TMI Blog2006 (11) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... r a bona fide belief in the matter. He further failed to appreciate that the penalty proceedings are separate than the regular assessment proceedings. The reasons assigned by him for upholding the penalty are wrong." 3. The Assessing Officer has imposed the penalty under section 271(1)(c) of the Act by observing and holding as under: "Original assessment in this case was completed under section 143(3) of the Income-tax Act on 24-9-1997 on a total income of Rs. 3,98,52,530. In this order the assessee's claim for depreciation amounting to Rs. 69,49,010 was allowed which includes half the depreciation of Rs. 50 lakhs on forging rolls worth Rs. one crore as the same has been used for a period of less than 180 days during the year under consideration. Balance depreciation has been claimed in assessment year 1995-96. During the course of assessment proceeding for assessment year 1995-96, it was found by the Assessing Officer that assessee's claim for depreciation on forging rolls is not genuine. The Assessing Officer found that forging rolls have been purchased by the assessee from M/s. Prakash Industries Ltd. and has been given back on lease to the same party. The assessee has not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has claimed that its claim for depreciation has erroneously been not allowed. The assessee has claimed that it has purchased forging rolls from M/s. Prakash Industries Ltd. on 21-3-1994 and given the same to the same company on lease. The assessee has claimed that in original assessment proceeding his claim for depreciation was accepted under section 143(3) of the Income-tax Act, therefore, the matter has obtained finality. The assessee has further submitted that though the Assessing Officer has referred the matter to DDIT(Inv.), Jabalpur for inquiry about the possession and actual use of rolls but the assessee claimed that DDIT(Inv.), Jabalpur only forwarded a copy of the enquiry conducted by him in another case who has also entered into similar transaction with RPG Telecom Ltd. and not in the case of assessee. The assessee claimed that the Assessing Officer simply employed same yardstick in its case. The assessee claimed that its claim for depreciation has not been allowed only on the ground that transaction is not genuine and assessee could not prove the identity of the assets. The assessee has submitted that the transaction in question has been treated as sham by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited and company has lost nearly Rs. 34 lakhs in the transaction as full rental has not been paid by that party. The assessee has claimed that in view of this fact no penalty can be leviable. I have considered the submissions of the assessee. The assessee has made claim for depreciation of Rs. 50 lakhs in the return of income furnished on 30-11-1994. This depreciation claim was 50 per cent of the value of heavy structural rolling mill rolls claimed to have been purchased by the assessee on 21-3-1994 for a sum of Rs. one crore. However, the claim of the assessee was rejected in assessment year 1995-96. In that year though assessee has filed appeal but the same was not contested as the assessee has availed the benefit of KVSS scheme. The issue could not be finally settled in that year. Even in this year though the assessee has filed appeal against orders passed under section 143(3) read with section 147 on 30-9-1999 but the same has been withdrawn. Even the assessee's application for revision under section 264 has been rejected by CIT-I, Pune vide order dated 4-5-2000. In this case it is found that the assessee's claim of purchase of forging rolls is not evidenced either by taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er simply used a survey report against him, which has been carried out by DDIT, Jabalpur in other case has no basis because though the survey was carried out in other cases but the intention of the survey party was to look into the genuineness of all sale and lease back transaction carried out by M/s. Prakash Industries Limited. This will cover the case of the assessee also. Further though forging rolls are eligible for depreciation separately as per provisions of Income-tax Act, it is found that M/s. Prakash Industries Ltd. has not purchased these assets separately. These assets which has been claimed to have been purchased by the assessee forms part of heavy structural mill equipment purchased by M/s. Prakash Industries Ltd. for a sum of Rs. 2,08,00,000 on 31-3-1993. Once the purchase has been made by any party consisting of many items that are necessary for production, the assessee cannot split these assets and claim depreciation on each asset separately unless the owner has physically separated these assets and used it at different places. Therefore, by purchasing a part of heavy structural mills equipments the assessee has become a fractional owner of the structural mill equip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted organization in the field of financing, suggested the proposal of Prakash Industries Ltd. for a sale and lease back transaction of Rolling Mill Rolls for Rs. 100 lakhs, the said rolls carry 100 per cent depreciation under the Income-tax Rules, the proposal envisaged a sale and lease back of the rolls from Prakash Industries for Rs. 100 lakhs for a period of 5 years. Praj was to get Rs. 134 lakhs as lease rentals in the period of 5 years. After considering the tax advantages, the average annual return worked out to be about 16.50 per cent after tax. The Board considered the proposal in its meeting dated 28-2-1994, and approved the same. .... Prakash Industries Ltd. already had purchased Heavy Structural Rolling Mill Equipment with accessories from M/s. TISCO, Jamshedpur. The assessee had obtained a copy of invoice by TISCO to Prakash along with relevant transportation vouchers, a copy of which is already placed on record with the Assessing Officer and enclosed herewith (annexure '1'). The Rolling Mill Rolls form part of the said Mill and are included in accessories. These are separate items and a separate asset in itself. In fact, a separate entry for these assets exists in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TISCO, Jamshedpur...... The value for 65 rolls was stated to be Rs. 100 lakhs by Prakash Industries which was got valued by the assessee through an independent Chartered Engineer (annexure '9') and only then proceeded in the matter.... The assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/P M/93-94, dated 23-1-1994 for Rs. 100 lakhs (annexure '4'). The assessee also settled the amount of Rs. 100 lakhs with Prakash Industries through cheques/DD (annexure '5'). The physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of the huge weight of the assets (about 400 tons) and high transportation costs. However, a confirmatory letter from Prakash Industries that they have sold the assets and taken back the same from Praj on lease is already on record of the department (annexures '6' and '6A'). Moreover, the assets were insured with The New India Assurance Co. Ltd. with specific mention of assessee's name on the insurance policy. (annexure '7'). Alternatively, it may also be appreciated that the assets are eligible for depreciation at the rate of 100 per cent. The depreciation is not being granted because the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livery was not practical and mode of delivery, whether actual or constructive, is not a deciding factor in determining whether sale is genuine or not. In fact, section 33 of the Sale of Goods Act postulates that the delivery of goods may be made by doing anything which the buyer and seller agree to treat as delivery. The Assessing Officer's contention, therefore, that there should have been actual delivery is wholly irrelevant in the context. Moreover, the Assessing Officer in the assessment proceedings for assessment year 1995-96 has stated that the assessee has taken constructive possession, which comments are repeated by the Assessing Officer in the order under section 143(3) read with section 147 for assessment year 1994-95. (c) Another contention of the Assessing Officer, both in assessment years 1994-95 and 1995-96, is that the rolls were not separately identifiable, the contentions of the Assessing Officer are not correct. In fact, in the first place M/s. Prakash Industries have vide their letter dated 28-4-1998 have confirmed that the assets are clearly identifiable are adequately insured and are without any encumbrance. Moreover, the assessee-company's auditors specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be observed that the appellant's contention that it had purchased assets and leased them out and, therefore, it was nothing but financing the leasing business, is a contention far from reality. There has to be a difference between financing leasing activity or 'lease financing' and 'leasing finance'. In the prior case, a concern purchases an asset as a genuine purchase and leases it out to a third party earning the income from lease rent necessarily whether with or without the benefit of incremental gain by way of higher claim of depreciation. Usually, such cases are of the nature of purchase of vehicles, heavy duty vehicles used for commercial purposes or otherwise, purchases on plant and machinery etc. and giving the same on lease. In the latter type of activity i.e., 'leasing finance', it is pure and simple activity of advancing loans under the garb of a leasing activity or in the name of placing inter-corporate deposits or acquiring debentures etc. These activities are nothing but financing loans. In the instant case, the lessee i.e., Prakash Industries Ltd. has effected purchase of total plant and machinery inclusive of rolling mill rolls which is a part of heavy structural mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a sale and lease back of the Rolls from Prakash Industries for Rs. 100 lakhs for a period of 5 years. Praj was to get Rs. 134 lakhs as lease rentals in the period of 5 years. After considering the tax advantages, the average annual return worked out to be about 16.50 per cent after tax. The Board considered the proposal in its meeting dated 28-2-1994, and approved the same. Prakash Industries Ltd. already had purchased Heavy Structural Rolling Mill Equipment with accessories from M/s. TISCO, Jamshedpur. The assessee had obtained a copy of invoice by TISCO to Prakash along with relevant transportation vouchers, a copy of which is already placed on record with the Assessing Officer and enclosed herewith (annexure '1'). The Rolling Mill Rolls form part of the said Mill and are included in accessories. These are separate items and a separate asset in itself. In fact, a separate entry for these assets exists in Appendix 'A' to I.T. Rules [entry No. III(3)(vii)]. The Act thus expressly recognizes these as separate assets. Prakash Industries Ltd., through Tata Finance, approached the assessee for sale and lease back finance for these rolls ... Having satisfied about the value and tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies vide their invoice No. PIL/SID/P M/93-94, dated 23-1-1994 for Rs. 100 lakhs (annexure '4'). The assessee also settled the amount of Rs. 100 lakhs with Prakash Industries through cheques/DD) (annexure '5'). The physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of the huge weight of the assets (about 400 tons) and high transportation costs. However, a confirmatory letter from Prakash Industries that they have sold the assets and taken back the same from Praj on lease is already on record of the department (annexures '6' and '6A'). Moreover, the assets were insured with The New India Assurance Co. Ltd. with specific mention of assessee's name on the insurance policy (annexure '7'). Alternatively, it may also be appreciated that the assets are eligible for depreciation at the rate of 100 per cent. The depreciation is not being granted because the assets are in the nature of social and public welfare such as, pollution control, energy saving etc., but is being granted looking at the life of these assets. The life of these assets being basically in the nature of consumables is hardly 2-3 years. When one is looking for identity of such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of plant and machinery, the appellant has to clearly state the facts and then only draw inference as it chooses. In the instant case, the appellant has only made a claim of 100 per cent depreciation without stating the facts. 10. As far as necessity of identifying the rolls actually purchased by the appellant is concerned, the Assessing Officer has addressed this issue from three different angles viz.:- (i) the purchases of the appellant were effected only on paper, (ii) the quantity purchased by the appellant was not identified, (iii) the appellant could not prove the use of the actual assets claimed to have been purchased. It would be understood clearly from the provisions of the law applicable that an assessee has to prove the above-mentioned three factors before it claims allowance of depreciation as per Rules. In the instant case, the appellant presumes that it has proved these points by virtue of paper transactions. It is an admitted fact that these rolls were not identified either by the Chartered Accountant issuing the certificate or by the Chartered Engineer issuing a similar certificate. In the re-assessment order, the Assessing Officer clearly states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant has wilfully made wrong ab initio which could not factually be substantiated and it is found logically, not tenable. The appellant also produced during the re-assessment proceedings for the first time and the certificates so as to prove that the rolling rolls were actually identified by the appellant before its purchase. Its bluff has been exposed during the re-assessment proceedings when the Chartered Accountant certifying the physical identification of such rolls admitted before the Assessing Officer that these rolls were not capable o[ being identified. Further, the appellant claimed in the proceedings that it is obvious that the rolls have been used and their total life was for 2-3 years, whereas the Chartered Accountant visited the site after a period of 4 years and, therefore, it was not possible to identify the rolls purchased by the appellant. At this stage, it must be mentioned that the appellant was given an opportunity to produce such Chartered Accountant and Chartered Engineer during these appellate proceedings so as to verify the correctness of this statement of the appellant. As a matter of fact, the record clearly reveals that these rolls were sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the written submissions filed before the CIT(A). This written submission filed by the assessee before the CIT(A) is placed at pages 11 to 17 of the paper book. The contentions and submissions that were made by the assessee in his written submissions filed before the CIT(A) were emphatically emphasized and highlighted by the ld. counsel for the assessee at the time of hearing of this appeal. All those facts and contentions highlighted by the ld. counsel for the assessee in the written submissions along with the various documents in support thereof have been taken note of very carefully by us. The assessee's written submission made before the CIT(A) has already been quoted hereinabove, and as such, we do not find it necessary to repeat the same here. to. The ld. DR, on the other hand, supported the orders of the authorities below. He contended that each and every aspect of the matter has been elaborately and meticulously discussed and analyzed by the Assessing Officer as well as by the CIT(A) in their respective orders to come to a conclusion that the assessee's claim of depreciation on the alleged forging rolls was not genuine and true, but the same is based on unreliable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereto and in the light of judicial precedents discussed above, the law on the subject of penalty imposable under section 271(1)(c) read with Explanation thereto can be spelt out in the prepositions as under:- (i) Wherever there is a difference between the returned and assessed income, there is an inference of concealment, as a rule of law as would be clear from Explanation 1 to section 271 (1)(c) of the Act. However, the Explanation 1 to section 271 (1)(c) raises only a presumption that can be rebutted by the assessee with reference to the facts of the case. (ii) The responsibility for rebutting such inference of concealment drawn under Explanation 1 to section 271 (1)(c) is squarely on the assessee. (iii) The assessee is required to offer an explanation for the difference between the returned and assessed income. (iv) Absence of any explanation, by itself, would attract penalty as is clear from clause (A) of Explanation 1 to section 271 (1)(c) of the Act. (v) The explanation of the assessee, were offered, should not be found to be false, so that the penalty would not be exigible. In other words, the explanation of the assessee if found to be false would attract penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 271 (1)(c) read with Explanation 1 thereto, we shall now revert to the facts of the present case to ascertain as to whether the assessee's explanation in support of the claim of depreciation on alleged forging rolls is found to be false by the Assessing Officer, and whether the assessee's explanation was bona fide and the assessee had disclosed all material facts and information relating to the claim of depreciation on forging rolls. 14. In this case, the original assessment for the assessment year 1994-95 under consideration was initially completed under section 143(3) on 24-9-1997, where the claim of depreciation to the extent of 50 per cent on forging rolls was allowed, inasmuch as it was claimed that the same were used for a period of less than 180 days during that year. The balance depreciation was claimed in the assessment year 1995-96, during the assessment proceedings of which it was found by the Assessing Officer that the assessee's claim of depreciation on forging rolls was not genuine, as the Assessing Officer found that the assessee could not establish, inter alia, that the forging rolls claimed to have been purchased from M/s. Prakash Industries Ltd. an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, the assessee is required to offer an explanation with regard to its claim of depreciation on the alleged forging rolls. The explanation offered by the assessee should not be found to be false for the purpose of not levying the penalty. In other words, the explanation of the assessee if found to be false, that would attract penalty as envisaged in clause (A) of Explanation 1 to section 271 (1)(c) of the Act. It is also clear that merely because the assessee has not been able to substantiate his explanation, penalty would not automatically be attracted, if the explanation so offered by the assessee is not found to be false but is bona fide, and all the facts relating and material to the computation of the assessee's income has been truly and fully disclosed by the assessee. Therefore, in the present case, it is the assessee's burden to show that his explanation as to the claim of depreciation of forging rolls is bona fide, and all the facts relating and material to the assessee's claim of depreciation on the forging rolls has been disclosed by it. This explanation of the assessee cannot be held to be discharged by any fantastic or fanciful explanation. It is also not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brance certificate dated 17-2-1994 given by Chartered Accountant. 25 7. Valuation by Chartered Engineer. 24 8. Invoice dated 31-3-1993 of TISCO Ltd. favouring Prakash Inds. along with 5 Nos. transport Receipts of Dharam Roadways. 18-23 9. Letter from Tata Finance for documentation. 33 10. Lease Agreement with M/s. Prakash Industries Ltd. 89-107 11. Resolutions dated 24-1-1994 and 28-1-2004 adopted by the Board of Directors. 118-119 17. It is the assessee's case that the sale and lease back transaction entered into with M/s. Prakash Industries Ltd. was materialized on the recommendations given by Tata Finance Ltd., which is a well known Tata organization in the field. The assessee's further case is that Prakash Industries Ltd. had already purchased heavy structural mills equipment with its available accessories from M/s. TISCO, Jamshedpur vide Invoice dated 31-3-1993, and the forging rolling claimed to have been purchased by the assessee from M/s. Prakash Industries Ltd. did form part of the heavy structural mills equipment with its available accessories purchased by M/s. Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion advancing a loan to M/s. Prakash Industries Ltd. 19. To ascertain as to whether the heavy structural mill equipment with its available accessories alleged to have been purchased by M/s. Prakash Industries Ltd. from M/s. TISCO vide invoice dated 31-3-1993 had actually included the very forging rolls claimed to have been purchased by the assessee and given them back on lease to M/s. Prakash Industries Ltd., we have carefully perused the aforesaid invoice dated 31-3-1993 of M/s. TISCO raised in favour of M/s. Prakash Industries Ltd. On perusal of the same, it is seen that the particulars of the items mentioned in the said invoice are stated as "Heavy Structural Mill equipments with its available accessories" and the price thereof is stated at Rs. 2 crores, whereupon CST at the rate of 4 per cent amounting to Rs. 8 lakh was also charged. The total value of the invoice is Rs. 2,08,00,000. This invoice dated 31-3-1993 was raised in respect of the order dated 16-7-1991. The list of the heavy structural mills equipment with its available accessories have not been furnished either by the assessee or by M/s. Prakash Industries Ltd. This invoice does not indicate whether the "heavy str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his confirmation letter that this heavy structural rolling mills rolls were installed and put to use on 22-3-1994 at their factory at Champa, Distt. Bilaspur, Madhya Pradesh. It was also stated therein that these assets were clearly identifiable as assets belonging to the present assessee. They further stated that M/s. R.D. Garg Co. Chartered Accountants had issued no-encumbrance certificate certifying that these assets are from any charge or encumbrance, and the assets were also insured. It was further confirmed therein that this sale and lease back transaction was syndicated for them by M/s. Tata Finance Ltd. At this stage, it is very pertinent to note that M/s. Prakash Industries Ltd. has also given an another letter dated 17-2-1994 to the assessee M/s. Praj Industries Ltd. stating therein as under: "February 17, 1994 M/s. Praj Industries Ltd. 1216/6, Furgusson College Road. Pune-411 004. Dear Sir, With reference to the proposal for lease Finance of Rs. 1,00,36,149 we hereby confirm that we have procured the concerned assets i.e. Steel Structure Rolling Mill Rolls is in the month of May, 1993 and these are at our factory site. Village Champa, Distt. Bislapur, (M.P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which was received from M/s. Tata Finance Ltd. for Rs. 1,00,00,000. The said Heavy Structural Steel Rolling Mills Rolls had been purchased by M/s. Prakash Industries Ltd. from M/s. TISCO, Jamshedpur vide Combined advice and Invoice No. 9303-82145, dated 31-3-1993 for a total amount of Rs. 2 crores, out of which 50 per cent was financed by us by way of sale and lease back transaction." On reading this averment of the assessee, it is seen that the assessee has also made out a case that out of the total consideration of Rs. 2 crores on account of purchase of the Heavy Structural Steel Rolling Mills Rolls by the assessee from M/s. TISCO, vide invoice dated 31-3-1993 which is related to the order dated 16-7-1991, 50 per cent thereof was financed by the assessee by way of sale and lease back transaction. In this regard, we observe that the assessee has claimed to have entered into the transaction of sale and lease back only after getting its approval from the Board of Directors, vide Resolution dated 24-1-1993 and 28-1-1994 and purchased the alleged forging rolls vide invoice dated 31-3-1993. It is not understood as to how the assessee had come to the picture of financing 50 per cent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries Ltd. had referred to the assessee's proposal for lease finance of Rs. 1,00,36,149, though, on the other hand, it is the assessee's claim that M/s. Prakash Industries Ltd. vide its invoice dated 23-1-1994 has sold the heavy structural rolling mills rolls amounting to Rs. one crore only. The lease agreement is of dated 2-2-1994. The invoice, which is relied on by the assessee, is raised by M/s. Prakash Industries Ltd. for sale of alleged heavy structural rolling mill rolls for a sum of Rs. one crore on 23-1-1994. The letter dated 17-2-1994 of M/s. Prakash Industries Ltd. confirming that steel structural rolling mill rolls were procured by them in the month of May 1993 and they were at their factory site was given with reference to the proposal for lease finance of Rs. 1,00,36,149. It is not made understood and clarified as to why a reference to a proposal of lease finance of Rs. 1,00,36,149 is made in the said letter dated 17-2-1994, when the assessee's case is that they had purchased this item for a sum of Rs. one crore only vide invoice dated 23- 1-1994. No explanation as to the discrepancy of the amount of Rs. one crore vis-a-vis Rs. 1,00,36,149 has been given. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Industries Ltd. in favour of Praj Industries Ltd. This makes the assessee's case very doubtful and unbelievable. This cast a very serious doubt as to the genuineness of the invoices claimed to have been raised by M/s. Prakash Industries Ltd. It is, thus, more than clear that all these documents relied upon by the assessee do not support the assessee's theory of actually having purchased the heavy structural rolling mill rolls worth of Rs. one crore from M/s. Prakash Industries Ltd. 22. The assessee's claim that heavy structural rolling mill rolls claimed to have been purchased by the assessee from M/s. Prakash Industries Ltd. did form part of the plant and machineries of M/s. Prakash Industries Ltd., who in turn had purchased the same from M/s. TISCO vide invoice dated 31-3-1993 may be examined from one more angle. It is the assessee's' case that 65 numbers of rolling mill claimed to have been purchased from M/s. Prakash Industries Ltd. were duly identified by its Chartered Accountant, who conducted physical inspection of the concerned assets leased back by the assessee to M/s. Prakash Industries Ltd. vide CA's certificate dated 30-1-1998, which is placed at page 64 of the pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement dated 2-2-1994, one of the conditions specified therein is that the lessee shall affix a name plate or other mark on the equipment identifying the sole and exclusive ownership thereof of the lessor and not allow or permit the same to be removed or defaced. But, on an enquiry and investigation, and in the light of the discussion made above, it becomes clear that no such name plate or other mark on the alleged 65 Nos. of forging rolls identifying the sole and exclusive ownership thereof of the assessee has been established. Further, in the said lease agreement, the description of the equipment is given as "Steel Roller", which makes it clear that no detail as to the numbers and identifications of the Steel Roller alleged to be given on lease by the assessee to M/s. Prakash Industries Ltd. are described in the lease agreement. From this point of view also, existence of the alleged forging rolls and sale and lease back thereof by the assessee is not found to be established. 23. In the course of hearing of this appeal, the ld. authorised representative for the assessee has submitted that it is because of the non-co-operation and non-helping attitude of the C.A. Mr. Salvekar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible one. 24. Furthermore, no evidences or materials or particulars whatsoever have been brought on record by the assessee to prove and establish that the very 65 Nos. of forging rolls were identified and earmarked and were physically verified by the assessee before purchasing the same vide alleged Invoice dated 23-1-1994 of M/s. Prakash Industries Ltd. Though no actual physical delivery of the rolls could be possible as viewed by the assessee, it is always desirable and necessary to identify the very assets intended to be purchased before the constructive delivery thereof was taken. In order to take a constructive delivery of any property, it is desirable that the property must first be identified and its existence should be ascertained by the purchaser. In this regard, the assessee has relied upon the valuation certificate dated 4-1-1994 of a Chartered Engineer and non-encumbrance certificate dated 17-2-1994 of a Chartered Accountant. We have already observed above that the non-encumbrance certificate given by a Chartered Accountant is not with reference to the Invoice dated 23-1-1994, but with reference to the invoice dated 24-8-1993. The valuation certificate is with regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untant that the rolls were without any encumbrance (annexure '3') and only then proceeded in the matter. Having satisfied about the value and title, the assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/P M/93-94, dated 23-1-1994 for Rs. 100 lakhs, (annexure '4')." On perusal of the same, it is thus clear that it is the assessee's case that having satisfied about the value and title, the assessee purchased the rolls from M/s. Prakash Industries Ltd. vide their Invoice No. PIL/SID/P M/93-94, dated 23-1-1994 for Rs. 100 lakhs. The date of purchase is claimed as 23-1-1994. As already observed above, the non-encumbrance certificate of the Chartered Accountant is of dated 17-2-1994, which is subsequent to 23-1-1994, the date of purchase. Therefore, the question of being satisfied about the title on the date of purchase, i.e., 23-1-1994, on the basis of encumbrance certificate dated 17-2-1994 of the Chartered Accountant, on which the assessee has put heavy reliance could not arise at all. 27. The assessee has also made a reference to two Resolutions dated 24-1-1993 and 28-1-1994 of its Board of Directors to substantiate its case of transaction of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chairman and Managing Director was authorised to finalise the deal only after obtaining confirmations, credit references and securities to his satisfaction in consultation with Mr. Shashishekhar Pandit." This second resolution is with regard to the acceptance of a proposal of sale and lease back received from M/s. Tata Finance Ltd. for Rs. one crore, which proposal envisages the purchasing of Steel Rolling Mill's Rolls from M/s. Prakash Industries Ltd., New Delhi. Here, it is interesting to note that before this proposal was even discussed and approved in its Board's meeting held on 28-1-1994, and before the consent was accorded to commence the business vide resolution dated 24-1-1993, the assessee had already purchased the rolls in question from M/s. Prakash Industries Ltd., vide their Invoice No. PIL/SID/P M/93-94, dated 23-1-1994 (which is described as delivery challan-cum-invoice) as would be seen from the case made out by the assessee itself. This seems to be totally improbable and impractical. All these papers and documents relied upon by the assessee do not, therefore, support the assessee's case of alleged sale and lease back of rolls to be genuine one. In the backdrop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole sequence of events discussed and appreciated above by us, it becomes quite clear as to how the things were managed by the assessee in the present case to give the financial transaction a colour of sale and lease back transaction with a view to claim the depreciation on forging rolls. In our considered view, and after considering the totality of the discussion made above, the assessee's claim of depreciation on the basis of sale and lease back transaction does not ring true and could not have been accepted by any reasonable person. The whole arranged story of the assessee has been unearthed by the department, and the assessee's claim of depreciation was thus disallowed, finding the same to be not correct and genuine one. 30. We, therefore, hold that the explanation offered by the assessee in support of its claim of depreciation on forging rolls is not found to be bona fide and genuine one, but rather it is otherwise found to be false. Further, the assessee has also not furnished full and true particulars relating to the claim of depreciation on forging rolls. It is, thus, clear that the assessee has not been able to discharge the burden that lay upon it under Explanation 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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