian Penal Code and under the Income-tax Act, 1961.

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 Societyis my employer. I and my team implement the hardware, software, networking, internet band width, in the institutions ; I also do some amount of website related implementation.

Q. 4. You are hereby shown copy of account of M/s. Washington Software Ltd. in the books of the ApeejayEducational Society for financial year 2010-11. Please state what kind of material/services are procured from the above company.

Ans. So far is copy of account is concerned I know nothing as this is not my Id. However Washington Software Ltd., I am aware has been supplying our upgrading ERP/Talent search software, admission software, fee software and computer aided learning software.

Q. 5. Please state when these softwares were supplied, who had provided the basic requirement/frame work for the preparation of the software. How the software was supplied. How many time 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 software on CD by the management, Dr. Satya Paul. My team was responsible for in putting the date which varies from year to year. Some 2-3 years back the upgraded form of some of the softwares were also supplied by M/s. Washington Softwares Ltd.

Q. 6. How did you know that software were supplied by M/s. Washington Softwares Ltd. Do you have any kind of evidence document of otherwise in, support of your claim.

Ans. Dr. Satya Paul on a few occasions once or twice called me and related persons and would 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, Fees, Website and ERP. These are the once I dealt with.

Q. 8. As you said earlier you and your team were assigned with the job of implementation and execution of the said softwares. Please state in which places these softwares are implemented.

Ans. These softwares are mostly installed in the Apeejay School, Delhi, NCR except for few which were only installed on Apeejay School Delhi.

Websites : All Schools
Admission Softwares : Sheikh Sarai, Saket, Pitam Pura, Delhi.
Apeejay Talent Search Software : 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 to be from M/s. Washington Softwares Ltd. Do you have any other evidence, other then the words of chairman that those were procured from M/s. Washington Softwares Ltd.

Ans. He mentioned this several years back and then once again 2- 3 years back over and above this, I do not here any other evidence nor did I ever ask about the softwares. These do not pertains to my scope of work that the origin of the software.

Q. 10. Have you had any occasion to communicate with any person of M/s. Washington Software Ltd. in respect of implement often or execution of their softwares ?
Ans. No, Never.

Q. 11. There you ever tried to ascertain whether those softwares were actually applied by the above company and no other because usually, softwares CDs contains the name of the developers also.
Ans. No, I have never ascertained.

Q. 12. Please produce the software CDs purportedly supplied by M/s. Washington Software Ltd.
Ans. We can show you the softwares installed on the system of the office. However we do not have the original softwares CDs of M/s. Washington Softwares Ltd.

Q. 13. We have searched for the above CDs along with you and with your team and could not find the original CDs purportedly supplied by the above company. Your people have also shown us the softwares purportedly procured from the above company. However nowhere in the above software the name of M/s. Washington Software Ltd. appeared rather the name of your institution, i.e., Apeejay Education Society. Can you show us any evidence 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 be ascertained, some of your institutions have categorically stated that they had received bills of above company from head office and no such software were ever installed in their systems. Please submit the comments on the above.

Ans. The ATSE software would certainly be present in the school systems. Though we could not show the logo of Washington Software in the H.O. System, we do here the installed upgrades of the software at the H.O. some of these can be seen in the office. I do not here any 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 Washington Software Ltd.
The statement is temporarily concluded.
Q. 17. Where are the software purportedly supply by M/s. Washington Software Ltd. notable.
Ans. These softwares have been installed in the server/system impounded by you today during the course of survey proceeding.
Q. 18 Do you want to say anything ?
Ans. Nothing.
I have read the above statement and found it to be correctly recorded. I have given this statement without any fear, forces or coercion."

64. He was asked Q. No. 4, 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 times and when these softwares were upgraded. Sh. Amitava Misra stated that the softwares had been supplied over a period of 5-6 years ; that they were given the softwares on CD by the management and that some 2-3 years earlier, the upgraded form of some of the softwares had also been supplied by M/s. Washington Software Ltd. By virtue of Q. No. 7, Sh. Amitava Misra was asked to explain the exact particulars of the softwares purportedly supplied by M/s. Washington Software Ltd., and he responded by stating that the softwares supplied by M/s. Washington Software Ltd., the ones which he dealt with, were softwares related to admission (school) talent scholarship, fees, website and ERP. To Q. No. 8, he replied that the softwares were mostly installed in Apeejay School, Delhi, NCR, except for a 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 once again 2-3 years earlier, stating that those CDs, though, were from M/s. Washington Software Ltd. ; and that apart from this, he did not have any other evidence that those softwares had been obtained from M/s. Washington Software Ltd. By way of Q. No. 12, Sh. Amitava Misra was asked to produce the software CD purportedly supplied by M/s. Washington Software Ltd. He responded by stating that they could show the software installed in the system of the office ; and that, however, they did not have 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 ApeejayEducation 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. Misra responded in the negative. Responding to Q .No. 14, he stated that they did have the installed upgrades of the software at the head office and that some of these could be seen in the office. To Q. No. 15, he replied that most of the upgradation master entry had been done by them and not by M/s. Washington Software Ltd. In Q. No. 17, he was asked as to where the softwares purportedly supplied by M/s. Washington Software Ltd. were. Sh. Amitava Misra replied that these softwares had been installed 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 institutions of the assessee-society. Ms. Anita Paul confirmed that the software had been purchased from M/s. Washington Software Ltd., and that it may have been installed at the assessee's head office. The learned Commissioner of Income-tax (Appeals) failed to take into consideration the fact that the Assessing Officer, in deciding against the assessee, relied only on her response to Q. No. 22, in response to which, she had stated that the software had not been installed in her school. It is trite law, as discussed supra, while dealing with the statements of Sh. Sanjay D. Sonawani, that a statement has to either be accepted in full, or fully rejected. The deposition of Ms. Anita Paul in response to Q. No. 3, that the software may have been installed at the assessee's head office at 14, Commercial Complex, Masjid Moth, GK-II, New Delhi, was illegally ignored by the Assessing Officer and this very material discrepancy was not considered by the learned Commissioner of Income-tax (Appeals), causing prejudice to the assessee.

66. Apropos the statement of Sh. Amitava Misra, the position remains much the same. He too maintained, in response to Q. No. 12 that the software installed in the system of the office (the head office at Apeejay House, 144 Commercial Complex, GK-II, New Delhi), where the statement of Sh. Amitava Misra was recorded during the course of the survey proceedings, as available at APB 412A, in the first para thereof, could be shown to the survey team. In response 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 pertaining to all the assessment years involved. This discrepancy in the order under appeal takes on an intense glare in the face of the undisputed fact that the server/system where the softwares were stated to have been installed, stood statedly impounded by the survey team during the survey proceedings conducted on March 29, 2011, at the head office of the assessee-society, located at Apeejay Satya House, 14 Commercial Complex, GK-II, New Delhi. The server having been impounded by the survey team and not 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 Sh. Amitava Misra was, therefore, again, illegally ignored by the learned Commissioner of Income-tax (Appeals).

69. In accordance with our above observations, it is patent that the observations made by the learned Commissioner of Income-tax (Appeals) are observations made merely on the basis of bald assumption and presumption and they are, as such, unsustainable in the eye of law.

70. Thus, remarkably, whereas in the case of the statements of Sh. Sanjay D. Sonawani, convenient parts thereof were 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 value. However, it has nowhere been held that such statements cannot be taken into consideration for collateral purposes.

72. Then, the learned Commissioner of Income-tax (Appeals) has observed that no evidence was ever produced with regard to purchase of the software even during the survey operations conducted at various premises of the group. This observation, however, has also been made in stark oblivion of the fact that, as discussed above, the computer server wherein the software, stated to have been purchased from M/s. Washington Software Ltd., stood installed, had, per se, physically been impounded during the survey conducted at the central/head office of the assessee-society.

73. Thus, impounding of the computer server at the head office of the assessee also puts to naught the observation of the learned Commissioner of Income-tax (Appeals) that the representatives of the assessee-society, who were present during the survey operations, had never taken the stand that the software had been installed at the central office of the assessee. Would that the server impounded had been examined ! However, nothing in this regard has been brought to the fore by the Department and we would be loath to register any comment in this regard.

74. Further, the learned Commissioner of Income-tax (Appeals) has observed that providing some printouts with the plea that they had been taken from the software, would not prove, in the absence of the original CD and the hard-disc of the computer 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 stated that though the name of M/s. Washington Software Ltd. does not appear on the screen of the software, as objected by the Assessing Officer, the same appears in the source code of the software, as also stated in the report of the expert (which report we will presently discuss).

75. Tainting the printouts provided by the assessee as merely print outs not proving the software does not buttress or bolster the finding recorded by the learned Commissioner of Income-tax (Appeals), particularly in 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 been asserted as to what was contained in the central server impounded in the survey proceedings at the head office of the assessee. Rather, as taken note of, the observation of the learned Commissioner of Income-tax (Appeals) is that the assessee failed to produce the hard-disc of the computer where the software purchased from M/s. Washington Software Ltd. had been installed.

76. At the cost of repetition, Sh. Amitava Misra, in his statement, in response to Q. No. 17, had categorically stated that the software stood installed in the server/system impounded by the survey team during the survey proceedings. He had also responded to Q. No. 12, pointedly stating that the software installed in the system of the office could be shown to the survey team.

77. Further, it also remains undisputed, and which fact has nowhere been discussed by the learned Commissioner of Income-tax (Appeals) in the order under appeal, that the assessee, on having been asked to tender corroborative evidence that the software stood installed at its head office, had filed an expert report (APB 24-25) from M/s. Trident International System Pvt. Ltd., confirming that the programme stood installed at the head office of the assessee from 2004 to 2011. The said report dated September 11, 2012 is reproduced hereunder :

Sub : Software Certification of "ERP Software for School" installed at Apeejay Education Society.

This is to certify that Trident Information Systems Pvt. Ltd. (with office at M-31A, M-Block Market, Greater Kailash Part II, New Delhi- 110048, India) 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 through the various modules and reports of the software along with the source code available at the office of the Apeejay Education Society (AES).

The following observations were made by the Trident team :
(1) The software 'ERP Software for school' (multi-user and client- server based) was found installed on the computers of the Apeejay Education Society's Central Office.
(2) The software installed at the Apeejay Education Society premises comprised the following modules and relates functionalities:

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 calculation and disbursement
Salary component its processing, reimbursement, provident fund, loan
Staff attendance, deductions, increments and their promotions
Leave maintenance
Final settlement
ITAX/TDS calculation
Multiple reports
Inventory module
Procurement process
Stock management system
Multiple reports
Financial accounting module
Opening and closing of financial year
Manage groups and accounts
Budget entry
Voucher entry
Asset management
Interface with payroll and inventory
Multiple reports

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 ApeejayEducation Society. However, there was no data in the financial accounting module. Each of the modules has multiple report- generation facilities (which are printable)."

78. A perusal of the above report of the expert, M/s. Trident International Pvt. Ltd., clearly shows that it has been certified by the expert that the software was installed at the assessee's central office and it was functional for the past several years, i.e., it contained data from 2004 to 2011. The report, inter alia, also certifies that the name of M/s. Washington Software Ltd. is indicated in the source code of the software. This report adequately meets the Assessing Officer's objection in this regard. However, this aspect of the matter has also remained untouched by the learned Commissioner of Income-tax (Appeals), in so far as this report failed to earn even as much as a mere mention in the order under appeal.

79. And not only this, the assessee had requested to the Assessing Officer, as it also brought to the knowledge of the Commissioner of Income-tax (Appeals) (page 74, 1st para of this order) that the Department itself appoint an expert to verify the contention of the software having been installed at the head office of the assessee. This request was also made by the assessee by way of written submissions dated March 25, 2013 (APB 39- 43, relevant portion at APB 42, 4th para), before the learned Commissioner of Income-tax, Jalandhar-II, in proceedings under section 12AA(3) of the Act. This request reads as follows :

"On the contrary we have provided in our replies most of the evidence 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 evidence. Still to meet the ends of justice and to satisfy you, we would request you to depute some expert from your Department to visit our central office and verify the software. In case any financial implication is there we are ready to bear that and if you desire we can pay in advance."

80. However, the above request of the assessee was not acceded to, for reasons neither revealed to the assessee, nor discernible from the record.

81. In this manner, it is also incorrect on the part of the 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 satisfactory explanation, when asked if the original CD, software, or hard-disc was available with the assessee- society.

82. Then, as to on what basis the learned Commissioner of Income-tax (Appeals) has observed that Sh. Vijay Berlia was directly instrumental in arranging accommodation entries and everything was done on his direction, has also not been delineated by the learned Commissioner of Income- tax (Appeals). The above elaborate discussion also questions this observation of the learned Commissioner of Income-tax (Appeals), particularly when, in the assessment order, the Assessing Officer has nowhere identified Sh. Barliya or, for that matter, anyone else, to be a beneficiary, being a person covered under section 13 of the Act. Therefore, in no manner can the provisions of section 13 be said to be either operative, or even applicable.

83. Moreover, section 13(1)(c) of the Act states that sections 11 and 12 shall not exclude any income of a trust received directly or indirectly for the benefit of any person referred to in section 13(3). The learned Commissioner of Income-tax (Appeals) has erred in observing that everything was done under the instructions of Sh.Vijay Berlia, meaning thereby, that it was Sh. Vijay Berlia, who was benefitted. Now, it is also not the case of the Department, as submitted on behalf of the assessee, that money was withdrawn from the bank and it was returned to any such person.

84. In this regard, the Delhi Bench of the Tribunal, in Devinder Kumar v. Deputy CIT vide order (authored by one of us, 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 never been returned to the assessee.

86. In this regard, in the assessment order dated March 28, 2013, passed in the case of the assessee for the assessment year 2010-11 (concerning ITA No. 713/Asr/2014), as reproduced in para 6 above, the Assessing Officer has observed as follows :

"(1) During the course of assessment proceedings, it was seen that the assessee-society has paid money through cheques/bank drafts which have been credited in the Axis Bank account No. 104010200005128 of WSL (copy of bank statement is placed on record). The fact as narrated by Sh. Sonawani in his statement that his company WSL was actually not developing any software and was issuing only bogus sale bills is further corroborated from the fact that after credit of amount in the said account from the assessee, the cheques were immediately issued to following parties :

From the description of the name of the parties itself like Netania Shares and Securities P. Ltd., Omega Lifestyles and Technologies, Topsun Rim Iron Ore Industries, A to Z Alloy P. Ltd., Karma Ispat Ltd. and Swati Spentose P. Ltd., it is clear that the subsequent payments have been made to parties other than those involved in software development services. Therefore, it is proved beyond any doubt that the statement given by Sh. Sonawani that his company did not develop software from financial year 2003-04 onwards and that it was providing only accommodation entries without actual delivery of software to certain concerns, is correct, the assessee being one of the major beneficiary of these bogus transactions."

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 discounted. This, however, gets negated by the observation of the Assessing Officer that the payments were made through RTGS. In the statement of Sh. Sanjay D. Sonawani, there is no allegation of any benefit having accrued to Sh. Vijay Berlia and there is no finding adverse to the assessee recorded in this regard by the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has erroneously not kept in view this angle too.

89. Then, the above apart, consideration of the alleged evidence wrongly 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/cancelled. The Department sought redressal from the hon'ble High Court against the said Tribunal order and their Lordships, vide their order dated March 10, 2015, observed, inter alia, as follows, upholding the Tribunal order :

"Thus, it cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The allegation is regarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in canceling the registration granted on May 13, 1999 with effect from the assessment year 2004-05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011."

90. So, the grant of registration has been approved by the hon'ble High Court, despite the deposition of Sh. Sanjay D. Sonawani.

91. The assessee, contending that exemption under section 11 was wrongly denied to it, has rightly relied on CIT v. Stock Exchange, rendered by the hon'ble Gujarat High Court, on December 14, 2010 in ITA Nos. 471, 473 and 478 of 1999 (CLPB 67-74), wherein, it has been held that the registration of a charitable trust under section 12A is not an empty formality ; and that once registration is granted, the Assessing Officer is not justified in refusing the benefit which would otherwise have accrued 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-compliance with the provisions of section12A bars an assessee from being granted the benefit of sections 11 and 12 ; that 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 ; that an assessee would be entitled to be granted the benefit only if it complies with the other requirements of these sections ; and that an assessee that has complied with 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 relation to the income of any trust or institution unless the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and manner to the relevant authority and within the time stipulated therein or any extension thereof as may be granted. There are other conditions in section 12A with which we are not concerned in this reference. Compliance with section 12A does not entitle an assessee to the benefit of section 11, ipso facto. Non- 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 establish that the conditions of sections 11 and 12 are satisfied before it is entitled to the exemption under sections 11 and 12.

22. A view to the contrary would lead to the most unusual consequences. A view to the contrary would mean the assessee can by merely complying with the provisions of section 12A claim an exemption under sections 11 and 12 even though the ingredients thereof are not satisfied. The fallacy of such a contention is obvious from the fact that an assessee may well acquire the properties even after it complies with section 12A. Such properties may not be held under trust wholly for charitable purposes. A view to the contrary would entitle the assessee to the benefit of sections 11 and 12 despite the same.

23. The question then is whether the assessee has satisfied the conditions stipulated in section 11. Firstly, the exemption under section 11(1)(a) is in respect of the income derived from property held under trust wholly for charitable or religious purposes. Secondly the exemption is available only to the extent to which such income is applied to such purposes in India. Thirdly, where such income is accumulated or set apart for the application to such purposes in India, the exemption is applicable to the extent to which the income so accumulated or set apart is not in excess of 25 per cent. of the income from such property. The conditions are cumulative."

93. The computations of income of the assessee Apeejay Education Society for all the years under consideration are reproduced hereinbelow :

Apeejay Education Society
New Jawahar Nagar,
Bhagwan Mahavir Marg
Jalandhar City

Apeejay Education Society
New Jawahar Nagar
Bhagwan Mahavir Marg
Jalandhar City

Apeejay Education Society
New Jawahar Nagar
Bhagwan Mahavir Marg
Jalandhar City

94. In the present case, 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 conditions regarding deriving income from property held under trust wholly for charitable purposes, application of income to charitable purposes in India and accumulation not being more than 15 per cent. of such income are satisfied.

95. The position with regard to the other assessee remains undisputedly the same. Neither of the authorities below has challenged the financials of either of the assessees, and therefore, the requirements of section 11 of the Act, as noted, qua both the assessees, has remained unquestioned, nullifying the impugned orders on this score.

96. On the basis of the above discussion, we hold that the learned Commissioner of Income-tax (Appeals) has erred in confirming the non- grant of exemption under section 11 of the Act to the assessee and, accordingly, none of the alternative submissions raised by the assessee requires to be adjudicated, that they having been rendered merely academic.

97. As an aside, but has a necessary concomitant hereto, it must also be recorded that the Bench had enquired of both the parties regarding the fate of the assessment in the case of M/s. Washington Software Ltd. However, both the parties stated at the bar that such fate was not known. It is also well settled that each assessment is to be dealt with separately, on its own merit.

98. In view of the above, finding the grievance of the assessee to be justified, the same is accepted. The order under appeal is reversed and cancelled.

99. As stated at the beginning of this order, the facts are, mutatis mutandis, common in all these appeals. Our above observations shall, therefore, apply, mutatis mutandis, to all the other appeals.

100. In the result, all the appeals are allowed.

The order pronounced in the open court on August 12, 2016.