TMI Blog2010 (12) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... outcome of the appeals. These appeals are accordingly admitted on the following substantial question of law. "1. 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 ?" With the consent of learned counsel for the parties, we have heard the matter finally at this stage. The issue raised by the assessee had been adjudicated by the Tribunal wherein the Accountant Member of the Tribunal disagreed with the order passed by the Judicial Member. Therefore, the matter was referred to third Member. The third Member of the Tribunal has restored the issue relating to claim of the deduction, while concurring with the view taken by the Judicial Member on the following of aspects: "(1) That initiation of proceedings under section 147 read with section 148 of the Act in all the three assessment years is justified. (2) That there is justification for disallowance of the claim of depreciation of Rs. 25,36,136 in the assessment year 1990-91, Rs. 14,18,926 in the assessment year 1991-92 and Rs. 10,63,721 in the assessment year 1992-93. (3) There is justifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other issues raised would depend upon the outcome of this question. Accordingly, arguments were heard on the question of law framed in respect of this issue. The detailed facts of the present case are as follows The assessee is a limited company, manufacturer of TVs and runs a leasing business of computers. During the assessment year 1990-91, the assessee purchased computers from M/s. Pertech Computers Ltd. (in short PCL) and on the same date leased them to M/s. Altos India Ltd. (in short AIL), who in turn sub-leased to PCL, this being a lease back transaction. In the regular assessment made under section 143(3) of the Act by the Assessing Officer, he duly accepted and granted depreciation of computers to the assessee in his order dated March 29, 1993. During proceedings for the assessment year 1993-94 on enquiries it transpired that the lease transaction was not genuine. Therefore, M/s. AIL and M/s. PCL were summoned. In response to same, Sh. R. P. Goel, accountant of PCL stated that the computer monitors and printers involved in the lease transaction were sold by PCL to M/s. Video Electronics, vide their invoice dated of February 28, 1990, and on the same day these assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were given by PCL to M/s. Video Electronics Ltd. The Altos India Ltd. is only a via-media to get depreciation on non-existent assets. The assessee has claimed depreciation on computers amounting to Rs. 18,91,060 during this year. I have reason to believe that the assessee has claimed depreciation amounting to Rs. 18,91,060 on the non-existent assets, therefore, the income of the assessee-company has escaped assessment to the tune of Rs. 18,91,060 during the year. To bring this income in tax-net notice under section 148 is required to be issued. Your kind approval is solicited to issue notice under section 148 for the assessment year 1990-91." After taking approval from the Commissioner of Income-tax, the Assessing Officer issued notice under section 148 of the Income-tax Act on March 24, 1998. Accordingly, he reassessed the income by disbelieving transaction of computers including disallowance of depreciation on computers which were allowed originally. The aforesaid action of the Assessing Officer was challenged before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) upheld the reopening of the assessment and confirmed the addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The lease agreement was executed through M/s. S. K. Financial Consultants, 30/16, Daksh Nagar, Vishwash Nagar, Shahdara, Delhi, as per photocopy of bill enclosed and they were paid Rs. 2,12,750 for the services rendered by them." The Member in minority was of the view that the validity of proceedings initiated had to be decided from the reasons recorded and not from the new ground or new reasons or new material stating in the assessment order. He relied on the principle embodied in the judgment of the Calcutta High Court in the case of East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal) at pages 355 and 356. Accordingly, the learned Member was of the view that the reasons recorded reveal that the factum of surrender of lease rental expenses by M/s. PCL were for the assessment years 1991-92 and 1992-93. Reasons recorded by the Assessing Officer do not state of any surrender of lease rentals by that company for the assessment year 1990-91, the year under consideration. For this reason alone, the Assessing Officer could not have formed a belief that the computers were non-existent or that the assessee had entered into an arrangement to claim depreciation so as to say th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional connection with or relevant bearing on the formation of the belief. There must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of income of the assessee from assessment in the particular year due to his failure to disclose fully and truly all material facts. No doubt the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion or that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment, but at the same time the court have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement from assessment. The words "definite information" which are there in section 34 in the Act of 1922, at a time before its amendment in 1948, are not there in section 147 of the Act of 1961. Therefore, it would not lead to the conclusion that, the action can now be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. U on March 8, 1991, when it had not acquired leasehold rights till March 15, 1991, from the assessee as the lessor. Moreover, there is nothing in the alleged lease deed dated March 15, 1991, indicating commencement of the lease from a prior date. There is nothing in the so-called lease dated March 15, 1991, as to the arrangement between the parties prior to March 15, 1991. There is nothing in the so-called lease dated March 15, 1991, indicating any prior practice as submitted on behalf of the assessee. On the contrary, the so-called lease dated March 15, 1991, recites that it shall commence only from March 15, 1991. Moreover, under the sublease between M/s. A and M/s. U it is stated that M/s. A is the absolute owner of the bottles. Lastly, the so-called lease dated March 15, 1991, stipulated that the lessee, M/s. A, shall have no right, title or interest to create a sub-lease without the permission of the lessor. No such permission has been produced. For the afore stated reasons, we find no infirmity in the concurrent findings of fact recorded by the authorities below. Transaction dated March 15, 1991, is not proved. Therefore, the Assessing Officer was right in disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 148, it is not necessary that material must be extensive and detailed. The High Court had led emphasis on the difference of material for purpose of initiation of investigation and those required for successfully completing the reassessment. One of the method by which the material can come into possession of the Income-tax Officer is by assessment proceedings in the subsequent assessment years. In the present case, there was sufficient material for the Income-tax Officer to initiate proceedings under section 147/148 of the Act. The only requirement of section 147 of the Act is the Income-tax Officer has to record the reasons to believe which has been rightly recorded in the present case. In the case of Diwakar Engineers [2010] 329 ITR 28 (Delhi), this court came to the conclusion that the assessment proceedings were rightly initiated under section 147(a) and there is no need for the Revenue to refer and to rely upon section 147(b) to sustain the impugned notice and section 147 of the Act. In view of the said discussion, the writ petition filed by the assessee was dismissed. We note that the assessee had not made full and true disclosure of material facts to the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framing original assessment has taken a view on the basis of facts of the case, he cannot turn around subsequently on change of opinion to say that the income chargeable to tax has escaped assessment. In the instant case, as we have discussed above, the Assessing Officer had made an assessment under section 143(3) on March 29, 1993. The assessee had disclosed the lease rent received from M/s. Altos India Ltd. and the same was assessed as such. Deduction was claimed by the assessee against such income on account of depreciation which was also allowed. It is pertinent to mention that the assessee had filed a certificate from M/s. Altos India Ltd. to the effect that the equipment had been supplied to them and the same had been installed in their office at Delhi. The contents of the certificate from M/s. Altos India Ltd. are as under : "This is to confirm that the equipment, as per the lease agreement No. 001/90, dated February 28, 1990, have been received and the same have been put to use in full satisfactory condition at our office in Delhi." Neither M/s. Altos India Ltd. nor the assessee disclosed that M/s. Altos India Ltd. had sub-leased the computers to its sister concern, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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