TaxTMI 
TaxTMI 
2010 (12) TMI 1077
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....with the order passed by the Judicial Member. Therefore, the matter was referred to third Member. The third Member of the Tribunal has restored the issue relating to claim of the deduction, while concurring with the view taken by the Judicial Member on the following of aspects: "(1) That initiation of proceedings under section 147 read with section 148 of the Act in all the three assessment years is justified. (2) That there is justification for disallowance of the claim of depreciation of Rs. 25,36,136 in the assessment year 1990-91, Rs. 14,18,926 in the assessment year 1991-92 and Rs. 10,63,721 in the assessment year 1992-93. (3) There is justification for disallowance of consultancy charges allegedly paid to M/s. Esskay Financial Consultants." The third Member of the Tribunal has further added that the payment of consultancy charges allegedly paid by M/s. Esskay Financial Consultancy is disallowed. As a consequence, the transaction of lease of computers having been held as not genuine. He has further held that even otherwise there is contradiction in the claim made by the assessee regarding the services rendered by M/s. Esskay Financial Consultancy and the claim made....
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....ed to PCL, this being a lease back transaction. In the regular assessment made under section 143(3) of the Act by the Assessing Officer, he duly accepted and granted depreciation of computers to the assessee in his order dated March 29, 1993. During proceedings for the assessment year 1993-94 on enquiries it transpired that the lease transaction was not genuine. Therefore, M/s. AIL and M/s. PCL were summoned. In response to same, Sh. R. P. Goel, accountant of PCL stated that the computer monitors and printers involved in the lease transaction were sold by PCL to M/s. Video Electronics, vide their invoice dated of February 28, 1990, and on the same day these assets were leased by M/s. Video Electronics to M/s. AIL, who in turn had subleased them to PCL without there being any physical movement of goods in the entire transaction. He further informed that, since the assets were pre-determined to be taken back on lease, the distinctive numbers were not mentioned in the sale invoice. He also made a specific statement that their company was not maintaining any record to this effect. On further enquiry from PCL, Sh. Daban Bhai, managing director of PCL made a statement under section....
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....ion 148 is required to be issued. Your kind approval is solicited to issue notice under section 148 for the assessment year 1990-91." After taking approval from the Commissioner of Income-tax, the Assessing Officer issued notice under section 148 of the Income-tax Act on March 24, 1998. Accordingly, he reassessed the income by disbelieving transaction of computers including disallowance of depreciation on computers which were allowed originally. The aforesaid action of the Assessing Officer was challenged before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) upheld the reopening of the assessment and confirmed the addition made by the Assessing Officer in entirety. The assessee had further challenged the order dated February 19, 2001, passed by the Commissioner of Income-tax (Appeals) before the Income-tax Appellate Tribunal Principal Bench, New Delhi. As we have already mentioned, the two Members of the Tribunal passed separate and conflicting orders. The Judicial Member agreed with the view taken by the Revenue authorities that there was no leasing of computers, the same being a sham transaction. He thus held that the reassessment p....
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.... Calcutta High Court in the case of East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal) at pages 355 and 356. Accordingly, the learned Member was of the view that the reasons recorded reveal that the factum of surrender of lease rental expenses by M/s. PCL were for the assessment years 1991-92 and 1992-93. Reasons recorded by the Assessing Officer do not state of any surrender of lease rentals by that company for the assessment year 1990-91, the year under consideration. For this reason alone, the Assessing Officer could not have formed a belief that the computers were non-existent or that the assessee had entered into an arrangement to claim depreciation so as to say that the income on that account for the year under consideration had escaped assessment. The learned Member in minority also found that at the time when the reasons were recorded, the Assessing Officer did not have access to the statement of Sh. Dadan Bhai, managing director of M/s. PCL which was recorded under section 132(4) of the Act. This statement came in his possession during the course of reassessment on August 31, 1999, from the Joint Commissioner of Income-tax, Special Range 4 where the file of ....
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....me-tax Officer on the point as to whether action should be initiated for reopening assessment, but at the same time the court have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement from assessment. The words "definite information" which are there in section 34 in the Act of 1922, at a time before its amendment in 1948, are not there in section 147 of the Act of 1961. Therefore, it would not lead to the conclusion that, the action can now be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The learned Member has recorded in his order that the admitted position of the fact that the assessee had produced in original assessment, i.e., all the evidence relating to purchase of computers, sale-cum-lease agreement, evidence of payments and source as to withdrawal of Rs. 55 lakhs from IDBI. The Assessing Officer did not doubt the genuineness of the purchase and being satisfied with the ownership of the assessee in the computers and use thereof in his business, allowed the claim of depreciat....
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....of the assessee. On the contrary, the so-called lease dated March 15, 1991, recites that it shall commence only from March 15, 1991. Moreover, under the sublease between M/s. A and M/s. U it is stated that M/s. A is the absolute owner of the bottles. Lastly, the so-called lease dated March 15, 1991, stipulated that the lessee, M/s. A, shall have no right, title or interest to create a sub-lease without the permission of the lessor. No such permission has been produced. For the afore stated reasons, we find no infirmity in the concurrent findings of fact recorded by the authorities below. Transaction dated March 15, 1991, is not proved. Therefore, the Assessing Officer was right in disallowing depreciation. [para. 11] An alternative submission was advanced on behalf of the assessee in the context of the second transaction that, if the said transaction was a financial arrangement, as held by the Department, even then the assessee could be taxed only on interest embedded in the amount of lease rentals received from the lessee, M/s. A. In this connection, it was submitted that the assessee had earned total income of Rs. 6,33,596 over a period of 36 months commencing from March 15, 1991....
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....edings under section 147/148 of the Act. The only requirement of section 147 of the Act is the Income-tax Officer has to record the reasons to believe which has been rightly recorded in the present case. In the case of Diwakar Engineers [2010] 329 ITR 28 (Delhi), this court came to the conclusion that the assessment proceedings were rightly initiated under section 147(a) and there is no need for the Revenue to refer and to rely upon section 147(b) to sustain the impugned notice and section 147 of the Act. In view of the said discussion, the writ petition filed by the assessee was dismissed. We note that the assessee had not made full and true disclosure of material facts to the Assessing Officer at the time of the original assessment. Sh. Dadan Bhai, managing director of M/s. PCL had surrendered lease rent allegedly paid to various parties including the assessee. The parties had used M/s. Altos India Ltd. a sister concern of M/s. PCL to give the colour of the genuineness to the lease transactions. The assessee had failed to inform the Assessing Officer about the sub-leasing of the computers by M/s. Altos India Ltd. to M/s. PCL, the original sellers of the computers. A perusal....
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....inst such income on account of depreciation which was also allowed. It is pertinent to mention that the assessee had filed a certificate from M/s. Altos India Ltd. to the effect that the equipment had been supplied to them and the same had been installed in their office at Delhi. The contents of the certificate from M/s. Altos India Ltd. are as under : "This is to confirm that the equipment, as per the lease agreement No. 001/90, dated February 28, 1990, have been received and the same have been put to use in full satisfactory condition at our office in Delhi." Neither M/s. Altos India Ltd. nor the assessee disclosed that M/s. Altos India Ltd. had sub-leased the computers to its sister concern, namely, M/s. PCL without charging any extra premium on the lease rent payable to the assessee as per the lease agreement. As per the information given during the original assessment proceedings, M/s. PCL was only a guarantor for the payment of lease rent on behalf of M/s. Altos India Ltd. to M/s. Video Electronics Ltd. It cannot be said that the Assessing Officer had reopened the assessment on mere change of opinion. Therefore, the material which has been received by the Assessing Offi....