Lease agreements deemed sham, assets not utilized in time, DLWL income recognized as completed work

The Tribunal concluded that the lease agreements were sham transactions as the assessee failed to establish their genuineness. It was found that the assets were not put to use before the specified date, disqualifying the assessee from claiming depreciation. Additionally, the amount received from DLWL was deemed income for completed work. The Tribunal upheld the Assessing Officer's decisions, dismissing the appeal as no substantial legal questions were identified to challenge the findings.

---

---

Issues Involved:

1. Whether the lease agreements entered by the assessee with six concerns are sham transactions.
2. Whether the assessee is entitled to claim depreciation on the assets purchased before 31.03.2001.
3. Whether the amount received from Das Lagerway Windfarm Ltd. (DLWL) claimed as advance is income of the assessee for the relevant assessment year.

Detailed Analysis:

1. Lease Agreements and Sham Transactions:

The Tribunal found that the money received by PHOTON from the assessee was remitted back to the assessee on the very next day. Payments were made by the assessee to PHOTON in April and May 2001, and advance lease rentals were received by the assessee from PHOTON only in April and May. The money received by PHOTON from IREDA was remitted back to the assessee towards lease rentals in May, June, and November 2001. This established that the assessee secured a soft loan from IREDA and utilized it for making paper entries to show that the lanterns were leased out to six concerns, while in reality, the lanterns were supplied by PHOTON.

The Managing Director's statement during the survey indicated unawareness of the transactions, showing that the payments were paper transactions and the assessee was not aware of the six lessees. The Tribunal concluded that the primary burden was on the assessee to establish the genuineness of the lease transactions, which was not satisfactorily discharged.

The Tribunal observed that the assessee received advance lease rentals even before entering into lease transactions, indicating that the lease agreements were never intended to be implemented. The Tribunal, therefore, upheld the Assessing Officer's view that the transactions were mere paper transactions and sham.

2. Entitlement to Claim Depreciation:

The Tribunal noted that the assessee purchased the assets for lease, but the lanterns were not delivered to the lessees on or before 31.03.2001. The assets were tested in the godown of PHOTON on 25.03.2001, 08.05.2001, and 27.05.2001. Statutory forms and waybills showed that the goods were transported only after May 2001. Hence, the Assessing Officer rightly concluded that the assets were not put to use before 31.03.2001, disqualifying the assessee from claiming depreciation. The Tribunal confirmed these findings.

3. Amount Received from DLWL as Income:

The assessee claimed that the amount received from DLWL was an advance due to pending disputes. However, the Assessing Officer found that the advances shown were payments received for completed work. DLWL confirmed that no money or material was due from or to the assessee, and payments were made for work completed in March 1999 and March 2000.

The Tribunal noted that the FIR referred to a dispute unrelated to the contract with DLWL. The Tribunal concluded that the payments received by the assessee were for completed work and should be treated as income. The Tribunal upheld the addition made by the Assessing Officer.

Conclusion:

The Tribunal's findings were based on factual analysis, and the transactions were found to lack genuineness. The assessee was not entitled to claim depreciation, and the amount received from DLWL was correctly treated as income. The appeal was dismissed, and no substantial question of law was found to interfere with the Tribunal's findings.

---