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2012 (10) TMI 754 - AT - Income TaxValidity of reopening of assessment u/s 147 - Assessee purchase the assets and lease back to the same party – Claim 100% depreciation on leased out of assets – AO issue notice u/s 148 on the basis of Investigation report of ADIT - Excessive and wrong allowance of the claim of depreciation on leased assets – Assessee contended that basis is only change of opinion – Held that:- As concluded from the facts AO did have tangible new material to reopen the assessment u/s 147 and to form a reason to believe that income had escaped assessment. There is nothing either in the assessment order passed u/s 143(3) or in the details or explanation filed by the assessee in response to notice u/s 143(2) to show that the AO had made any enquiry on the issue of allowability of depreciation and whether the nature of transaction is operating leased or a finance lease. We are unable to accept the contention of the assessee that full and true particulars relating to the purchase and leased back transaction were furnished with ROI. Therefore, investigation report of ADIT is very relevant and tangible additional material for formation of belief that income chargeable to tax has escaped assessment on account of excess claim of depreciation allowed in the original assessment. Reopening of assessment on the basis of wrong facts - Non existence of the asset was detected only during the investigation and enquiry of investigation wing – Held that:- The assessee has not conclusively established that the facts pointed out in the investigation report are absolutely wrong. The claim of depreciation was finally disallowed on the ground that the transaction of purchase and lease back were sham, than it cannot be said that the reopening is on the basis of wrong facts. Merger of Order of assessing authority with CIT (A) – Assessee contended that reopening of assessment when the assessment order has merged with the order of CIT(A), then reopening of the assessment is bad in law – Held that:- There is nothing either in the assessment order or in the record available at the time of assessment to suggest that the AO had made any attempt to address this issue. As no such issue was under consideration before the appellate authority and the assessment order was not set aside. Therefore notice u/s 148 can be issue for on the basis of belief that has not been raised before CIT(A) Depreciation on leased assets – The assessee has purchased the assets on hire purchase basis and then leased back to the same parties - AO argued that transactions of sale and lease back of assets are sham & remained with the lessee itself – Held that:- Following the decision in case of Induslnd Bank Ltd (2012 (3) TMI 212 - ITAT MUMBAI) that under finance lease, the asset in question is stated as sold to the lessee at a predetermined price already received by the assessee as security. This peculiar feature shows that the assessee had no interest in the asset itself; but the interest of the assessee was to recover the entire investment and avail the benefit of 100% appreciation. Since rental receipts has been taxed, this issue has not been adjudicated by the CIT(A). Accordingly, the issue of capital component in the rental receipt not to be taxed is set aside to the record of the CIT(A). Issue remand back to CIT(A)
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