TMI Blog2005 (7) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had leased out the following assets to M/s. Gujarat Health Care Ltd. by lease agreement dated 31-3-1995: ------------------------------------------------------ S.No. Description Qty. Nos. Rate Amount ------------------------------------------------------ 1. Verticle Slats 600 4825 28,95,000 2. Castings (with 11 bearings) 600 4910 29,46,000 3. Control Volves 22 4825 1,06,150 4. Steel Volves 26 4685 1,21,810 ---------- Total 60,68,960 ------------------------------------------------------ Ld. Assessing Officer further observed that initially a notice under section 158BD was served upon the assessee, however, subsequently it was realized that search was conducted upon the assessee and assessment was liable to be made under section 158BC of the Act. Accordingly, a notice under section 158BC dated 5-8-1998 was served on the assessee on 7-8-1998 requiring it to file the return for the block period ended on 30-1-1997 within a maximum period of 45 days. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans were obtained etc. According to the Assessing Officer for claiming depreciation, initial burden to prove the ownership of assets, its uses in the business, and in the present case genuineness of the transaction, is upon the assessee and assessee failed to discharge the primary onus. The Assessing Officer observed that assessee had merely an invoice dated 18-3-1995 to indicate the purchase of the assets but no corresponding details about the possession/delivery taken in respect of the leased assets, details of payment made and other relevant details were not available with the assessee. The Assessing Officer further observed that assessee failed to establish the ownership over the assets and in this connection assessee even could not file the circumstantial evidence indicating the fact that transaction was entered into in the ordinary course of the business. Ld. Assessing Officer held the transaction as sham and disallowed the claim of depreciation. 4. Appeal to the ld. CIT(A) did not bring any relief to the assessee. 5. Impugning the finding of ld. Revenue Authorities below ld. counsel for the assessee took us through assessment order as well as the details submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. The ld. counsel for the assessee further submitted that in the books of account all details have been duh disclosed and no incriminating material was found by the search party at the time of search. An agreement entered with M/s. Gujarat Health Care Ltd. duly disclose all the details. He also pointed out towards the resolution passed by the Board of Directors of M/s. Gujarat Health Care Ltd. available at page 38 of paper book. On the strength of this resolution he submitted that M/s. Gujarat Health Care Ltd. duly resolved for taking the assets on lease. Ld. counsel for the assessee further contended that it is incorrect to say that valuation of the assets was not carried out by the assessee. Such valuation was done and a certificate issued by Mega Associates available at Pg. 39 was brought to our notice by the ld. counsel. He also submitted that M/s. Gujarat Health Care Ltd. had issued a certificate indicating the user of the assets in its business. On the strength of all these details he submitted that disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false. 158BB. Computation of undisclosed income of the block period.-(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,- (a) where assessments under section 143 or section 144 or section 147 have been concluded prior to the date of commencement of the search or the date of requisition on the basis of such assessments; (b) where returns of income have been filed under section 139 or in response to a notice issued under sub-section (1) of section 142 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called to any partner not being a working partner: Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement. (c) assessment under section 143 includes determination of income under sub-section (1) or sub-section (1B) of section 143. (2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to financial year in those sections shall be construed as reference to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the materials which are already in the possession of the authority, it can be estimated to the best judgment by the assessing authority on the basis of the material in his possession. However, the assessing authority is not conferred with power to make estimation of income de hors the material in his possession, while making regular assessment order under section 158BB. It has to be borne in mind that proceedings under sections 158BB and 158BC are that of undisclosed income. Therefore, the proceeding carries with it a presumption that returns filed in pursuance of such proceedings are of undisclosed income and not necessarily in accordance with the books of account. Its verification has to be searched outside regular books with reference to material that has been found during search. That makes it imperative to adjudicate the return with reference to material that has come in the possession of the assessing authority during the course of search proceedings and on which basis the belief about the existence of undisclosed income is entertained by the assessing authority inviting invocation of sections 158BB and 158BC. The enquiry into the correctness of such returns with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of search. This section does not provide a licence to the revenue for making roving enquiries connected with the completed assessment. It is beyond the power of the Assessing Officer to review the assessments completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence or material the Assessing Officer is not empowered to draw any presumption as to the existence of undisclosed income. A presumption is an inference of fact drawn from other known or proved facts. It is rule of law under which courts are authorised to draw a particular inference from a particular fact, until and unless the truth of such inference is disproved by other evidence. We find that the scheme of Chapter XIV-B does not give power to the revenue to draw the presumption in regard to the undisclosed income. The Assessing Officer could proceed on the basis of material detected at the time of search and the evidence gathered. Under section 132(4), the authorised officer may, during the course of search or seizure, examine on oath any person who is found to be in possession or control of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease rental income of ₹ 19,07,000 that was offered by the appellant as taxable income in the return of income filed for the assessment year 1996-97. 12. I have come to the considered conclusion that no genuine leasing had been taken place and the entire transaction was a collusive transaction. As such, the Assessing Officer is directed to look into this ground of the appellant-company and to do the needful in accordance with the provisions of the Act. 13. Since we have reversed the finding of ld. CIT(A) and deleted the disallowance of depreciation, therefore, rental income shown by the assessee on leased asset in assessment year 1996-97 would be taxable. The ld. Assessing Officer shall reconsider this aspect in the light of our finding recorded in the main issue. 14. In addition to the above grounds of appeal the assessee has raised an additional ground of appeal impugning the charging of surcharge. Ld. counsel for the assessee at the time of hearing contended that at the time of filing appeal inadvertently the correctness of the assessment order in levying surcharge was omitted to be challenged. However, it is purely a legal ground which goes to the root of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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