TMI Blog2012 (12) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... MR. R.V. EASWAR JJ. Appellant: Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Ms. Gayatri Verma, Advocate. Respondent: Mr. Salil Kapoor with Mr. Ankit Gupta, Mr. Vikas Jain and Mr. Sanat Kapoor, Advocates. R.V. EASWAR, J.: This is an appeal by the CIT under section 260A of the Income Tax Act, 1961 and the following substantial questions of law were framed on 30.7.2007: - 1. Whether the Income-Tax Appellate Tribunal was correct in law in allowing depreciation of Rs.30,00,37/- to the assessee on leased out LPG cyclinders? 2. Whether the Income Tax Appellate Tribunal was correct in allowing depreciation of Rs.19,99,440/- to the assessee on leased out Air Jet Spindle Assembly and Positar Disc? The figure of Rs.30,00,37/- in question No.1 should actually read as Rs.30,00,000 . The question shall stand amended accordingly. 2. The appeal relates to the assessment year 1995-96. The respondent-assessee is a company engaged in financing business. In the return of income filed by it, it claimed the above two sums being claims for depreciation on the leased out assets described in the questions. Apparently its claim was that these assets were owned by it and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amply established the claim for depreciation, that the AO did not effectively confront the assessee with evidence adverse to it or did he afford adequate opportunity to cross-examine his witnesses, that the AO ignored material evidence that was in favour of the assessee without assigning any valid reason, and that in these circumstances there was no merit in the appeal of the revenue. The Tribunal dismissed the appeal. 6. The revenue is in appeal before us. Prima facie it would appear that the case is essentially one of fact and the findings of fact which are concurrent should not be easily tampered with unless the findings are perverse or are so unreasonable or irrational that no reasonable person, properly apprised of the facts and legal position, would have come to record such findings; further, the record should disclose that the appellate authorities overlooked relevant material or took note of irrelevant material in reaching those findings. If these considerations are not present, it would not be proper for the court in an appeal under section 260A which can be granted only on a substantial question of law, to disturb the findings of fact, particularly when two appellate au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed the order as it would be expected of it if it were to become the owner of the cylinders so that it can lease them to Janta. It was only on 22.03.1995 that Janta claimed to have written to Aravalli authorising the latter to sell and raise the invoice against the assessee. This letter was improperly addressed and did not reach the Aravalli. In the statement of Ratan Mahipal, director of Aravalli, recorded on 06.12.1997 by the AO he denied having sold the cylinders to the assessee and affirmed having sold them to Janta. He stated that the cylinders cannot be sold to the assessee because it did not have the requisite permission to bottle the gas or the approval from the Department of Explosives. He stated that the assessee did not supply the drawings or the logo as required by the regulations to enable Aravalli to sell the cylinders to it. He also affirmed that the order was placed by Janta who supplied the logo, specifications and the drawings; that Aravalli has been manufacturing cylinders for Janta earlier also. 9. The AO specifically put the letter dated 22.03.1995 allegedly written by Janta to Aravalli authorising it to sell the cylinders to the assessee, to Aravalli for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any person duly posted of the facts and the legal position. The inferences drawn are unreasonable. The order is placed by Janta on Aravalli; that was sometime in September and December, 1994. All of a sudden and without any reason or explanation Janta claims to have authorised Aravalli to sell the cylinders to the assessee. The receipt of the letter allegedly written by Janta to Aravalli was denied by the latter; the fact that the letter bore an incomplete address of Aravalli lends support to its claim of non-receipt of the letter. Janta had no evidence to show that the letter had actually been received by Aravalli. If the letter was not received by Aravalli, there was no other basis upon which it would have looked upon the assessee as the owner of the cylinders, to have them delivered to it. That in turn would mean that there was no privity of contract between Aravalli and the assessee for the sale of the cylinders. The assessee could not have therefore become, by any standards, the owner of the cylinders. No motive can be, and was in fact, attributed to Aravalli when it denied the receipt of the letter. 13. As for the payment, even Aravalli admits that it received the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to proceedings under the Income Tax Act; but the basic principles such as rules of natural justice are incorporated into the proceedings by the statute (Income Tax Act) and it was in this spirit that the AO offered M.P. Mahipal for cross-examination to the assessee. The assessee chose not to avail of it; that was at its own risk. We are inclined to believe that if Janta had written to Aravalli on 22.03.1995 that the cylinders should be sold to the assessee and if on the same day the assessee had entered into the lease agreement with Janta, it could not have been possible without prior arrangement between the assessee and Janta, and in that case there would have been some verification or cross-checking by the assessee with Aravalli whether Aravalli is in the know of the arrangement. In that case, such knowledge on the part of Aravalli could have been brought out during the cross-examination of M.P. Mahipal. At any rate, the assessee could have revealed its cards to Aravalli to belie the latter s claim that it was not aware that the assessee has been, by an arrangement between it and Janta, constituted the owner of the cylinders. The assessee, however, took a technical and obst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary value for the reason that he had not been subjected to any cross examination by the assessee. The fact that Rattan Mahipal did not turn up for cross examination can only lead to the conclusions that whatever evidence given by him to the Assessing Officer cannot be accepted. The Assessing Officer has completely overlooked the bulk of evidence filed on behalf of the assessee to prove the transaction of lease. CIT (A) was therefore justified in his conclusions. 17. The Tribunal has opined that the denial by Aravalli of the receipt of the letter allegedly written on 22.03.1995 by Janta is not material, because Aravalli raised the invoice on the assessee in whose name there was an account in its ledger. In that case it is difficult to see why the assessee chose not to confront M.P. Mahipal with these facts when he was offered by the AO for cross-examination on 04.03.1998. After Ratan Mahipal stated before the AO that the cylinders were sold only to Janta vide Bill Nos.110-112 and the assessee only financed the sale, a show-cause notice was issued to the assessee as to why it should not be treated as only a financier and not an owner lessor. The assessment order does not sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems to us that he made no effort to examine the evidence marshalled by the AO; he appears to have merely accepted the submissions of the assessee, taking them to be sacrosanct. 19. The main ground on which the Tribunal accepted the assessee s claim was that the denial by Aravalli of the receipt of Janta s letter dated 25-3-1995 was not material in the light of the fact that the invoices were raised on the assessee and there was a ledger account in the name of the assessee in Aravalli s books. The Tribunal ought to have appreciated that the assessee s case need not necessarily be genuine or true merely because there was documentary evidence in its support. Firstly, the assessee did not place the order with Aravalli for the supply of cylinders. The order was admittedly placed by Janta as parallel manufacturer; the assessee could not have, under the relevant statutory regulations/rules, placed any order for the supply of LPG cylinders. Secondly, there is no evidence to show that the letter allegedly written by Janta on 22.03.1995 to Aravalli authorising the latter to sell and raise the invoice on the assessee was received by Aravalli; in fact, Aravalli s denial of the receipt stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Drawings approved by the Explosive Deptt. and their logo. Question: Has M/s. Ganpati Finance Ltd. Supplied you with their approved Drawings and their Logo. Answer: No, they have not supplied any Drawing and Logo. Question: In view of the above, how it is claimed by you and M/s. Ganpati Finance Ltd. That the Gas Cylinders have not been sold by you to M/s. Ganpati Finance Ltd. Answer: As stated earlier, we again stress that these Gas cylinders cannot be sold and have not been sold to M/s. Ganpati Finance Ltd. These gas cylinders bear the Logo of Indojam and hence can only be sold to M/s. Janta Gases Pvt. Ltd. M/s. Ganpati Finance Ltd. Has only financed this deal. 20. That is precisely why the AO concluded, and in our opinion correctly, as follows: Thus, it is very clear that the gas cylinders were being manufactured for and on behalf as per the orders of Janta Gases and were being supplied to them on a regular basis and only at the end of the financial year some of these cylinders have been shown as sales to M/s. Ganpati Finance who in turn have leased them to M/s. Janta Gases only to allow M/s. Ganpati Finance to avail 100% depreciation. In fact M/s. Ganpat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p in the PAN from M/s. Rajaji Electronics. It has claimed to be a sales tax assessee but has not shown whether it has paid sales tax on this sales made to M/s. Ganpati Finance Ltd. In fact, in the bill No.167 dated 15.3.95 raised by M/s. Rajaji Electronics Ltd. To M/s. Ganpati Finance Ltd. in respect of the sales of air jets etc. no sales tax have been charged. Hence, the fact that M/s. Rajaji Electronics is a sales tax assessee is of no consequence if it is unable to prove that the sales made to M/s. Ganpati Finance have been entered in its books and it has paid sales tax on this sale. c) M/s. Maruti Syntex Ltd. could not produce evidence in the way of goods inwards and stock register regarding the fact that the goods have in fact been received by them at their factory premises. d) No acceptable explanation have been given regarding the manner of transport of these machineries. In view of the above the assessee has not been able to produce sufficient evidence to prove its claim that it had purchased airjets and spindles from M/s. Rajaji Electronics. In view of this the 100% depreciation amounting to Rs.19,99,440/- is being disallowed. 22. The CIT (A), as in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to prove both ownership of the assets and user for the purpose of its business in order to claim depreciation under Section 32. The assessee was unable to prove the purchase of the assets from Rajaji, nor was Rajaji able to furnish the details of the sale of the assets to the assessee. While in the case of LPG cylinders the AO did not doubt the existence of the assets but took the view that the nature of the transaction between the assessee and Janta was one of a financing and not that of lease, in the case of airjet spindile and positar disc the very existence of the assets, and consequently the claim of ownership of the assets, is suspected. There was no reason why Rajaji, from whom the assessee claims to have purchased the assets, should not furnish the relevant particulars and chose to evade the notices/summons issued by the AO. It ultimately furnished only skeletal particulars a mere affirmation of the sale, that too, without charging sales-tax as the copy of the invoice showed. Its sales-tax registration number and income-tax PAN number were not capable of proper verification, leading to the very existence of Rajaji coming under grave suspicion. The AO acted fairly by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
