TaxTMI 
TaxTMI 
2005 (7) TMI 286
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.... assessee had leased out the following assets to M/s. Gujarat Health Care Ltd. by lease agreement dated 31-3-1995: ------------------------------------------------------ S.No. Description Qty. Nos. Rate Amount ------------------------------------------------------ 1. Verticle Slats 600 4825 28,95,000 2. Castings (with 11 bearings) 600 4910 29,46,000 3. Control Volves 22 4825 1,06,150 4. Steel Volves 26 4685 1,21,810 &n....
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....assessee failed to comply with the directions of the Assessing Officer. The Assessing Officer simultaneously issued summons under section 131 to M/s. Gujarat Health Care Ltd. and directed it to furnish the following details: "(a) wards/circle/range with assessed to Income-tax, (b) copies of P&L account & balance sheet, Audited report with computation of income, (c) date of original purchase, copy of depreciation schedule as per IT Rules filed with the return of income showing w.d.v. of assets and rate of depreciation, (d) whether assets were purchased, turnkey basis or item-wise purchase basis, name and address of the original supplier from whom purchase were made etc., (e) these assets were funded assets, if so, particulars of loan taken for acquisition and whether loan amount had been paid back and details of acquisition from whom the loans were obtained etc." According to the Assessing Officer for claiming depreciation, initial burden to prove the ownership of assets, its uses in the business, and in the present case genuineness of the transaction, is upon the assessee and assessee failed to discharge the primary onus. The Assessing Officer observed that assessee had merely an....
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....that all these documents are official documents already disclosed to the revenue and can be subject-matter of regular assessment. 6. Ld. counsel while apprising us as to how an income is to be assessed in the block period submitted that some direct evidence should have come out at the time of search indicating the undisclosed income. It should be based only on the seized material and cannot be computed on the basis of the material already in the possession of the Assessing Officer. In this connection he relied upon the decision of ITAT, Mumbai rendered in the case of Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 wherein the Tribunal has observed that section 158BA does not provide a licence to revenue for making roving enquiries connected with the complete assessment. It is beyond the power of the Assessing Officer to review the assessment completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. The ld. counsel for the assessee further submitted that in the books of account all details have been duh disclosed and no incriminating material was found by the search party at the time o....
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....as claimed depreciation on the assets which were actually not owned by it. In this connection he drew our attention towards reasoning of Assessing Officer. 8. We have duly considered the rival contentions. Before adverting to the controversy in hand it is salutary for us to understand the meaning and scope of expression undisclosed income provided in section 158B(b) of the Act and its computation provided in section 158BB(1) of the Act. Thus both these clauses read as under: "158B(b) "undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false." "158BB. Computation of undisclosed income of the block period.-(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years....
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....Explanation.- For the purposes of determination of undisclosed income,- (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of this Act without giving effect to set-off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32: Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set-off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32; (b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called to any partner not being a working partner: Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement. (c) assessment under section 143 includes determination of income under sub-section (1) or sub....
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....see for such period. It is also apparent from the perusal of section 158BB that the returns are also required to be filed in pursuance of the notice under section 158BC(a) and the assessment is to be framed on that basis in the light of material that has come into possession of the assessing authority during the course of search which is the foundation of the proceedings. That being so, the correctness or otherwise of the returns filed in pursuance of the notice under section 158BC(a) has to be examined with reference to the material in the possession of the assessing authority having nexus to assessment of "undisclosed income" which is with the assessing authority, and premise of such proceedings. If the returns filed by the assessee do not accord with the materials which are already in the possession of the authority, it can be estimated to the best judgment by the assessing authority on the basis of the material in his possession. However, the assessing authority is not conferred with power to make estimation of income de hors the material in his possession, while making regular assessment order under section 158BB. It has to be borne in mind that proceedings under sections 158B....
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....3. There are adequate safeguards present against any possible misuse of the provision of search and seizure. Chapter XIV-B was introduced in order to make procedure of assessment of search and for requisition cases more effective. Under the provisions of this Chapter the undisclosed income detected as a result of search initiated or requisition made after 30-6-1995 be assessed separately as income of that block of ten previous years. The provision was introduced to streamline the procedure concerning the search matters. It is abundantly clear from the perusal of the prescription of section 158BA that within the pale of Chapter XIV-B assessment could be made only in respect of the undisclosed income. Such undisclosed income must come as a result of search. This section does not provide a licence to the revenue for making roving enquiries connected with the completed assessment. It is beyond the power of the Assessing Officer to review the assessments completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence or material the Assessing Officer is not empowered to d....
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....the claim. This disallowance was not based on the seized material. Similar action could be taken while scrutinizing the regular return. Therefore, we do not find force in the contention of ld. D.R. For the reasons discussed above we allow first ground of appeal. 11. The next ground of the assessee reads as under: "The learned CIT(A) erred in holding that lease rental of Rs. 19,07,000 taxable when the claim of depreciation on the assets leased out is disallowed." 12. Ld. CIT(A) has dealt with this ground on appeal as under: "11. In the ground of appeal No. 2, it has been agitated as under: "Without prejudice to the above, if the lease was held to be non-genuine, the learned JCIT ought to have granted deduction for the lease rental income of Rs. 19,07,000 that was offered by the appellant as taxable income in the return of income filed for the assessment year 1996-97." 12. I have come to the considered conclusion that no genuine leasing had been taken place and the entire transaction was a collusive transaction. As such, the Assessing Officer is directed to look into this ground of the appellant-company and to do the needful in accordance with the provisions of the Act." 13. S....