Section 148 notices time-barred by four-year proviso to Section 147; cash-basis income and higher commercial-vehicle depreciation upheld

HC held reassessment notices under section 148 for the two relevant assessment years were time-barred by the four-year proviso to section 147 and thus invalid. The court upheld deletion of additions for overdue charges, accepting that recognition of such income on a cash basis was allowable where recovery was uncertain. It confirmed that leasing out commercial vehicles constitutes use in the assessee's business, entitling them to the higher depreciation rate under the rules. Appeals were disposed accordingly.

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Issues Involved:
1. Jurisdiction to reopen assessments.
2. Entertaining objections to jurisdiction at a later stage.
3. Change of accounting method for overdue interest.
4. Depreciation on bottles purchased in bulk and leased out.
5. Depreciation on steel rollers purchased and leased back.
6. Acceptance of apparent consideration in sale and leaseback transactions.
7. Charging of interest under section 234A.
8. Higher depreciation on leased out commercial vehicles.

Detailed Analysis:

1. Jurisdiction to Reopen Assessments:
The Tribunal held that the Assessing Officer (AO) did not have the jurisdiction to reopen the assessments for the assessment years 1992-93, 1993-94, and 1994-95. The period of limitation for reopening under section 147 of the Income-tax Act was four years, which had expired for the assessment years 1992-93 and 1993-94. Notices were issued beyond this period, violating the proviso to section 147. For the year 1994-95, the reopening was based on a mere change of opinion, which is not permissible as per established legal principles.

2. Entertaining Objections to Jurisdiction at a Later Stage:
The Tribunal was right in entertaining the assessee's objection to the AO's jurisdiction, even though it was not raised at any earlier stage. The court emphasized that the AO must have a rational connection or live link for the formation of the belief that income has escaped assessment.

3. Change of Accounting Method for Overdue Interest:
The Tribunal upheld the assessee's change of accounting method for overdue interest from the mercantile basis to the cash system. The change was permissible in law and did not result in any loss to the Revenue. The court cited decisions from the Bombay and Calcutta High Courts, which allowed such changes if they were bona fide and did not lead to tax evasion.

4. Depreciation on Bottles Purchased in Bulk and Leased Out:
The Tribunal allowed 100% depreciation on bottles, following the decision in First Leasing Co. of India Ltd. v. CIT, which held that each bottle was an independent unit eligible for depreciation. This decision was supported by another ruling in CIT v. Alagendran Finance Ltd.

5. Depreciation on Steel Rollers Purchased and Leased Back:
The Tribunal granted 100% depreciation on steel rollers, aligning with the Supreme Court's ruling in CIT v. Shaan Finance (P.) Ltd. and other decisions that allowed depreciation for assets used in the business of leasing.

6. Acceptance of Apparent Consideration in Sale and Leaseback Transactions:
The Tribunal accepted the apparent consideration as the cost in sale and leaseback transactions unless there were reasons to believe that the amounts specified were not received. This was in line with the Bombay High Court's interpretation of "apparent consideration."

7. Charging of Interest under Section 234A:
The Tribunal held that no interest under section 234A could be charged for the delay in filing the return in response to a notice under section 148, as the original return was on file. This was because the reopening itself was based on a change of opinion and was without jurisdiction.

8. Higher Depreciation on Leased Out Commercial Vehicles:
The Tribunal allowed higher depreciation on leased out commercial vehicles, citing the Delhi High Court's decision in CIT v. Bansal Credits Ltd. and the Madras High Court's ruling in CIT v. Madan and Co. The court clarified that leasing out vehicles is a mode of business, and the end use of the asset determines the depreciation rate.

Conclusion:
The appeals were disposed of in favor of the assessee, with all questions answered affirmatively against the Revenue. The connected miscellaneous petitions were also closed.

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