9911796707
Advanced Search 
TMI Blog2016 (1) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue's behest ITAs 3386 and 3465/Ahd/2004. This is followed by assessee's appeal in consequential penalty proceedings bearing ITA no. 3416/Ahd/2008. We take first of all above stated quantum cross appeals. 3. The assessee in its appeal 3386/Ahd/2004 raises solitary ground of depreciation of Rs. 1,71,92,701/- on assets sold and leased back. The CIT(A) relies upon tribunal's special bench decision in ICICI Ltd vs. DCIT decided on 14-08-2003 at Mumbai bench for rejecting its depreciation claim. The Revenue's cross appeal in turn assails lower appellate order deleting disallowances of Rs. 74,78,000/- on account of sale of investments treated capita loss in reassessment and business loss in the lower appellate proceedings. Its second substantive ground seeks to restore depreciation claim disallowance of Rs. 38,24,344/- in respect of assets given on lease to M/s Rajendra Steels Ltd., Kanpur. 4. The assessee-company is in the business of leasing and hire purchase with trading in shares and other investments. It filed its return admitting income of Rs. 61,11,200/- along with audit report, balance sheet and P & L account. The Assessing Officer completed a regular assessment on 24-03-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions to adopt netting formula after adjusting the lease rent already shown income thereby taking only the interest component as income of the relevant previous year. The same stands accepted in lower appellate order. The assessee thereafter argued in lower appellate proceedings that all disallowances hereinabove have to be deleted since impugned reopening itself is not sustainable in view of the fact that the sole reason recorded resulting in corresponding disallowance stands deleted. The CIT(A) declines the same by observing that the Assessing Officer is very much competent in the courses of reassessment to open any claim not correctly worked out earlier in regular assessment. This backdrop of facts leaves both parties aggrieved to the extent of their respective pleadings indicated hereinabove. 7. The assessee at the outset draw our attention to its last argument raised in lower appellate proceedings. It states that the depreciation disallowance amounting to Rs. 38,24,244/- forming the only ground of reopening stands deleted in the lower appellate proceedings. This is the sole substantive ground in Revenue's appeal ITA 3465/Ahd/2004. The assessee accordingly submits that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B & C grounds hereinabove. The Revenue filed appeal before the hon'ble Delhi high court against the tribunal's order qua B & C issues only. Their lordships upheld tribunal's order in these facts by observing that the latter reasons had been wrongly combined with the sole reason of reopening on the issue of bad debts formed earlier. Their lordships take note of the fact that the Revenue had not preferred any appeal on bad debts issue original reopening reason. It was not kept alive in other words. Now, we come to Agra bench decision of the tribunal. The factual backdrop appears to be similar to above stated judicial precedents. The Assessing Officer reopened assessment on the issue of capital gains of Rs. 3,98,950/-. He added the same along with two other heads of Rs. 3,98,593/- and Rs. 3,97,955/-. The CIT(A) deleted the first addition forming sole reason of reopening. The assessee preferred appeal. The Revenue did not challenge the CIT(A)'s order therein qua the first addition. The ld. co-ordinate bench in these facts and circumstances quashes reopening by quoting case law of CIT vs. Jet Airways (2011) 331 ITR 236 by taking note of the Revenue's inaction in not preferring an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has not been shown to have altered, even sub silientio, the well settled legal position that the validity of reassessment proceedings is a sine qua non for any additions being made to the income of the assessee, during the course of the reassessment proceedings-whether in respect of the reasons recorded for reopening the assessment or in respect of the reasons other than the reasons recorded for reopening the assessment. 15. Moreover, particularly in the light of the scheme of law as visualized by Hon'ble Supreme Court's decision in the case of GKN Driveshafts Vs ITO [(2003) 259 ITR 101 (SC)], such a situation would be rather rare . 16. The reason is this. The reasons for reopening the assessment, as is the scheme of law visualized and set out by Hon'ble Supreme Court in the GKN Driveshaft's case (supra), are to be confronted to the assessee and the assessee has an opportunity to rebut these reasons. This is a stage prior to the Assessing Officer proceeding with the reassessment proceedings and after he has issued notice for reopening the assessment. In a situation in which the assessee can convince the Assessing Officer that these reasons are not good enough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the income which had not escaped assessment for which no notice had been given to the assessee under Section 148 read with Section 147 of the Act". Their Lordships appreciated that to that extent the legal proposition was incorrect in the light of insertion of Explanation 3 to Section 147, and the earlier judicial precedents, which were relied upon by the assessee, did not hold good law, as Their Lordships made clear in no uncertain words. The correctness of the reasons of reopening was not an issue before Their Lordships. The correctness of the reasons for reopening was not, directly or indirectly, in challenge. 19. As is evident from the discussions earlier in this order, here is a case in which the very reasons on account of which the CIT(A) has deleted the quantum additions were also good enough to hold that the initiation of reassessment proceedings is bad in law and yet the CIT(A) was fighting shy of the logical conclusions thereto and natural corollaries to these findings. It is also important to bear in mind the fact that the relief so granted by the CIT(A), on the basis of which the additions in respect of the reasons recorded for reopening the assessment were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of reopening. The lower appellate findings decide the issue in assessee's favour as follows:- "Ground No. 3 : This relates to depreciation claim of Rs. 38,24,344/- in respect of assets leased to M/s. Rajendra Steels Ltd., Kanpur by the appellant. This has been discussed by the AO in para 3 page 2, 3 and 4 of the order The claim relates to Air Pollution Equipment purchased by the appellant from M/s. Industrial Enterprises, Kanpur and thereafter the assets have been leased to M/s. Rajendra Steels Ltd. Since the period for which the assets were put into use were less than 180 days, 50 per cent of the eligible claim of Rs. 76,56,687.50 i.e. Rs. 38,28,344/- was claimed by the appellant. The AO has discussed in detail the appellant's letter dated 4.2.2002 and 19.3.2002 as referred above. The assessment is also reopened primarily on account of non-existence of the said assets as per physical inventory prepared at the premises of Rajendra Steels Ltd. during the course of search u/s. 132 at Kanpur by DDIT (Inv) Unit-2. This has been referred in the reasons recorded for reopening in the opening paragraphs. The AO has rejected the claim as per para 3.1 of the order giving the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO that the said fund did not belong to the appellant. Keeping in view the above facts, I do not find any justification for the AO to disallow the depreciation claim made in respect of the above assets and direct the AO to accordingly allow the same for the respective period." 11. We have given our thoughtful consideration to rival arguments. The Revenue's contention is that it had carried out a search in case of Kanpur entity which did not reveal any such asset subject matter of the impugned depreciation claim. A perusal of the case file reveals that page 40 is the installation report of this asset. Page 41 of the paper book reveals lease rent income therefrom in assessee's P & L account. Page 43 is sales tax challan of the asset. It transpires from the case file that this Kanpur entity went into liquidation. The assessee filed company application before hon'ble Allahbad high court for inspection and possession of its lease asset. More particular, the air pollution control equipment in question by specifically stating value thereof as per lease agreement dated 18-03- 1996. Their lordships passed order 11-12-2002 at page 147 of the paper book issuing necessary directions to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
