2010 (12) TMI 1077 - HC - Income Tax

Whether on the facts and law the Tribunal was right in holding that the initiation of proceedings under section 147 read with section 148 of the Act in all the three years is justified ? Held that - We are of the view that the majority view taken by the Tribunal was right and we concur with the same. The Tribunal was fully justified to remand the matter back to the Assessing Officer with certain directions. We do not find any reasons to interfere with the same. As a result the question of law framed is answered in favour of the respondent and against the appellant resulting into dismissal of these appeals.

Summary

Issues Involved:
1. Reopening of proceedings under section 147 read with section 148 of the Income-tax Act, 1961.
2. Justification for disallowance of depreciation claims.
3. Disallowance of consultancy charges.
4. Consideration of utilization of withdrawal from IDBI deposits under section 32AB of the Act.

Detailed Analysis:

1. Reopening of Proceedings under Section 147/148:
The primary issue revolves around the reopening of proceedings under section 147 read with section 148 of the Income-tax Act, 1961. The Tribunal adjudicated that the initiation of these proceedings for the three assessment years was justified. The Tribunal's third Member concurred with the Judicial Member, holding that the reopening was warranted due to the discovery of new information indicating that the lease transactions were not genuine. The assessee had initially disclosed all material facts, but subsequent findings revealed discrepancies, prompting the Assessing Officer to reassess the income.

2. Disallowance of Depreciation Claims:
The Tribunal upheld the disallowance of depreciation claims for the assessment years 1990-91, 1991-92, and 1992-93. The third Member agreed with the Judicial Member that the transactions involving the lease of computers were sham and non-genuine. The assessee had claimed depreciation on computers which were allegedly leased but were found to be non-existent as there was no physical movement of goods. The Tribunal concluded that the assessee entered into an arrangement to claim depreciation on non-existent assets, justifying the disallowance.

3. Disallowance of Consultancy Charges:
The Tribunal also justified the disallowance of consultancy charges allegedly paid to M/s. Esskay Financial Consultants. The third Member noted contradictions in the assessee's claims regarding the services rendered by the consultancy firm. The Tribunal held that the payment of consultancy charges was part of a non-genuine transaction, further supporting the disallowance.

4. Utilization of Withdrawal from IDBI Deposits under Section 32AB:
The Judicial Member restored the issue relating to the claim of deduction under section 32AB to the Assessing Officer for fresh consideration, while the Accountant Member had initially deleted the addition. The third Member agreed with the Judicial Member, directing the reassessment of the utilization of withdrawal of Rs. 55 lakhs from IDBI deposits. The Tribunal found that the utilization of these funds for the purchase of equipment was not genuine, necessitating a fresh evaluation by the Assessing Officer.

Conclusion:
The High Court upheld the Tribunal's majority view, agreeing that the reopening of proceedings under section 147/148 was justified based on new information indicating non-genuine transactions. The disallowance of depreciation and consultancy charges was affirmed, and the issue of utilization of IDBI withdrawals was remanded for fresh consideration. The Court emphasized that the assessee had not made full and true disclosure of material facts, and the reassessment was not based on a mere change of opinion but on substantial new evidence. The appeals were dismissed, and the Tribunal's decision was upheld.