TaxTMI 
TaxTMI 
2013 (12) TMI 843
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....usiness premises of the assessee on 02.07.1996, in which, 14 leased transactions were examined based on the materials recovered at the time of inspection. The leasing transaction of the company was in the nature of buy and lease back, i.e, the assessee would buy and lease back the plant and machinery installed in the factory or going to be installed in the factory and in respect of this business assets, the assessee claimed depreciation. On an enquiry made as to the genuineness of these transactions, except for 5 transactions, the assessee's business with 9 other companies on buy and lease back transactions were confirmed as genuine transactions. For the block period covered under the block assessment from 01.04.1986 to 03.07.1996, an order of assessment was made under Chapter XIV-B of the Income Tax Act on 31.7.1997. 3. It is a matter of record that the assessee went on appeal as against this order of block assessment before the Income Tax Appellate Tribunal. Apparently, on account of the difference in the conclusion reached between the Vice President and the Accountant Member, the appeal was placed before the Third Member Senior Vice President, who concurred with the view of the....
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....er of Income Tax proposed to revise the assessment holding a view that the Assessing Officer had wrongly granted deduction on margin money and hire management fee in respect of leased transactions, which had been held as sham and bogus on the block assessment made on 31.3.1997. The Commissioner further viewed that the Assessing Officer had allowed the claim on 100% depreciation in respect of the asset acquired from M/s.Morgan Industries Limited at Rs.51.00 lakhs without properly appreciating the fact that the lease agreement, hire purchase agreement and supplementary agreement had all been entered on a single day, i.e., on 28.3.1995, which would indicate that no ownership had passed on. Thus, before satisfying himself on the genuineness of the transactions regarding the allowability of the claim, the Assessing Officer had granted the relief, which was erroneous and prejudicial to the interests of the Revenue. Consequently, the assessee was called upon to file its objection on or before 06.03.2000. This notice was subsequently followed by yet another notice on 12.3.2001 by reason of the change of the Authority. The consequent notice dated 12.3.2001 is almost on identical lines as co....
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....at the assessment made for the assessment years 1995-96 and 1996-97 alone were the subject matter of revision and not the block assessment. In this view of the matter, he rejected the assessee's contention on jurisdiction. 12. Aggrieved by this, the assessee preferred appeal before the Income Tax Appellate Tribunal contending that when the block assessment itself was made only after the approval of the Commissioner of Income Tax as required under Chapter XIV-B, the self-same authority could not assume authority once again even as against the assessment years 1995-96 and 1996-97 on issues which were already subject matter of consideration in the block assessment. The order of the Commissioner of Income Tax directing the Assessing Officer to go into the genuineness of the transaction with M/s.Morgan Industries Limited was totally contrary to what was considered in the block assessment and then subject matter of appeal before the Income Tax Appellate Tribunal. The assessee further pointed out that as on the date of order, the Commissioner was well aware of the pending appeal and the difference of opinion between the two Members of the Tribunal. In the circumstances, when the alleged ....
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....ce the block assessment was quashed, there was no undisclosed income for the purpose of computation of block assessment. The Tribunal further pointed out to the findings of the earlier order of the Tribunal that the block assessment could not be proceeded as there was no undisclosed income as defined under Section 158B(b) of the Income Tax Act. The Tribunal, evidently, had not gone into the view of the earlier order of the Tribunal touching on the aspects of the genuineness of the transaction, but apparently, it restricted its decision only on the jurisdiction and nothing beyond. 16. Learned counsel appearing for the assessee submitted that when the subject matter of block assessment and the revision were one and the same; that the Commissioner having granted his approval to the order passed under Chapter XIV-B, the self-same authority cannot assume jurisdiction for the purpose of Section 263 to revise the order of assessment. She further pointed out that the very basis of the 263 proceedings was the finding in the block assessment. When the alleged finding of bogus nature of the transaction was set aside by the Tribunal in the appeal preferred by the assessee, there was nothing o....
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.... find that the action of the Assessing Officer in allowing the claim is wrong in asmuchas this expenditure relates to lease back transactions which have been held to be sham and bogus in the block assessment made on 31.3.1997. It is also further noticed that the Assessing Officer has allowed the claim of 100% depreciation in respect of the asset acquired from M/s.Morgan Industries Ltd. for Rs.51 lakhs, without properly appreciating the fact that the lease agreement and hire purchase agreement, supplementary agreement have all been entered on a single day i.e. On 28.3.95 which would indicate that no ownership has passed on. He has also failed to verify and satisfy the genuineness of the transactions and other conditions regarding the allowability of the claim. 2. In the circumstances, I am of the opinion that the assessment made under section 143(3) for the Assessment Years 95-96 and 96-97 are erroneous and prejudicial to the interest of the revenue. 3. Therefore, under the powers vested in me under section 263 of the Income-tax Act, I propose to pass such orders thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment order cancel....
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....als, which represented income. The entries for depreciation did not represent income; it was only a derivative entry. Hence, the Vice President agreed with the submission of the assessee that the depreciation was not income. On the aspect of the availability of materials in the regular books of accounts, the Vice President pointed out that there was no denial of fact that the assessee in the returns filed for the assessment years 1995-96 and 1996-97 had reflected all the 14 transactions. Thus, the undisputed fact was that there were entries in the books of accounts which were audited, signed and forwarded to the Board of Directors disclosing the 14 transactions. 23. On the question as to whether the amounts which were already there in the books of accounts were treated as undisclosed income, the Tribunal pointed out that the mere fact that some parties had denied transaction could not lead to the existence of undisclosed income, particularly when the transaction details had been furnished to the Department or found by them in the course of search. The Department had found detailed correspondence which supported the transaction. The Department had also accepted that all the transac....
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.... President reveals that he concurred with the views of the Vice President that the seized materials did not disclose any concealed income, as the transactions were very much available in the books of accounts of the assessee. He further pointed out that the crux of the allegation, namely, the transactions were only in form but not in substance was not considered necessary because the only issue was whether the transactions could have resulted in undisclosed income. He further pointed out that the learned Vice President had touched upon the documents seized and on the facts found in the books of accounts, learned Vice President held that except to make allegation on the depreciation claim as false and not allowable under the provisions of the Act, there was no evidence to suggest that the entries were false or the assessee had falsified the accounts. 27. In the background of the findings thus reached, the learned Senior Vice President held that he concurred with the Vice President on the facts found that when the transactions were already there in the books of accounts, there was no such thing as undisclosed income for the purpose of bringing under Chapter XIV-B of the Income Tax A....
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....ation. 29. The Revenue does not deny the fact that the block assessment was a subject matter of appeal before the Tribunal and the majority view had become final. Even though the Revenue made strenuous argument that the depreciation was not the subject matter, we fail to understand such a line of argument, since the order of the Tribunal as well as the block assessment order clearly point out that the claim on depreciation was also considered on account of doubt on the genuineness of the transactions. We may also point out herein that the assessee in its reply specifically pointed out that the claim on depreciation in respect of 13 transactions were disallowed leaving out M/s.Morgan Industries Limited. Thus, the Department had consciously allowed the claim of the assessee on depreciation in respect of M/s.Morgan Industries Limited. Paragraph No.12.1 of the assessee's reply dated 10.3.2000 clearly pointed out to this fact, which is not disputed so far by the Revenue. The margin money and hire management fee related to hire purchase transaction entered into by the company were during the assessment years 1995-96 and 1996-97. With the claim of the Revenue on the genuineness of the tr....