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TMI Blog2012 (7) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 100% depreciation claim was made, came to Rs. 1,19,64,480/-. Based on investigations undertaken by the Department, A.O. came to a conclusion that the lease transactions were not genuine, but was only a sham arrangement for providing finance and claiming depreciation under the Act. Submission of the assessee was that the transactions entered with M/s Bellary Steels and Alloys Ltd. were normal in the course of its business activities. Nevertheless, assessee decided to withdraw the claim of depreciation and treated the transaction as a loan. Assessing Officer, despite the admission of the assessee, gathered details of the transportation of steel from the seller, M/s OVR Castings Pvt. Ltd. to the lessee M/s Bellary Steels and Alloys Ltd. He was of the opinion that the lorry receipts which showed transportation of steel, were not genuine since the weight of steel carried by the lorry was much more than what was possible. 3. Assessee had also claimed to have purchased from M/s Atin Industries, Ahmedabad Rectifier Unit and an M.S. Vessel costing Rs. 50,18,000/-, which were leased to M/s Jay Agrochem Ltd. Depreciation claimed of such machineries was 25%. However, as per the A.O., inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eighment certificate and store receipts given by M/s M/s Bellary Steels and Alloys Ltd. However, the A.O. was not impressed. According to him, assessee had concealed particulars of its income to the extent to claim depreciation Rs. 1,19,64,480/- and Rs. 3,29,131/- with respect to the purchases claimed for operational lease shown against M/s Bellary Steels and Alloys Ltd. and M/s Jay Agrochem Ltd. totalling to Rs. 1,22,93,611/-. Penalty was levied at 100% of the tax sought to be evaded. 7. In its appeal before CIT(Appeals), contention of the assessee was that it had offered explanation as to why it had claimed depreciation in the return. As per assessee, it was under a bonafide belief that the claims were genuine and it had no reason to doubt the records submitted by the respective parties. However, the CIT(Appeals) was not impressed. According to him, Assessing Officer had clearly established that the transportation of steel rolls claimed by the assessee was physically impossible and insofar as the lease to M/s Jay Agrochem Ltd. was concerned, the Department was in possession of affidavits showing irregularities in respect of such party. He, therefore, relying on the decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date there was no onus on the Revenue to prove mens rea. Assessee was bound to explain its case and such explanations were found to be not genuine. Levy of penalty was, therefore, justified. 10. We have perused the orders and heard the rival submissions. In the first place, we find that the transactions entered by the assessee with M/s Bellary Steels and Alloys Ltd. were for the purchases made from M/s ORV Castings Pvt. Ltd. which were leased to M/s Bellary Steels and Alloys Ltd. Similar is the case for purchases effected from M/s Atin Industries, Ahmedabad, which were leased to M/s Jay Agrochem Ltd. Assessee had, vide its letter dated 4th February, 2006, copy of which has been placed at paper-book pages 54-56, given the following details with respect to these purchases:- For lease to M/s Bellary Steels and Alloys Ltd. (1) Purchase Order dt. 15.06.1995 was placed with the supplier. (2) Proforma Invoice dt. 28.06.1995 was issued in IEL's name by the supplier. (3) Officials of IEL undertaken pre-disbursement inspection to supplier's place and lessee's place and ascertained their genuineness. The pre-disb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which is placed at paper-book pages 44-52, it is clear that the responsibility of the lessor was to purchase the equipments selected by the lessee from a supplier designated by lessee. This is clearly mentioned at clause 16 of the said agreement. It is also mentioned that the lessor is not a manufacturer nor a dealer and the equipment was to be selected and examined by lessee. In other words, it is clear that the equipment was to be received by the lessee directly from the supplier. In such a situation, we cannot fault the assessee if it had believed the documents furnished by the lessee for receipt of the items at their premises. Assessee might have chosen to withdraw the depreciation based on subsequent developments, whereby the investigation conducted by the Department with the concerned lessees showed that it was a sheer finance transaction and there was no operational lease. In a similar situation, earlier it was held by the Tribunal in its order dated 24.8.2007 in assessee's own case, as under:- "10.8 The facts to be considered here is that the assessee is in leasing business and has taken steps in the course of carrying on such business and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 995 Delivery Challans duly signed by BSAL 7 17/04/1995 Installation Certificate 8 17/04/1995 Insurance policy 9 03/03/2000 Inspection carried out by SFL 10.10 There is no finding by the assessing officer to show that the above documents are false. Without giving the finding that the above documents are false, penalty cannot be levied. We rely on the decision of the ITAT, Mumbai Bench in the case of ITO vs. Devibai H Parmani (84 ITD 342) wherein it was held as under: "As per Explanation 1 to section 271(1)(c), if the assessing officer has found that the explanation offered by assessee is false, then penalty can be imposed on the amount which is found to be concealed. Therefore the explanation cast a duty on the assessing officer that he should first record reason that there has been concealment of income and then seek explanation from the assessee. These are the basic requirements of natural justice desired by the Legislature for providing this Explanation. Therefore the initial burden is on the Department to prima facie record that there is concealment and thereafter the explanation is to be sought and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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