TMI Blog2004 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... AN., S. R. SINGHARAVELU. JUDGMENT The judgment of the court was delivered by P.D. Dinakaran J.- These appeals are directed against the common order dated January 23, 2003 of the Income-tax Appellate Tribunal, Madras "A" Bench, made in I.T.A. Nos. 99 to 101 and 103/M2/02, with reference to the assessment years 1992-93, 1993-94, 1994-95 and 1998-99. In brief, the assessee-company is a non-banking financial company engaged mainly in the business of hire-purchase and equipment leasing. After completion of the original assessments for the assessment years 1992-93, 1993-94,1994-95, notices were issued by the Assessing Officer for reopening the assessments of the respondent/assessee on the ground that income has escaped assessment for the said three assessment years. The Assessing Officer, during the course of the reassessment, by the assessment order dated March 23, 2001 for the assessment year 1992-93; and by assessment order dated March 26, 2001 for the assessment years 1993-94, 1994-95 and 1998-99, (i) found that the change of method of accounting of overdue charges from mercantile basis to cash system was not justified and therefore, added overdue interest on mercantile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessee's objection to the jurisdiction of the Assessing Officer, which had not been raised at any earlier stage? (iii) Whether, on the facts and circumstances of the case, the Tribunal was right in upholding the action of the assessee in changing the method of accounting of overdue interest alone on a cash basis, when the system of accounting of the assessee was mercantile? (iv) Whether, on the facts and circumstances of the case, the Tribunal was right in allowing 100 per cent, depreciation on bottles purchased in bulk by the assessee and leased out to others? (v) Whether, on the facts and circumstances of the case, the Tribunal was right in allowing 100 per cent, depreciation on steel rollers which were purchased from and leased back to the same party? (vi) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the apparent consideration should be accepted by the Assessing Officer as the cost in a sale and lease back transaction, although the amounts specified as lease amounts were not received by the assessee? (vii) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that no interest unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been issued on or before March 31, 1998, whereas it was issued only on March 5, 1999. Therefore, apparent on the face of the record, it could be seen that the notice for the two assessment years 1992-93 and 1993-94 was issued after the expiry of the period of four years from the end of the respective assessment years, violating the proviso to section 147 of the Act. With reference to the jurisdiction to reopen the assessment for the year 1994-95, the Assessing Officer proposed to reopen the assessment for the year 1994-95 purely based on the change of opinion, namely, the change in the method of accounting of overdue interest on cash or actual receipt basis, when the assessee was following the mercantile system of accounting. In CIT v. Matchwell Electricals (I.) Ltd. [2003] 263 ITR 227, a Division Bench of the Bombay High Court held that the change of method of accounting is permissible in law. In the said case, the assessee was engaged in the business of manufacturing electrical appliances. It followed the accounting year ending September, 20. The assessee was also engaged in exporting its products. The assessee received cash assistance and duty drawbacks from the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable by the assessee, becomes not payable in the case in hand. (v) when the court is faced with a task of construction in the above manner, the court is not bound to make the construction in favour of the assessee merely on proof by the assessee, that it has entered into no illegality and made no prohibited transaction. (vi) the court would have to assess, in the facts and circumstances of each case, upon general principles of conscience and justice, whether the arrangement of affairs by the assessee, so as to cause the possibility of a reduction of tax incidence, can fairly be permitted to the assessee, as a genuine and legal means of tax reduction, employed by it in a commercial fair sense, or whether allowing the assessee to earn the reduction, in the facts and circumstances of the particular case, is opposed to the public policy of not encouraging citizens to engage themselves in dealings and transactions designed primarily for the purpose of non-payment of tax only." In the instant case, learned counsel for the Revenue is not in a position to demonstrate or satisfy us that due to the change of accounting method adopted by the respondent/assessee, which is permissible i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere change of opinion cannot form a basis for reopening the completed assessment and further held that when a regular order of assessment is passed under section 143(3) of the Act, a presumption can be made that such an order has been passed on application of mind. It is well known that a presumption can be raised to the effect that in terms of section 114(e) of the Indian Evidence Act, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Hence, it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. Accordingly, questions Nos. (i) to (iii) are answered in the affirmative, against the Revenue and in favour of the assessee. Question No. (iv): Whether, on the facts and circumstances of the case, the Tribunal was right in allowing 100 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that the Tribunal was right in granting 100 per cent, depreciation on steel rollers, and accordingly, we answer this question in the affirmative, in favour of the assessee and against the Revenue. Question No. (vi): Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the apparent consideration should be accepted by the Assessing Officer as the cost in a sale and lease back transaction, although the amounts specified as lease amounts were not received by the assessee? Strictly speaking, "apparent consideration", as held by the Bombay High Court in Polycon Paper Ltd. v. Union of India [2002] 253 ITR 182, would mean the whole or part of the consideration for such transfer, which is payable on any date or dates falling after the date of such agreement for transfer, and the value of such consideration payable after such date shall be deemed to be the discounted value of such consideration as on the date of such agreement or transfer, determined by adopting such rate of interest as may be prescribed in this behalf. Therefore, unless and until there are reasons to believe that the cost in a sale or an amount in a lease back transaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and motor taxis used in a business of running them on hire", held as follows: "Owners of vehicles who used it for their own purposes are allowed to claim depreciation at the normal rates. Owners of vehicles mentioned in the entry when they allow it to be used for a price are allowed to obtain a higher rate of depreciation. The distinction is based upon the fact that a person who obtains the temporary right to use of the vehicle on payment of a charge price is likely to, by the nature of his user, such user being for the purpose of the hirer and not the owner, depreciate the value of the vehicle faster. All such vehicles, which are so used, are likely to undergo a little more rough use than vehicles owned by and used for the personal purposes of the owner. It is in recognition of that fact of the depreciation occurring at a faster rate for such vehicles that the law provides for the higher rate of depreciation. The fact that the assessee here chose to lease out the vehicle does not on that score disentitle the assessee to claim the benefit of the higher depreciation. The lease of the vehicle enables the lessee to have possession of the vehicle, and have the right to use the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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