TaxTMI 
TaxTMI 
2001 (11) TMI 224
X X X X Extracts X X X X
X X X X Extracts X X X X
....ging to the same group. On the same date again, certain documents of the nature of two bunches of loose sheets were found from the office premises of the assessee-company at 3A, Ripon Street, Calcutta-16 and were also seized. It appears that in continuation of further search proceedings carried on 6-3-1997, a fresh Panchnama was issued in the name of the assessee-company and its premises were searched once more, on 8-4-1997. On this particular date also, the search was temporarily concluded and certain further loose bunches containing complete printout in respect of the assessee-company were seized. From the papers placed on our record, it is not possible to know what happened thereafter and how and when the search was ultimately concluded permanently. In any case, the ld. counsel for the assessee strongly contends, in the first place, that continuation of the search from January 1997 to April 1997 by passing a prohibitory order under section 132(3) was for collateral purpose and hence completely illegal. It is argued that only one loose bunch was seized on the later date being 8-4-1997 and that the same could have been seized even on the earlier date of the search in January....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erred for a collateral purpose. In the instant case, in the absence of any definite information about the actual state of affairs, we are not in a position to come to the conclusion which the ld. counsel for the assessee wants us to draw' The department thus gets a benefit of doubt. We cannot, therefore, exactly say that the search was unnecessarily postponed for a collateral purpose and hence the search must be considered to have been concluded in January 1997 itself. This preliminary ground taken up by the assessee's counsel against the validity of the assessment order from the limitation angle cannot, therefore, stand and is hence being rejected. 3. Now coming to the merits of the case, the facts, as discussed by the Assessing Officer in the assessment order, are that the assessee entered into, in the accounting year relevant to the assessment year 1993-94 included in the block period, an agreement for sale and lease-back of Gas Cylinders with M/s. Commercial Corpn. of India Ltd. (CCI) and Shrutaa Builders (SB), 750 Gas Cylinders were sold to both the concerns for the total amount of Rs. 16,38,000 in each case comprising of the actual sale price of Rs. 15,75,000 and Central Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the security deposits as advances merely. 4. The Assessing Officer states thereafter that in order to verify the genuineness of the sale and lease-back transactions in respect of the cylinders, the Assessing Officer asked the assessee-company to produce the concerned persons i.e. lessors. The Assessing Officer also mentions that SB had admitted the transactions between it and the assessee is nonexistent under the Voluntary Disclosure Scheme, 1997. In this connection the assessee was supplied with by the Assessing Officer a copy of the statement of Shri Manmohan Kamath, son of K. Mardappa Kamath, as recorded by the ADI (Inv.), Mangalore, according to which Shri Manmohan Kamath had not verified the physical existence of the gas cylinders either at the time of purchase of the same or at the time of entry into the lease agreement. The assessee tried to argue that inasmuch as both the sale of the cylinders as well as the lease-back of the same stand fully established by the sale-cum-lease agreement and inasmuch as the sale proceeds had been received by the assessee through account-payee cheques/drafts which stand reflected in the bank statement of the assessee-company and the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l existence of the cylinders at any point of time. The Assessing Officer furthermore held that there was a breach in respect of certain terms of' the agreement like making payment of full amount of security deposits Lo the lessors at the time of said agreement, etc. He thus concluded that the assessee-company and the lessors had not actually followed the terms of the lease agreement regarding payment of security deposit amounts of Rs. 1,20,000 in each case. The Assessing Officer thereafter discussed that although the assessee maintains a register of its fixed assets there is no entry of sale and lease back of the cylinders in this register. He states that the search at the Kalyani factory of the assessee-company showed that no cylinder was found having distinctive number. The Assessing Officer furthermore states that the Factory Manager admitted in his statement that he was not having any knowledge regarding the sale of the cylinders by the assessee-company. The Assessing Officer furthermore states that from the records of the assessee-company, it is not clear whether the company was in possession of all the cylinders which it claims as having sold and again taken back on lease. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Rs. 17,26,670 ------------- Rs. 31,50,000 ------------- This amount of Rs. 31,50,000 was ultimately added back in the block assessment. In the appellate stage also, the CIT(A) confirmed the additions. 7. At the stage of hearing of the appeal before us, the Ld. counsel for the assessee stated that all the seized papers were already on the records of the Assessing Officer and that even after taking into consideration these papers the Assessing Officer had completed the regular assessment for the assessment year 1993-94 on 22-1-1996 by accepting the genuineness of the sale-cum-lease agreement. For the assessment year 199....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... about the non-genuineness of the sale-cum-lease agreement was raised in any of these regular assessment orders. The CIT(A) has referred to the Single Bench judgment in the Writ case of Shaw Wallace & Co. Ltd. v. Asstt. CIT [1999] 238 ITR 13 (Cal.) in which it was held that once the search is complete under Chapter XIV-B of the Income-tax Act all additions s1hould be made only in the block assessment and the regular assessment should be completed more or less on the basis of the return filed by the assessee. We have, however to refer to a latter Division Bench judgment of the jurisdictional High Court in the case of Caltradeco Steel (P.) Ltd. v. Dy. CIT [2000] 243 ITR 643. In this case it has been field that there is no bar to proceed to assess the income of an assessee under section 143(3) which he discloses in the return of an year forming part of block assessment while proceedings under the provisions of Chapter XIV-B are pending. The Division Bench of the Calcutta High Court also, in the case of Parag Nivesh (P.) Ltd. v. Dy. CIT [1999] 240 ITR 419, held that section 158BA provides for assessment of "undisclosed income" as a result of search and, therefore, before proceeding to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....linders cannot be considered to arise out of discovery of any material found out during the course of the search in the case of the present assessee or any subsequent enquiries conducted after the search. Hence, from this angle, the addition as made by the Assessing Officer in the block assessment is liable to be deleted. We hold accordingly. 9. Even on merits also, the addition cannot stand. The grounds given by the Assessing Officer for considering the sale-cum-lease-back agreement to be not a genuine one and just a paper transaction seem to be, more or less, based on conjectures and not firm ones. Firstly, the Assessing Officer harps on the refusal on the part of the assessee to produce the purchasers-cum-lessors. The parties being located at Mangalore, a far-distant place, the Assessing Officer cannot insist on producing the parties before him. At best, he could have issued a commission to the local Assessing Officer to question the parties concerned on the points at issue. He has not taken recourse to such proceedings. Thereafter the Assessing Officer points out the lack of distinctive numbers in respect of the cylinders and also on the absence of mentioning of the sale-cum-l....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Assessing Officer on the statement of Shri Manmohan Kamath is concerned, Shri Ka math never said anything going to disprove the genuineness of the sale-cum-lease-back agreement. On the other hand, he merely makes certain statements of facts about non-mentioning of the distinctive numbers of the cylinders in the agreement, non-witnessing the cylinders and their physical conditions and non-verifying even the physical existence of the cylinders inasmuch as, in the circumstances of the case, the two parties viz, CCI and SB, cannot be considered to be interested in such verification. The sale-cum-lease-back agreement is very such common to the commercial world and there may be various considerations behind such agreements. Simply because the cylinders were sold back by the assessee and taken on lease immediately thereafter cannot lead to the conclusion that an agreement in that regard was bogus. The non-fulfilment of all the necessary conditions of the agreement, as discussed by the Assessing Officer, also seems to be rather a trivial issue. The substance of the agreement is required to be taken into account. Some of the conditions mentioned in the agreement need not be complied wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers, already credited to the Revenue account of the assessee, will have to be deleted from the total income of the assessee. The Assessing Officer has not taken any measure in that regard. 14. It is also not possible to agree with the contention of the Assessing Officer that the assessee did not discharge its primary onus relating to the establishment of the genuineness of the sale-cum-lease-back agreements. The transaction in this regard stands concluded not only by the agreement itself but also by the entries made in the financial books of both the sides, Not only the assessee but one of the other parties also viz., CCI stands for the genuineness of the agreement. There is nothing on record to show that payments made under the agreement viz. the receipt of money by the assessee towards, Sale and Payment towards lease rentals were riot genuine financial transactions and that the monies involved therein came back to the original parties in some back-door ways. Hence, in our view, the assessee must be considered to have discharged its primary onus of proving the genuineness of the sale-cum-lease-back agreement. The arguments put forward by the Assessing Officer, as discussed above....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not bad in law and time barred as well. (2) That the CIT(A) has further erred in holding that appellant has failed to discharge its prime onus to prove that transaction of sale and lease back of the gas cylinders was genuine when the very transaction was held to be genuine in proceedings under section 143(3) in original assessment for- assessment year 1993-94 on the basis of same set of agreements and documents as were placed on record which were also found in course of search on 22-1-1997 and on basis of which order under section 158BC of the Act (under appeal) was passed by Assessing Officer. (3) That on the facts and under the circumstances of the case CIT(A) has further erred in confirming the computation of undisclosed income at Rs. 31,50,000 by Assessing Officer under section 158BB of the Act being lease rent paid in four years as detailed below and which was allowed in original assessment proceeding under section 143(3) for those four years: Asst. Year Amount (Rs.) 1993-94  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee-company. He was sent by Mr. Rao. As per the lease agreement the assessee-company was immediately required to deposit Rs. 11,20,000 as security with the lessors. The assessee company has not followed this very clause of the agreement and this fact has been highlighted by the Assessing Officer in the assessment order. 6. From the letter quoted on page 6 of the assessment order, it is noticed that the Assessing Officer was of the opinion that depreciation was not allowable. Therefore, Sri Manmohan Kamath wrote to Mr. Agarwal (Chief Executive of the assessee-company) asking for preparing certain documents showing fictitious sale so that M/s. Srutaa Builders could avail depreciation. It appears, the assessee-company did not oblige M/s. Srutaa Builders for the preparation of this document. M/s. Srutaa Builders had no alternative but to declare the fictitious claim of depreciation on the gas cylinders. 7. According to Assessing Officer as per para (v) page 9 of the assessment order, there was no entry of sale and lease-back cylinders in the register of fixed assets maintained by the assessee-company (EGL/27). The Assessing Officer has quoted some further details, i.e. th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which is not proper and legal according to the Assessing Officer. The CIT(A) has endorsed the view of the Assessing Officer and I also have no comments against the views taken both by the Assessing Officer and the CIT(A). 12. On a perusal of the order of the learned CIT(A) containing 17 pages it was observed that the learned CIT(A) has quoted the relevant portion of the order of the Assessing Officer in verbatim in his appellate order and has justified the confirmation of the assessment. In this connection, pages 6, 10 and 16 of the order of the CIT(A) are pertinent to be noted. 13. Ultimately, the learned CIT(A) has agreed with the -Assessing Officer by endorsing his views that the case of the assessee-company is fully covered by the judgment of the Calcutta High Court in the case of Shaw Wallace & Co. Ltd. and has rejected the first ground taken by the assessee. 14. In my considered opinion objective satisfaction of the Assessing Officer in the sine-qua-non of the Income-tax Act and no assessee can shift the primary onus of proving some facts on the revenue to which he asserts, I am also inclined to endorse with the view taken by the CIT(A) at para 4 on page 16 of his orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny evidence/ materials during the course of the search in the premises of the assessee and/or any enquiries conducted by the Assessing Officer pursuant thereto and in that way the disallowance can be considered to have correctly been made in the block assessment? Whether a disclosure made by a third party under the VDIS can be used against the assessee without allowing the assessee an opportunity of cross-examining the other party? (4) Whether, on the facts and in the circumstances of the case, the assessee can be considered to have discharged its primary onus in establishing the genuineness of the Sale-cum-lease-back agreements? (5) Whether, because of the fact that the assessee could not produce two Mangalore-based parties before the Assessing Officer and the Assessing Officer also did not accept the assessee's request of summoning them under section 131 of the Income-tax Act, an adverse view can be taken against the assessee? (6) Whether, in the present case, it cannot be said that a substantial compliance of the requirements of the Sale-cum-lease-back agreements was made by the parties concerned? (7) Whether, on the facts and in the circumstances of the case, and havi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m-lease-back agreements? (5) Whether, because of the fact that the assessee could not produce two Mangalore based parties before the Assessing Officer and the Assessing Officer also did not accept the assessee's request of summoning them under section 131 of the Income-tax Act, an adverse view can be taken against the assessee? (6) Whether, in the present case, it cannot be said that a substantial compliance of the requirements of the sale-cum-lease-back agreements was made by the parties concerned? (7) Whether, on the facts and in the circumstances of the case, and having special regard to the fact that the genuineness of a portion of the sale-cum-lease-back agreements was accepted by the Assessing Officer by way of not interfering with the inclusion, within the total income of the assessee of the amount of sale-proceeds of the cylinders, the action of the Assessing Officer in treating the sale-cum-lease-back agreements as non-genuine and in that way in disallowing the lease rentals is correct?" 2. To begin with, the assessee is a company and engaged in the business of manufacturing and sale of industrial gases and also in trading in steel items. There was a search and seizur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; 5,32,265 1996-97 2,56,065 -------- 9,68,330 -------- 4. The Assessing Officer further noted the following payments by way of security deposit by the assessee to CCIL and SB. (a) Payment to Commercial Corporation of India Ltd. Dates Amount 05-05-1993 1,80,000 08-06-1993 &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; --------- 5. Assessing Officer further noted the following lease rent payments to CCIL: (a) M/s. Commercial Corporation of India Ltd. Date Amount 30-03-1993 90,000 07-10-1993 90,000 10-09-1994 2,75,000 -------- 4,55,000....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... lessor and finally transferred to the "cylinder retention charges" account as lease rent on 31-12-1995. The Assessing Officer in order to verify the genuineness of the lease rent to the tune of Rs. 15,75,000 to each lessor, the details of which are as under: --------------------------------------------------------------------------- Paid to Commercial Paid to Shrutaa Sl.No. Asst. year Corpn. of India Ltd. Builders --------------------------------------------------------------------------- 1. 1993-94 90,000 90,000 2. 1994-95 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... All those transactions coupled with the legally enforceable agreement proved the genuineness of the transaction. It was emphasised that the sale-cum-lease-back transaction was well known in the commercial world. 9. The Assessing Officer noted that Shrutaa Builders, one of the lessors filed VDIS and offered for taxation the wrong claim of the depreciation on cylinders. The Assessing Officer required explanation. It was clarified and explained by the assessee-company it was not concerned with the actions of M/s. SB who made certain disclosures in VDIS, 1997. It was their outlook as to why and under what compulsions the disclosure was made by them. Referring to the decision of the Hon'ble Supreme Court in the case of Jamnaprasad Kanhaiyalal it was urged that benefit or immunity of VDIS 1997 was available to declarant only and so corollary to that proposition the benefit to one could not be used as a wrong to the other. It was emphasised that since the assessee-company was not a party or part of such disclosure no adverse inference was to be drawn. It was also said that the assessee was not given any opportunity to have a say on such disclosure of the assessee. 10. Referring to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion. To that regard the Assessing Officer referred to the seized document which is a letter from Shri M.M. Kamath to the assessee-company. The Assessing Officer further found that though the assessee was maintaining register of the fixed assets which was seized and marked for identification as EGL/27 but there was no entry of the sale and leaseback of the cylinder in that register. From the materials gathered during the search of Kalyani factory the assessee-company even the factory manager was not knowing about the sale and lease back of cylinders by the assessee-company. The Assessing Officer particularly noted that from the records of the company it was not clear as to whether it had all the cylinders in its possession which the assessee-company claimed to have sold and again took back on lease. The Assessing Officer having further referred to two correspondence kept at pages 68 and 69 of the seized documents identified as EGL-34 said that ultimately CCIL and SB sold back those cylinders to the assessee-company but the books of account of the assessee did not show the purchase of the cylinders till date of the search. On those various facts finally the Assessing Officer came to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... upheld the order of the Assessing Officer. So against that order the assessee went in appeal before the Tribunal and there is difference of opinion among the ld. Members. 13. The difference of opinions are on various counts as stated above. But they are so closely intertwined and in fact they are the texture of the same fabric do not require separate and independent finding. The questions raised would get answered with the flow of discussion of the entire facts and circumstances of the case itself. 14. The ld. AR of the assessee vehemently objected to the order of the CIT(A). He submitted that neither the Assessing Officer nor the CIT(A) considered the matter correctly and in right perspective with reference to the facts and law obtained in the present case. He said that the asst. under section 158BC under Chapter XIV-B of the Income-tax Act is a special provision that was to be strictly done relating to the "undisclosed income" resulted due to search and seizure operation under section 132 of the Income-tax Act. The provision of section 158B defines "undisclosed income" which reads as follows: " 'Undisclosed income' includes any money, bullion, jewellery or other valuable a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act that describes the manner of computation of undisclosed income specifically to sub-section (2) of that section which states that "in computing the undisclosed income for the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall so far as be, apply and references to 'Financial year' in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition", it gives an impression that the undisclosed income includes those that are treated as deemed incomes like cash credits under section 68; unexplained investments under section 69; unexplained money, etc. not recorded in books under section 69A; investment not fully disclosed in the books under section 69B and unexplained expenditure under section 69C of the Act. Further, the definition of undisclosed income talks of income based on any entry in the books, documents or transactions that has not been or would not have been disclosed for the purposes of the Act but, it nowhere states that the entry in the books is so made that has the effect of reducing the income that is recorded in the bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er XIV-B could be applied only for undisclosed income. Since out of the search nothing was found out excepting some information in the shape of a statement of Mr. Kamath and some information from ACIT, Invest. Circle, Bangalore relating to VDIS made by M/s. Shrutaa Builders which could have been secured otherwise also the Assessing Officer, it should not be said that if the revenue found out undisclosed income of the assessee. 17. The Ld. AR of the assessee submitted that the Ld. CIT(A) was not correct to say that since there was an assessment under section 158BC of the Income-tax Act the assessments already completed under section 143(3) should be done afresh. He said that approach of the ld. CIT(A) which was based on a judgment of a single Judge of the Hon'ble Calcutta High Court in the case of Shaw Wallace & Co. Ltd. was not correct because that decision of single judgment was overruled by subsequent decisions of Division Bench in the said case of Shaw Wallace & Co. Ltd. The ld. AR of the assessee said that even prior to that decision jurisdictional High Court in the case of Caltradeco Steel (P.) Ltd held that the assessment for disclosed income and assessment for undisclosed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments, silver articles and utensils. The Tribunal disapproved the assessment because those gold ornaments, silver articles and utensils were also declared by the assessee in its earlier return of wealth tax and that were duly assessed. He further relied in the case of Kairoos M. Bhaya v. Dy. CIT [1998]100 Taxman 165 (Mum.)(Trib.). In that case commission and brokerage were treated as undisclosed income by the revenue but since they are found to be reflected in the balance sheet the addition was deleted. In the recent case the Hon'ble Gujarat High Court upheld the order of the Tribunal in the case of N. R. Paper &Board Ltd v. Dy. CIT [1998] 234 ITR 733 (Guj.) In that decision it was clarified that already disclosed income could not be held to be undisclosed income. Even similar was the position in the case of Parag Nivesh (P.) Ltd. In this case it was said that when the income of the assessee for the assessment year in question was subject-matter of the Settlement Commission the proceedings under section 158BC/BD was not correct. The ld. AR of the assessee on the basis of these various decisions reiterated that once all the facts relating to the sale-cum-lease back were before the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essor towards security deposit and to that regard the Ld. AR of the assessee referred to Annexure 'E' compiled with the paper book. Complete details of cheque No. with date and the entry in the bank statement were shown. The Ld. AR of the assessee again referred to bank statement in order to show that from time to time when payment was made towards security deposits the account of the assessee in the bank got detailed. The Ld. AR of the assessee further said that payment of lease rent were also made by cheque from time to time and to that regard the Ld. AR of the assessee referred to page 2 of Annexure 'E' wherein complete details were given. He submitted that in fact the security deposits in due time got adjusted towards the payment of lease rent totalling Rs. 36,50,000. He said that because the assessee made entries of the security deposits as advance, towards lease rent did not lead to show that there was a gross violence of covenant or conditions of the lease. It was emphasised that in fact the lease agreement was followed in substance and some minor detraction in following the terms of the lease would not lead that the aforesaid transaction of sale-cum-lease-back was bogus, Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actually been used might not be knowing the financial transaction of the company with CCIL and SB because as submitted earlier there was no physical movement of the cylinders from the assessee-company to the purchasers/lessors i.e. CCIL and SB and again back from them to the assessee-company. The Ld. AR of the assessee submitted that the authorities below of the revenue harked much on the disclosure made by SB under section 68(2) of the VDIS Scheme, 1997. In that regard the Ld. AR of the assessee referred to copies of the said certificate compiled at page 46 as well as letter dated 4-6-1998 from ACIT, Investigation Circle, Mangalore compiled at pages 44 and 45. The Ld. AR of the assessee said that if a third party did anything for their own benefit the assessee could not be put in jeopardy for their acts. He said that the consequence of VDIS should not be directed towards the assessee and to that regard he referred to the decision of the Hon'ble Supreme Court in the case of Jamnaprasad Kanhaiyalal. He said that any immunity or benefit granted under VDIS was limited to the declarant only and so on the same analogy since the benefit was being limited to the declarant itself negative ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actions was unjustified and bad in law. He urged to delete the same. 20. On the other hand, the Ld. DR of the revenue primarily relied on the order of the authorities below. He said that assessment under section 158BC under Chapter XIV-B of the Income-tax Act was rightly done because the sale-cum-lease-back transaction being bogus, was found out due to the materials gathered during the search and seizure operation under section 132 of the Income-tax Act. He said that regular assessments for assessment years 1993-94, 1994-95, 1995-96 and 1996-97 might have been done holding the said sale-cum-lease-back transaction as genuine because all material facts were not before the authorities below. He reiterated that the said transaction being bogus and sham was the outcome of search and seizure. In course of his arguments having gone through some of the paras of the assessment order as well as the order of the CIT(A), the Ld. DR pointed out why and in what manner the sale-cum-lease-back transaction was sham and bogus. Concising his submissions he said that in course of search and seizure various materials were brought to light on the basis of which it could easily be tainted that the said....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Shaw Wallace & Co. Ltd. is to be still followed particularly when there are two subsequent decisions giving a contrary view to the decision of Single Bench Judgment. 22. It is to be reiterated that in this case assessment has been done under section 158BC/ 143(c) of the I.T. Act for the block period from 1-4-1986 to 22-1-1997. The assessment under section 158BC of Chapter XIV-B of the Income-tax Act is a special assessment particularly dealing with undisclosed income of the assessee which has been unearthed or found during the course of search and seizure operation carried out under section 132 of the Income-tax Act. In order to have a clarity we may refer to provision of section 158B(b) of the Income-tax Act which defines undisclosed income- "158B. In this Chapter, unless the context otherwise requires, - (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 ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the lease rent to CCIL and SB for the first time in the assessment year 1993-94. In that year all documents were placed before the Assessing Officer. Assessee's claim for lease rent was accepted. The regular assessment was done under section 143(3) of the Income-tax Act on 21-1-1996. For the assessment year 1994-95 the return of income initially was processed under section 143(1)(a) of the Income-tax Act but the regular assessment was completed under section 143(3) of the Income-tax Act. Again for assessment year 1995-96 the regular assessment under section 143(3) was made on 31-3-1998 and even for assessment year 1996-97 the regular assessment under section 143(3) of the Income-tax Act was made on 15-5-1998. These assessment years are constituent of the block period and particularly relating to which the lease rent has been considered as undisclosed income of the assessee by the revenue while completing the assessment under section 158BC of the Income-tax Act. For assessment years 1993-94 and 1994-95 which are the prior period of the search and seizure it can be said that all materials were not there before the Assessing Officer but for the assessment years 1995-96 and 1996-97 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... basis of those seized materials the assessment can be reopened under section 147 of the Act or the same be questioned under section 263 of the Income-tax Act. As has been contended by the Ld. AR of the assessee that even on the basis of the seized materials the sale-cum-lease-back transaction cannot be said bogus. This contention of the Ld. AR of the assessee has some merits. The assessee has entered into an agreement for sale of 750 gas cylinders each to CCIL and SB for a consideration of Rs. 32,76,000 (cost of cylinders Rs. 31,50,000 + Central Sales Tax Rs. 1,26,000) and in pursuance of that agreement the assessee-company sold the same to those buyers. The assessee received the amount through account-payee cheque/draft which was duly accounted for in the books of account of the assessee and the cheque/draft was deposited in the bank. The bank statement is placed in the appeal record wherein there is entry of the aforesaid amount of Rs. 32,76,000. As per agreement of the lease-back the assessee was to pay Rs. 11,20,000 to each of the buyers/lessor towards security deposits. Those amounts were paid by cheques/draft the details of which can be seen at Annexure 'E' compiled in the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not be acceptable. Other allegation is that it is very unusual that though a commercial transaction of considerable amount has been carried out for purchase of lease-back but neither physical existence of cylinder was verified nor the distinctive numbers or the existing conditions of the cylinders issued into and to that regard reference has been made to the statement of Shri M.M. Kamath. This plea also of the revenue is not sufficient to render the said sale-cum-lease-back transaction as bogus. It can be an act of imprudence on the part of the purchaser but certainly it has nothing to do with the genuineness of the said sale-cum-lease-back transaction. In sale-cum-lease-back transaction since the goods or material in question remained with the seller itself there does not seem any necessity to go for such a minute detail and for physical verification even there is no need for giving delivery of the same to the purchaser and again taking back. The ld. AR of the assessee as well as the Ld. AM have rightly appreciated the facts and have said that in sale-cum-lease-back transaction there is no need of physical delivery of the goods. This being the state of affairs naturally the manage....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d out that it is a matter of third party and one has to accept the contentions of the assessee that no adverse inference should be drawn with respect to the aforesaid VDIS declaration by SB. It is a settled law in view of the decision of Hon'ble Supreme Court in the case of Jamnaprasad Kanhaiyalal that the benefit or immunity if any on account of any declaration made is limited to the declarant only. So on same analogy no adverse effect or wrong can be caused to other party. This contention of the assessee has some force and that has to be accepted. The Hon'ble Supreme Court in the cases of Jamnaprasad Kanhaiyalal and ITO v. Rattan Lal [1984] 145 ITR 183 and also Delhi High Court in the case of Addl. CIT v. Popular Jewellers [1984] 149 ITR 666 have also held that for action of a third party without giving opportunity to have its say the same cannot be used adversely. 27. Non-mentioning of question of cylinder in assets register also not a big cause to render the sale-cum-lease-back transaction a sham or bogus transaction. For AR has clarified that since assessee had taken the benefit of 100 per cent of depreciation so there was no mention of those cylinders in fixed assets regist....