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TMI Blog2025 (1) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee preferred an appeal before the CIT (Appeals) and by order dated 18.07.2000, the appellate authority remitted the matter back to the AO on the ground that no material was brought on record by the AO to suggest that the assessee was not entitled for depreciation. The AO was directed to afford an opportunity to the appellant/assessee to place all information relating to depreciation within a period of 15 days from the date of receipt of the order, which the assessee wants to be considered by the AO and considering the same, the AO shall pass fresh orders in respect of the disallowance. 3. On remand, the AO had issued notice and since the assessee did not produce any records, a summon was issued under Section 131 of the Act on 20.12.2000, which also did not evoke any response and as such the AO had visited the business premises of the assessee and had recorded a sworn statement on 22.12.2000. In the statement, since the Director of the assessee company had stated that he will file the purchase invoices of machinery but however failed to file the invoices, the AO had visited M/s.Operating Lease and Hire Purchase Ltd. and M/s.South Asian Finance Exchange Ltd. to obtain copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case, the Income Tax Appellate Tribunal is justified in treating an order passed under section 143 (3) read with section 250 which ought to have been passed under section 144 read with section 250 of the Income Tax Act as "purely technical" error? (2). Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal is justified in disallowing the depreciation claimed to the extent of Rs. 48.65 lakhs for the assessment year 1996-97 in the assessment of the appellant merely on the basis of statement recorded from one of the suppliers when there were 5 others who did not deny such supply of machinery?" 9. Ms.T.C.A.Sangeetha, learned counsel for the appellant mainly contended that when an assessment order was already passed under Section 144 of the Act, the appellate authority had without setting aside the assessment order, remitted the matter back to the AO only to consider the documents to be submitted by the assessee in respect of the disallowance of the depreciation claim on machinery. On remand, the AO had exceeded the jurisdiction and travelled beyond the scope of remand by visiting the premises and obtaining statements from the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of the depreciation, he had to necessarily gather all the materials in the absence of the same being supplied by the assessee to pass the fresh order as directed by the CIT (Appeals). In support of his contentions, the learned Senior Standing Counsel relied on the following decisions:- i. Ramanlal Kamdar Vs. Commissioner of Income Tax reported in (1977) 108 ITR 0073 (Madras) ii. P.R.Narahari Rao Vs. Commissioner of Income Tax reported in (2008) 299 ITR 400 (Kerala) iii. Anjuga Chit Fund (P.) Ltd. Vs. Deputy Commissioner of Income-Tax reported in (2009) 318 ITR 121 (Madras) iv. Avasarala Technologies Ltd. Vs. Joint Commissioner of Income-tax reported in (2016) 66 taxmann.com 377 (SC) 14. Heard the rival submissions of the respective counsels and perused the materials available on record. 15. The main dispute in the appeal is in respect of the disallowance of the depreciation on machinery for a sum of Rs. 48,65,360/-. The assessee had filed the return for assessment year 1996-97 by admitting a loss of Rs. 33,210/-. The return was selected for scrutiny and the notice under Section 143(2) was issued on 21.07.1998 by fixing the hearing on 06.08.1998 and subsequently to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the machinery were not installed and depreciation claims were false. No material has been brought on record by the Assessing Officer even to remotely suggest that the appellant was not entitled for depreciation. Considering the summary manner in which the Assessing Officer has proceeded to disallow substantial depreciation exceeding Rs. 50,00,000/-, loss on sale of car of Rs. 1,12,000/- and adding interest income only on the ground that it was not shown separately in the Return of Income, in the interest of justice, the additions made by the Assessing Officer cannot be sustained. The Assessing Officer is, therefore, directed to give the appellant an opportunity to place before him all the information relating to the accounting of interest Income as also the depreciation and loss on sale of car. The Assessing Officer should consider all the facts so presented and then, pass a speaking Order on the point bringing out the reasons for the conclusion that he has drawn. The appellant is directed to furnish to the Assessing Officer within 15 days of receipt of this Order, all the details which it wants the Assessing Officer to consider before giving effect to this Order." 17. On r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2001 in which he had stated that they have not sold any machinery to the appellant based on the invoices relied on by them and since the Director of the assessee was his maternal uncle, he had simply issued this invoice to enable them to avail the finance from the finance company which amount he had withdrawn and given to the assessee. There is no such manufacture of machinery at all in their company and hence the question of selling that machinery to the assessee does not arise. To be noted that M/s.R.D.Enterprises (P) Ltd., is only dealing with the sale of Bombay Dyeing Textiles. 21. From the invoice procured from the two financiers and the visit made to the seller company which resulted in the recording of the sworn statement on 30.01.2001, it became evident that there had been no actual sale / supply of machinery to the appellant company and the sale invoice was issued by the seller without actual supply but for the purpose of availing hire purchase loan. The sale price was withdrawn by the assessee after depositing it in the sellers account and again by using the invoice without actual supply of machinery, the assessee had made the claim of depreciation on machinery. 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxable income of other Companies. For example, a sworn statement was recorded from Mr.Gopal Damani on 25.7.98 where he has admitted that he gave "Bogus invoices" to M/s.Operating Lease and Hire Purchase Ltd. Based on these invoices M/s.Operating Lease and Hire Purchase Ltd., (M/s.OLHPL) has also claimed depreciation which was disallowed while completing the assessment of M/s.OLHPL. Consequent to this, M/s.OLHPL has paid taxes on this bogus depreciation claim which strengthens the Department's case of bogus depreciation (Incidentally, Mr.Gopal Damani gave a sworn statement to the undersigned only in the case of M/s.OLHPL). Now, summons u/s. 131 were issued to Mr.Gopal Damani, coming to our case to appear before the undersigned on 30.1.2001. But, Mr.Damani also did not appear in this office in response to summons, obviously at the behest of Mr.B.K.Bagdi of M/s. H.M.Bros. (P) Ltd. On 14.2.2001, Mr. B.K.Bagdi has appeared in this office along with his Chartered Accountant, Mr.K.S.Raghunath and Mr.B.K.Bagdi was given a copy of sworn statement recorded from Mr.Gopal Damani, Mr.B.K.Bagdi was asked whether the contents of the letter are correct or not, for which he has stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(2) was issued, as referred earlier, the assessee had failed to furnish any relevant materials even after providing nearly 14 opportunities by fixing the hearing on various dates and only as the appellant failed to co-operate with the enquiry, assessment came to be completed under Section 144 of the Act and an order was passed by disallowing the depreciation claim on machinery to the tune of Rs. 48,65,360/-. 26. When the matter was remanded by the CIT (Appeals) by order dated 18.07.2000 only on the ground that the disallowance should not have been made merely because of the non-submission of the materials, the AO was directed to afford an opportunity to the appellant to furnish the relevant materials relating to the claim of depreciation on machinery within 15 days from the order, which would be considered by the AO and a speaking order on that point bringing out reasons for the conclusion had to be passed. 27. As referred earlier, it is clear that on remand, the appellant was given ample opportunity but he has not availed the same by submitting the records within the time as set out in the order of CIT (Appeals). Still the AO had fixed the hearing on various dates to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on the claim of depreciation by considering the materials to be placed. When the relevant records have not been placed before the AO inspite of providing sufficient opportunities, we find no error in the approach of the AO in issuing the summon under Section 131 of the Act calling upon the assessee to produce the invoice and the relevant materials and as the same was not responded, in visiting the premises of the assessee, which led to conclusion of the proceedings. 31. On the appeal preferred by the Revenue, the ITAT by order dated 04.02.2011, rightly allowed the appeal and restored the disallowance towards depreciation claim on the machinery. The Tribunal had considered all the above materials in respect of non-supply of the machinery to the appellant, the sworn statement recorded by the Director of the supplier in invoice and the statement furnished by the appellant along with the Chartered Accountant expressing their unwillingness to cross-examine the seller and also admitting for completing the assessment by disallowing the depreciation claim. 32. Further in respect of the arguments advanced by the appellant counsel that the statement was only obtained by coercion, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee who is not co-operating and confronted had no option than to surrender. It is also admitted that no hire charges were received so as to show the usage of machinery. Be that as it may, since on merits the assessee has not submitted any details before the Assessing Officer as per directions of the CIT(A), to that extent that depreciation disallowance made by the Assessing Officer in the order 144 should get confirmed. The CIT(A) was not correct in allowing depreciation with out establishing the purchase and usage of machinery and even without the purchase invoices on record. Accordingly, we have no hesitation in setting aside the order of the CIT(A) dt. 16.7.02 and restoring that of Assessing Officer." 33. As such it is clear that the appellant was not able to produce the relevant materials either within the period of 15 days as per the order of remand or even subsequently when sufficient time was granted and the appellant was only taking contrary stands. On procurement of the invoice from the financier by the AO, the seller in the invoice was summoned and particulars were sought for which resulted in recording of the sworn statement by which the modus operandi of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetent. We may point out in this context the fact that one of the partners of the assessee appeared before the ITO and stated that the assessee had no objection to the proposed revision has not been disputed at any stage and even before us, and every one of the authorities, viz., the ITO, the AAC and the Tribunal has referred to this fact in the course of their orders." 36 In view of the aforesaid decision, when the Director of the appellant had given a statement admitting to complete the assessment by disallowing the depreciation claim, the appellant cannot be an aggrieved person to file an appeal as against the assessment. Might be only to overcome the same, the appellant would have made a futile submission before the Tribunal that the statement was obtained by coercion. 37. Further the learned Senior Standing Counsel by placing reliance on the decision of the Hon'ble Supreme Court in the case of Avasarala Technologies Ltd. Vs. Joint Commissioner of Income-tax reported in (2015) 373 ITR 34 (SC) submitted that once the purchase of machinery itself was found to be false and the transaction was sham, the claim of depreciation cannot be sustained. In the instant case also, fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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