TMI Blog2013 (11) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka. There is no evidence for payment of entry tax. The transporter has denied the transportation of Rolls from Mumbai to Bellary. The Supplier of M.S.Rolls also denied the supply of M.S.Rolls either to the Transporter or to BSAL. The Managing Director of BSAL admitted that it is only a paper transaction. Assessing Officer on the basis of the survey conducted in the premises of BSAL found that lease has been created on the basis of the non-existing assets. Accordingly, notice has been issued. All the above facts go to prove that hire purchase and lease transaction between the assessee and KMFL on one hand and the assessee and BSAL on the other hand were only paper transactions and there was no genuine purchase of lease of assets. By entering into paper transaction, the assessee has benefitted by availing depreciation at the rate of 100% of the value of the assets in question - Substantial question of law framed is required to be answered in favour of the Revenue and against the assessee - ITA No. 523/2006 - - - Dated:- 4-9-2013 - Dilip B Bhosale And B Manohar, JJ. For the Appellant : Sri. M Thirumalesh, Adv For the Respondent : Sri. S Parthasarathy, Adv J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 30-03-2001 informed the Assessing Officer that the return filed earlier be treated as return filed in response to the notice under Section 148 of the Act. Thereafter, a notice under Section 143(2) of the Act was issued to the respondent/assessee. In response to the said notice, the assessee s representative appeared before the Assessing Authority and filed his reply. During the course of hearing, the assessee was asked to substantiate the claim of depreciation claimed on plant and machinery at the rate of 100% which was leased to BSAL. The summons was issued to the Associates V.P. of the KMFL on 15-01-2002. Sri.Dinesh, Executive of KMFL attended the enquiry and made a statement. The survey report was also made available to the assessee. During the course of investigation proceedings in the case of BSAL, the following points have been observed: (i) There are no written orders/documents like quotations, enquiry letters, installation reports and delivery challans in the possession of the above company. (ii) Even the photocopies of same delivery challans found do not bear the seals of sales-tax check post. (iii) Usually machineries like SGCI Rolls are tailor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r loans outstanding and he is not in a position to prove the existence of the supplier of the M.S.Rolls or his capacity to manufacture or produce the equipments which are supplied to them as per the invoices. 5. On verification of the entire records, it was found that the assessee has claimed depreciation in respect of non-existing assets. The assessee failed to substantiate their claim by producing the cogent documents. Some of the documents produced by the assessee are not tallying with the documents produced by the Officers of KMFL. The Assessing Officer taking note of all these aspects of the matter passed the order of reassessment and depreciation of Rs.1,67,23,582/- claimed by the assessee has been withdrawn by its assessment order dated 28-03-2002. 6. The assessee being aggrieved by the fresh assessment order dated 28-03-2002, preferred an appeal before the Commissioner of Income Tax (Appeals)-III, Bangalore (hereinafter referred to as the First Appellate Authority ) challenging the reassessment and withdrawal of 100% depreciation on various grounds contending that on mere change of opinion of the Assessing Officer, reassessment cannot be made. The assessee filed return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teel rolls. When the appellant is challenging a finding, which has been recorded in his absence at the premises of another assessee then it was obligatory on the part of the Assessing Officer to have given the opportunity to the appellant to prove its contention. During the course of appellate proceedings, the learned Commissioner of Income Tax (A) asked for the remand report as it was also contended before him that assets can be identified. The Assessing Officer deputed his inspector. The inspector in the presence of the A.R. of the appellant and Director of BSAL verified that 103 rolls with identification mark of the appellant are available at the premises of BSAL. Even photograph was also enclosed. The learned D.R. argued that those markings have been done subsequently. For this conclusion, the learned D.R. submitted that as per hire purchase agreement, such assets should have identification marks of KMFL instead of appellant company. This mistake suggests that it was done as an after thought. Such an argument may look attractive but no evidence furnished in support of such argument. The revenue has not made any effort to establish the above arguments as fact. What is apparent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, an evidence to show that assets leased are available at the premises of the lessee and depreciation cannot be disallowed on the ground that such assets were not found at the time of survey. The stock inventory was prepared at the bank of the assessee and the assessee contended before the Assessing Officer that assets are available. Hence it is held that the depreciation on such leased assets identified at the premises of BSAL will be considered as assets of the appellant for depreciation and on such asset depreciation may not be allowable to BSAL. The concluding paragraph of the Appellate Tribunal reads as under: 7. Considering the facts that original documents of delivery, transportation etc., were available with BSAL, statements recorded from various persons to show that transaction of acquisition of M.S.Rolls was not genuine were recorded before the assessment proceedings and not made available to the appellant, assertion at the premises of BSAL, aggregate of lease rental being less than the amount advanced for acquiring the asset, taxing of lease rental in subsequent years and not allowing deduction of hire charges and the position of law as discussed above, it is hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TOMATION LTD., V/S. JOINT COMMISSIONER OF INCOME TAX and an unreported judgment made in ITA No.2611/2005 disposed of on 1-8-2008. He contended that the order passed by the Appellate Tribunal is contrary to law and sought for setting aside the same. 9. Sri.S.Parthasarathy, learned counsel appearing for the respondent argued in support of the order passed by the Appellate Tribunal contending that necessary documents have been placed before the Assessing Authority in respect of the transportation of goods from Mumbai to Bellary and also payment of Central Sales Tax, Insurance Policy and other expenditure incurred by the assessee. The statements have been recorded behind the back of the assessee and no opportunity was given to cross-examine those persons. The burden is on the appellant to prove that there is no transportation of M.S.Rolls from Mumbai to Bellary and it is only a paper transaction. The certificate issued by the Department clearly discloses that the M.S.Rolls were available in the premises of BSAL. The copies of the hire purchase agreement, payment made to the KMFL with regard to hire purchase charges, delivery of goods to BSAL, a copy of the premium paid towards insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee. Under Section 32 of the Act, to claim depreciation, the assessee must either be owned wholly or partly of the M.S.Rolls. In the instant case, the assessee has obtained M.S.Rolls under the hire purchase from the KMFL and leased the same to the BSAL. Hence, the assessee is not the legal owner to claim depreciation. 13. The records found during the survey clearly disclose that there is no transportation of M.S.Rolls from Mumbai to Bellary. The suppliers of M.S.Rolls i.e. M/s. B.H. International, Mumbai have denied the supply of Rolls to the assessee. However, they have confirmed the fact that the bills were raised to facilitate financing from credit institutions and sale proceeds received from the credit institutions were returned to the lessee immediately. The pass book of M/s. B.H. International, Mumbai shows that after receiving the sale proceeds from the Bankers, they were immediately sent back to the lessee. Further, the Chartered Accountants of the assessee-Company also admitted that the transactions entered are only financing transactions. The Managing Director of the BSAL clearly stated that all the lease transactions are only a financial transactions obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary. The specific case of the assessee is that the goods have been transported in four Lorries and it is for the assessee to prove the same by producing cogent evidence and also examining the manufacturer of the coil, the drivers and owners of the Lorries and the officers of the BSAL. It is the responsibility of the assessee to examine those persons to prove their case. 15. With regard to the issue of reopening of the assessment, all the three authorities held against the assessee. In view of the new material found during the survey under Section 133A of the Act and after recording the reasons, within a period of four years after issuing notice under Section 148 of the Act, the assessment has been reopened and fresh order has been passed. We do not find any flaw in the procedure followed by the Assessing Officer. The assessee has not made out a case to interfere with the reopening of the assessment. 16. It is brought to the notice of the Court that M/s. BPL Sanyo Finance Limited, for the assessment year 1997-98 claimed 100% depreciation on M.S.Rolls purchased from M/s.B.M.Steels (P) Ltd., and leased to BSAL. In the reopening proceedings initiated by the Department, the discrepa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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