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2004 (7) TMI 20

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....rves to be rejected outright and cannot be used as evidence against the party affected by such an uncorroborated testimony? 4. Whether the statement of Shri Manish Mehrotra, the alleged proprietor of M/s. Longman Industrial Enterprises was admissible in evidence? 5. Whether the Income-tax Appellate Tribunal did not err in law in confirming the reassessment withdrawing the depreciation allowance of Rs. 51,75,000 allowed by the Commissioner of Income-tax (Appeals) against the original assessment order passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961?" The relevant assessment year is 1992-93. The return for the assessment year has been filed on December 31, 1992. The assessment under section 143(3) was completed on March 14,1995. Subsequently, it is noticed that a search operation was conducted on February 10, 1995, at the residential and business premises of Shri Manish Mehrotra, proprietor of M/s. Longman Industrial Traders, New Delhi. At the time of the search, the statements of Shri Manish Mehrotra were recorded and in his statements he admitted that he never manufactured the shuttering material, nor he has sold any shuttering material to M/s. Ra....

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.... reopening as well as the addition made on the basis of the statements of Shri Manish Mehrotra is not justified. On the other hand, learned counsel for the Department, Mr. Mathur, submits that when the Assessing Officer has information in his possession that income assessed in the case of this assessee for the assessment year 1992-93 has escaped assessment, he has every right to reopen the assessment and tax the income which has escaped assessment. He further submits that Shri Manish Mehrotra proprietor of M/s. Longman Industrial Traders, admits that he has not supplied any shuttering material to the assessee or to M/s. Unitech Ltd. and he also admits that it was only a hawala transaction and that is sufficient if no sufficient material has been brought on record in spite of opportunity being given to the assessee to prove the genuineness of the transaction. The depreciation worth Rs. 51,75,000 which was wrongly allowed has rightly been withdrawn in the reassessment. The facts are not in dispute that in the original assessment completed on March 14, 1995, the Assessing Officer has allowed depreciation worth Rs. 51,75,000 on the shuttering material which has been claimed by the as....

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....at he has provided bills to M/s. Raunaq Finance Ltd. as under: S.No. Name of party Bill Date Amount 1. M/s. Raunaq Finance Ltd. 132 5-3-1992 Rs. 51,75,000 In the assessment order for the assessment year 1992-93, it is discussed that the assessee had purchased wooden shutterings of Rs. 51,75,000 from Longman Industrial Traders. As per detailed report received from the Commissioner of Income-tax, Delhi-I, vide letter No. 3074, dated December 11,1995, this is bogus purchase in order to claim 100 per cent, depreciation. In the light of the above discussion and consequent to the above information in possession with me, I have therefore reason to believe that the above income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year 1992-93. Accordingly, proceedings under section 147 read with section 148 are hereby initiated. Therefore, notice under section 148 is hereby issued." It is true that mere statements of Shri Manish Mehrotra, proprietor of Longman Industrial Traders, cannot be the basis for disbelieving the transaction, but if it is corrobo....

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....is possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts." Considering the view taken by the Delhi High Court and the hon'ble Supreme Court in the aforesaid cases and also the reasons recorded by the Assessing Officer for reopening of the assessment, we see no infirmity in the issue of show-cause notice under section 147 read with section 148 for reopening of the assessment. Consequently, in our considered opinion, there is no infirmity in the order of the Assessing Officer for reopening of the assessment. Now it brings us to the issue whether depreciation of Rs. 51,75,000 which has been allowed on the shutter....

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.... and at what place. At the same time, Shri Manish Mehrotra, proprietor of M/s. Longman Industrial Traders, failed to appear, he simply sent the letter in reply, stating the fact what he has admitted in the statements at the time of the search. One Shri Satyender P. Singh, managing director of M/s. Raunaq Finance Ltd. appeared before the Assessing Officer on January 22, 1999. He admitted that he does not know Shri Manish Mehrotra. He explained that the transaction was through M/s. Unitech Ltd. and the payment has been made by Mr. Raunaq Finance Ltd. on receipt of the shuttering material and that material has been received by M/s. Unitech Ltd. on behalf of the assessee and the assessee has leased out that asset to M/s. Unitech Ltd. M/s. Unitech Ltd. has issued the certificate to the assessee to the effect that he has received the material and that has been put to use in the month of March, 1991. Except that, in spite of repeated questions by the Assessing Officer to M/s. Satyender P. Singh, managing director of M/s. Raunaq Finance Ltd., he failed to produce any register maintained for receipt and dispatch of shuttering material in question. The managing director of M/s. Unitech Ltd.....

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....ier of the shuttering material has stated in his statement at the time of the search as well as reiterated the same thing in reply to the notice by the Department, it is not proper to allow the depreciation on shuttering material claimed to have been supplied by Shri Manish Mehrotra. On the other hand, the mere statement of Shri Manish Mehrotra is also not enough to disallow the depreciation, specially when the payment has been made to Shri Manish Mehrotra firm by account payee cheque. Therefore, in our view, the Assessing Officer has not properly enquired the issue in detail at the time of the assessment order under section 143(3), nor has he taken pains after show-cause notice for reopening of the assessment. The depreciation cannot be allowed only on the basis of payment made by cheque, specially in cases where the receiver of the cheque states that after depositing the cheque, the cash has been withdrawn and has been paid back to the assessee after deducting his commission. After reopening of the assessment, it also appears that Shri Manish Mehrotra has not co-operated. He did not appear for cross-examination. Even the officials for M/s. Unitech Ltd. and M/s. Raunaq Finance Ltd....