TaxTMI 
TaxTMI 
2012 (10) TMI 754
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....ctions, and without appreciating the fact that the assets in fact existed. Hence, the finding that the transactions were sham and colourable may be deleted, and the depreciation may be granted. 3 The assessee has also raised additional grounds as under: 1) The CIT(A) failed to appreciate the fact that the reassessment had become infructuous as the reasons for reopening are based on wrong facts and are non-existing as on the date of passing of reassessment order. 2) The CIT(A) failed to appreciate the fact that, on the date of issue of notice u/s 148 i.e. 24-09-1997, the assessee's appeal was already decided by the then CIT(A) vide order dt.30-01-1997 and the department had filed further appeal before the Tribunal on 04-04-1997. As the original assessment got merged with the CIT(A) order, the notice u/s 148 was issued during the pendency of the appeal filed by the Department, the notice is bad in law and liable to be quashed. 3) The CIT(A) failed to appreciate the fact that if depreciation is disallowed on the ground that the lease transactions are treated as sham and colourable, then the corresponding lease rentals could not be as income." 4 The ground No. 1 of the revis....
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.... counsel has submitted that the assessee has filed a certificate from Chartered Engineer regarding the market price and other descriptions of the Bio-gas generation systems, bills from M/s Western Paques (I) Ltd., confirmation from M/s Western Paques (I) Ltd., of installation of biogas plant at Kolhapur, Maharashtra, invoice from the respective parties, hire purchase agreements with the Overseas Sanmar Finance Ltd., , First Leasing Co. of India and M/s Kirloskar Investments and Finance Ltd; lease agreements with M/s Western Paques (I) Ltd ; Asian Electronics Ltd, Patheja Forgings and Auto Parts Manufactgurers Ltd., Residency Foods & Beverages Ltd and return-cum-challan under Maharashtra Sales Tax. The learned counsel has submitted that the Assessing Officer after considering the details filed by the assessee passed an order under section 143(3) against which the assessee filed appeal before CIT(A). The CIT(A) partly allowed the appeal filed by the assessee against which the revenue filed further appeal before this Tribunal which was dismissed by this Tribunal vide order dated 9/5/2000. 5.1 The learned AR of the assessee has contended that all the details were filed along wi....
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....P Ltd vs JCIT vi) Gujarat Power Corpn Ld DCVITY 238 CITR 91/202 Taxman 303/48 DTR 226(Guj) vii) ACIT Rolta India Ltd 132 ITD 98 (Mum) (TM) (Trib) 5.3 Thus, the ld AR for the assessee has submitted that when the Assessing Officer has formed an opinion on a claim at the time of original assessment, then the same cannot be reopened on the basis of change of opinion in the absence of any substantial additional material. 6 On the point of the additional ground raised by the assessee, the ld counsel for the assessee has submitted that the assessment has been reopened on the presumption of wrong facts about the installation of the biogas plants at Muzaffarnagar; whereas the assessee has brought on record that the plants were installed at Sangammner. He has further submitted that it is necessary for the Assessing Officer to first state that there is a failure to disclose fully and truly all material facts on the part of the assessee. If he does not record such a failure, he would not be entitled to proceed under section 147. In support of his contention, he has relied upon the decision of honourable jurisdictional High Court in case of Titanor Components Ltd vs ACIT reported in 60 DTR ....
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....ssue regarding disallowance of depreciation on sale and leased back assets before the Commissioner of Income Tax(Appeals) and therefore the doctrine of merger would not apply on the said issue. He has further submitted that the decision of honourable jurisdictional High Court in case of Metro Corporation (supra) is distinguishable on the facts because in the said case the CIT(A) has annulled the assessment on the ground that valid notice under section 143(2) was not issued before the expiry of a period of limitation and consequently, the Assessing Officer issued a notice under section 148 on 13/2/2006, which was quashed and set aside by the honourable High Court on the ground that during the pendency of the proceedings of original assessment, the notice under section 148 could not have been issued. Thus, the learned DR has submitted that the said decision of honourable judicial High Court is not applicable in the facts of the present case. 6.5 On change of opinion, the learned DR has submitted that when new information came to the knowledge of the Assessing Officer, than it is not a case of change of opinion on same facts and material. He has referred the decision of honourable fu....
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....ction 143(3) and there is no new material or information came to the knowledge of the Assessing Officer, subsequent to the original assessment, then the reopening on the basis of change of opinion, is not permitted. 7.1 The notice under section 148 has been issued on 24/09/1997 which is within the period of 4 years from the end of the assessment year. Therefore, this case does not fall under the 1st proviso to section 147 of I T Act and therefore, the prerequisite condition for exercising the powers under section 147 is existence of reasons to believe that there is escapement of income from assessment. In the return of income, the assessee claimed 100% depreciation on leased out of assets. The assessment has been reopened on the ground that the income chargeable to tax has escaped assessment due to excessive and wrong allowance of the claim of depreciation on leased assets. Thus, the case in hand falls under clause (c)of explanation 2 to section 147 of I T Act, which creates deeming fiction. For the sake of convenience and ready reference we quote explanation 2 as under: Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income c....
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....allation of these plants was shown premise Sir Shdi1al Distilleries & Chem. Ltd., Nuagar, Mansurpur, Dist. Khatanqhi, tJ.P. The Investigation Unit, Pune got the investigation conducted from A.D.I.(Inv.), Meerut, U.P. about the existence of these assets. As per the enquiry report dated 26.6.1996, sent by A.D.I.(Inv.), Meerut, along with its annexures, it was found that the said bio-gas plants were not physically found at the above mentioned premises. The statement of Shri M.K.Kamboj, Financial Controller of Sir Shadilal Distilleries & Chem. Ltd. was also recorded byA.D.I. (Inv.),Unit-II, Meerut on 24.4.1996 in which he denied the existence of these bio-qas plants claimed to have been supplied by M/s. Indo-Nippon Chemicals Co. Ltd. On the basis of the investigations carried out by the Investigation Wing, Pune and Meerut, it is clear that the assessee had claimed depreciation on the non-existent assets. Therefore, there is a reason to believe that by reason of the failure on the part of the assessee to disclose fully and truly all the material facts about the said transaction, the income chargeable to tax amounting to Rs. 1 crore has escaped assessment. Since not morethan 7 ye....
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.... it cannot be said to be full and true disclosure, when a new fact has came to the notice of the Assessing Officer because of the report of investigation wing and the assessment has been reopened on the basis of the said additional tangible material. 7.4 It is settled proposition of law that the sufficiency of reasoning is not required to be tested as conclusively proved at the stage of reopening under section 148 what is required for exercising of power under section 147 is existance of reason to believe that there is escapement of income from assessment. A belief that the income assessable to tax has escaped assessment can be formed on the basis of tangible material. Once this requirement is fulfilled, then it is within the jurisdiction of Assessing Officer to reopen the assessment under section 147 of the act. Therefore, we are of the view that the investigation report of ADIT (Invg) is very relevant and tangible additional material for formation of belief that income chargeable to tax has escaped assessment on account of excess claim of depreciation allowed in the original assessment. 7.5 Our this view is fortified by the latest decision dated 25th April 2012 of honourable De....
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....with the return of income. In fact, in para 3 and 3.1 of the affidavit of the petitioner, all these documents have been marked as annexures to the writ petition without any averment that they had also been filed along with the original return of income. In these circumstances, it is difficult to accept the contention of the petitioner that full and true particulars relating to the receipt of the share capital of 4,50,0O0/- from M/s Quality Security Services (P) Ltd. had been furnished along with the return of income. 9. Be that as it may, even if it is assumed for the sake of argument that those particulars were furnished along with the original return of income filed on 23.3.2005, they cannot be said to be full and true, having regard to the report of the investigation wing on the basis of which the assessment has been reopened. We have already seen that in the report there is specific information that the petitioner company had received an amount of 4,5O,00O/- from M/s Quality Security Services (P) Ltd. The report also mentions that this is an accommodation entry given by the said company to the petitioner company. The relevant bank account particulars, instrument number, etc. h....
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....( investigation) that the assets in question were purchased by the assessee and were leased back to the same party. Further, the non-existence of the asset was detected only during the investigation and enquiry of investigation wing. Therefore, the reason of escapement of income assessable to tax was the claim of depreciation at 100% allowed in the original assessment which is the crux of the matter in the investigation report as well as the basis of reopening of assessment. When the Assessing Officer had a reason to believe that the income assessable to tax has escaped assessment and the said formation of belief is based on some tangible material, than at the stage of reopening, it is not necessary that the reasoning to be tested as conclusively proved. 9.1 Moreover, when the claim of depreciation was finally disallowed on the ground that the transaction of purchase and lease back were sham, than it cannot be said that the reopening is on the basis of wrong facts. Even otherwise, this aspect has to be considered at the time of adjudication of the issue on merits. It is pertinent to note that the assessee did not raise this objection against reopening of assessment during ....
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.... the revenue in respect of ground number 1, this Tribunal dismissed the appeal of the revenue vide order dated 9th may 2000 on the ground that the issue was decided in assessee's own case for the assessment year 1989-90. Thus, it is clear that none of the issues raised in the appeal have any connection with the claim of depreciation and nature of transaction. The Assessing Officer disallowed the claim of hire purchase charges in paragraph 4 of the original assessment as under: "4.For the reasons given in para 7 of the assessment order for the Assessment Year 1990-91, a addition of Rs. 2,81,412/- is made to the assessee's income on account of Hire Purchase charges." 12. 2 The Assessing Officer disallowed the purchase charges by following the assessment for the assessment year 1990 - 91 wherein this issue was adjudicated by the Assessing Officer as under: "Assessee has entered into an agreement under Companies Act 1956 and some of its assets purchased on hire purchase basis. For purchasing these assets assessee has paid service charges of Rs. 1,35,450/-. These expenses being connected with the purchase of capital assets are not to be allowed as revenue expenses. Acco....
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....o the hire purchase agreement. He has submitted that there is no malafide intention behind the transactions entered into by the assessee. The learned counsel has pointed out that the Special Bench has observed that the assessee bank had already advanced short term loan to Indo Gulf Ltd., to purchase boiler much prior to entering into lease agreement. In the said case, the lease agreement was entered into subsequently with the sole purpose of enabling the assessee to artificially fulfil the requirement of ownership and use of asset so as to claim depreciation. Thus, the finding in the Special Bench is based on the facts of the said case, which are not similar to the facts of the case of the assessee. 14.2 The alternative contention of the assessee in the said case was that if the depreciation on leased asset was to be disallowed by treating it as a loan transaction, than the capital recovery embedded in the lease rentals should not be charged to tax, which was accepted by the Assessing Officer in all fairness by restricting the net disallowance by reducing the capital component. 14.3 In the case of assessee, the Assessing Officer has taxed the lease rental in all the years wherea....
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....d certificate is based as per the information supplied by the lessee and not as per the physical verification of installation at the site. The Assessing Officer has mentioned the reply received from the valuer from which it is clear that they have relied upon the figures given to them by lessees. The information sought from M/s Patheja Brothers Forgings & Stampings Ltd., was not furnished by the company on the ground that there was a major fire on 18/12/94 where all records got destroyed and no further details were possible to be furnished. 15.1 In case of Asian Electronics Ltd., it was submitted that the assets sold to the assessee and taken back by Asian Electronics Ltd on lease. Thereafter, the said assets were sub-leased to Maharashtra State Electricity Board (MSEB) and part of assets were capitalised in the books of accounts of M/s Asian Electronics Ltd., the company valued these assets as per the Companies Act at Rs. 27,04,901/- whereas the written down value of the assets as per I T Act was nil as the said company claimed hundred percent depreciation. The Assessing Officer has given the finding that the assets remained with the control of the lessee and never moved from the....
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....the entire cost of the asset during the lease period in the shape of lease rentals and the security amount to be adjusted against the realisable value at the end of the lease period. 16 Now, we analyse the facts of the assessee's case with the tests laid down by the Special Bench in case of Induslnd Bank Ltd (supra). The Special Bench has taken some broad features of finance lease in para 5.14 as under: "5.14 Thus it is apparent that the broader guidelines laid down by the Hon'ble Supreme Court in the case of ABB Ltd have been reiterated in the latter case of Association of Leasing & Financial Services Companies v. Union of India & Ors. On a fair reading of the aforenoted two judgments rendered by the Hon'ble Supreme Court in the light of the Guidance Note and the AS 19, we can draw the following broad features of finance lease :- - Such a lease is non-cancellable and there is a fixed obligation on the lessee for payment of lease money. In case lease is terminated prematurely by the lessee, the lessor is entitled to recover his investment with expected interest. - Such a lease is always for a fixed period, which period is decided by taking into consideration the economic life o....