TMI Blog2004 (9) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... n International Ltd. and M/s Paras Industries. The AO after giving detailed reasoning and on the basis of admission by the managing director, Shri K.V. Balakrishnan, under s. 132(4) of the Act during search, disallowed the claim of depreciation amounting to Rs. 1.31 crores. The AO also made addition on account of disallowance of 5 per cent of the lease expenses at Rs. 3,61,64,802 by giving the reasoning that all the payments of sub-lease are explained but there are no details available for expenses made out by the assessee on its lease income on any other lease transactions. On this account, he made addition to the extent of Rs. 18,08,240. Aggrieved, the assessee preferred first appeal before the Tribunal. 3. The assessee's appeal was dismissed by the Tribunal vide its order in Appeal No. IT(SS)A No. 369/Mds/1997, 'A' Bench, dt. 12th April, 2000 on merits, after considering all the arguments of the assessee. Subsequently, the assessee moved miscellaneous petition on 17th May, 2001, which was also dismissed by the Tribunal. Further, the assessee moved to the Hon'ble Madras High Court under s. 260 of the Act. The Hon'ble High Court in TC(A) No. 238 of 2001 vide order dt. 19th April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surcharge would not be leviable in a block assessment order. This is a patent error which ought to have been addressed under s. 154 by the assessing authority. (D) The CIT(A), therefore, erred in confirming that the abovecited mistakes apparent from record would not come under the scope of the AO's jurisdiction under s. 154. (E) The CIT(A) erred in deciding the matter without reference to the various submissions made by the petitioner to substantiate its case. (F) The CIT(A) erred in dismissing the appeal on the ground that the substantive appeal had been dismissed by the Tribunal and that a miscellaneous application had been filed thereon. These are matters which are totally extraneous to the case in issue and ought not to have influenced the appellate authority in his decision." 5. Before us, the learned senior counsel, Shri V. Ramachandran and Mrs. Anitha Sumanth, argued for the assessee. On the other hand, the learned Departmental Representative, Shri C.R. Janardhan, appeared for the Department. 6. The learned counsel for the assessee argued that when a decision has been taken in assessment and the same assessment subsequently upheld by the first and second appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike insurance certificate, inspection report by the Bank of Madura authority reached to the following conclusions which is being reproduced from the order of the AO as it is: "(i) M/s Paras Industries Ltd. has sold two continuous push type furnaces to M/s Duckfin International Ltd. prior to the asst. yr. 1994-95. It has been erected in the premises of M/s Duckfin International Ltd. and it has suffered 100 per cent depreciation already in the hands of M/s Duckfin International Ltd. (ii) Though the insurance certificate and supervision report given by the Manager, Bank of Madura, dt. 26th Sept., 1996, is available, but at the time of survey made by the authorities (Investigation Unit), Bhopal, these two furnaces did not exist in the premises of M/s Duckfin International Ltd. (iii) The furnaces have been hypothecated for a loan transaction. These shares of M/s Duckfin International Ltd. were also furnished as a collateral security. If the furnaces really existed, there was no necessity for getting further collateral security from M/s Duckfin International Ltd." (iv) What the assessee had availed of was a facility for borrowing funds from the Bank of Madura and making such fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search was conducted at the business premises of the assessee at Mumbai, no lease agreement was found and only a copy of invoice was located. Mr. Balakrishnan stated that the transaction was supposed to be in the nature of sale and lease back and at the request of lessee the name of M/s Paras Industries was introduced for routing the transaction. Statements from Mr Deepak Bhargava, director of M/s Duckfin International Ltd., were recorded at Bhopal on 1st Aug., 1996, and 2nd Aug., 1996, who had stated that no asset had been brought into existence and no assets were supplied and installed by virtue of this lease deed. He also stated that M/s Paras Industries does not exist and the so-called lease was mere paper transaction and the assets mentioned in these leases did not exist. When Mr. Balakrishnan, managing director, was confronted, he surrendered on behalf of the company the depreciation claimed to the tune of Rs. 1.30 crores on the assets leased to M/s Duckfin International Ltd. That being so, the depreciation on two continuous push type furnaces that were leased to M/s Duckfin International Ltd. was rightly disallowed." 9. Subsequently, the assessee moved application und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2 The Hon'ble Delhi High Court in the case of CIT vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del) has held that the fact that the assessee had itself included the income in the return for the asst. yr. 1958-59 was no effect; there was no estoppel and the assessee having itself challenged the validity of taxing the dividend for that assessment year, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. It is incumbent on the IT Department to find out whether the particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for the particular year, it cannot confer the jurisdiction on the Department to tax that income in that year even though legally speaking such income did not pertain to that year. 10.3 In the case of Pt. Sheo Nath Prasad Sharma vs. CIT (1967) 66 ITR 647 (All), the Hon'ble Allahabad High Court has dealt with the revisional power of the CIT and the Hon'ble High Court has held that the CIT has no power to decide the same matter over again upon a fresh revision application and any observation made in the earlier order can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he machinery would have to be examined to determine the category in which the machinery fell and there was no debatable issue in a case like this. The assessee produced aerated water and not aerated gas and hence 9 per cent was not applicable on the assessee's own showing and hence the grant of 9 per cent by the officer was clearly a mistake apparent from the record justifying action under s. 154. The matter was not one which was likely to involve any debate at all as the relevant details of the machinery would be on record." 10.6 In the case of CIT vs. K.C. Nirmal Kumar Khushlal Chand (2003) 183 CTR (MP) 503 : (2003) 263 ITR 77 (MP), the Hon'ble Madhya Pradesh High Court has held that: "A perusal of the unamended and amended provisions and the circular of the CBDT would make it clear that there had been no specific effect that the amendment effected to s. 158BB in the Finance Act, 2002, w.e.f. 1st July, 1995, would be applicable to the instant case as the block period covered ten years commencing 1986 to 1996. Emphasis had been given to the fact that the evidence must have been found during search and only thereafter, the question of gathering any material information would ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case or the facts are not relevant to the present case. In the present case, the issue of depreciation has already been settled upto the Hon'ble High Court and the matter is pending before the Hon'ble apex Court. The assessee by way of rectification application under s. 154 of the Act on 1st March, 2002, came before the AO as regards to the exclusion of lease rentals from the undisclosed income computed in the block assessment order dt. 29th Oct., 1997, which has already been finalised as well as the issue of deletion of surcharge. 12. From the above facts and case law discussed now, we have to conclude as to whether rectification is possible in respect of this matter which has already been considered and decided in appeals upto the Hon'ble High Court. Now, we will go through the newly inserted s. 154(1A) of the Act by the Direct Taxes Amendment Act, 1964, w.e.f. 6th Oct., 1964, which takes care of the situation where any matter has been considered and decided in any proceedings by way of appeal or revision relating to an order referred to in s. 154(1) of the Act. In such a situation, the authority passing such order may, notwithstanding anything contained in any law for th ..... 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