UNICHEM LABORATORIES LTD, MUMBAI V. DCIT 5(3), MUMBAI

ITA 372/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88584 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 25-03-2014
• Assessment Year: 1995-1996
• Appeal Filed On: 15-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Reopening of assessment; Depreciation; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI , !' !' !' !' ''' ''' ''' '''# ## # $ $ $ $ BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 372/MUM/2010 (ASSESSMENT YEAR: 1995-96) UNICHEM LABORATORIES LTD, UNICHEM BHAVAN, PRABHAT ESTATE, S V ROAD, JOGESHWARI (WEST), MUMBAI - 400 102 .: PAN: AAACU 0551 B VS DCIT-5(3), AAYAKAR BHAVAN, M K MARG, CHURCHGATE, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NITESH JOSHI RESPONDENT BY : SHRI PAVAN KUMAR BEERLA /DATE OF HEARING : 12-01-2015 ! / DATE OF PRONOUNCEMENT : 04-03-2015 ORDER ''' ''' ''' ''' , , , , : :: : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 9, MUMBAI, DATED 03.11.2009, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. LEARNED CIT (A) HAS ERRED IN HOLDING THAT ASSES SMENT HAS BEEN VALIDLY REOPENED. THE CONDITIONS NECESSARY FOR RE-OPENING OF THE ASSESSMENT NOT BEING SATISFIED IN THE PRESENT CASE, THE REOPENING OF THE ASSESSMENT OUGHT TO BE HELD TO BE WITHOUT JURISDICTION AND INVALID AND THE ASSESSMENT ORDER PASSED OUGHT TO BE CANCELLED. 2. LEARNED CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 1,19,88,000/- O N THE AIR POLLUTION CONTROL EQUIPMENT LEASED TO PRAKASH INDUSTRIES LTD ON THE GROUND THAT THE REAL NATURE O F THE TRANSACTION IS FINANCE LEASE AND THE APPELLANT IS N OT ENTITLED TO DEPRECIATION AS PER THE DECISION OF THE SUPREME COURT IN THE CASE OF ASEA BROWN BOVERI LTD. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, DEPRECI ATION OUGHT TO BE ALLOWED TO THE APPELLANT ON THE AIR POL LUTION CONTROL EQUIPMENT LEASED TO PRAKASH INDUSTRIES LTD. . 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND UNICHEM LABORATORIES LTD ITA 372/M/2010 2 AND/OR RESCIND ANY GROUNDS OF APPEAL DURING THE COU RSE OF THE HEARING. 2. GROUND NO. 1 PERTAINS TO THE LEGALITY FOR INITIATION OF REASSESSMENT PROCEEDINGS U/S 148. 3. THE FACTS IN THE PROCEEDINGS ARE THAT THE INSTANT PROCEEDINGS ARE 2 ND ROUND AFTER HAVING BEEN SET ASIDE BY THE ORDER OF THE ITAT. IN THE ASSESSMENT ORDER, THE AO MENTIONS THAT VIDE ITAT ORDER, THE AO WAS INVESTED WITH TWIN JURISDICTIO N, I.E. (I) TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE AFRESH WITH REGARD TO REOPENING OF ASSESSMENT U/S 147 AND (II) TO CONSIDER THE RATIO LAID DOWN IN THE CASE OF ASEA BROWN BOVERI LTD. ON THE FAC TS OF THE CASE. 4. IN THE INSTANT CASE, REGULAR ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 30.03.1998. IN THE REGULAR ASSESSM ENT PROCEEDINGS, THE AO SPECIFICALLY CALLED FOR THE DETAILS OF BOILER INSTALLED BY PRAKASH INDUSTRIES LTD., LUDHIANA (PIL) AT THE IR UNIT AT CHAMPA IN BILASPUR, M.P. IN THE INVESTIGATION MADE IN THE CASE OF PIL, BY THE DEPARTMENT BY DI (INV.) AT LUDHIANA A ND DI (INV.), BHOPAL, IT WAS FOUND THAT NO SUCH EQUIPMENT EVER EX ISTED OR WAS INSTALLED IN THEIR UNIT. HOWEVER IT WAS REPORTED THA T THE SUPPOSED EQUIPMENT WAS PRESUMED TO HAVE BEEN SUPPLIED BY M/S SAHIB ENGINEERING WORKS, LUDHIANA, TO THE ASSESSEE AN D NOT BY THE ASSESSEE, WHO IN TURN HAD ACQUIRED THE EQUIP MENT FROM M/S ASHISH ENGINEERING WORKS, DURG. ON RECEIPT OF THIS INFORMATION, THE CASE OF THE ASSESSEE WAS REOPENED U/S 1 47 BY RECORDING THE FOLLOWING REASONS, A REPORT DATED 11/03/1999 DI (INV) LUDHINA ADDRESS ED TO DG (INV), NEW DELHI AND CC II, MUMBAI STATES THA T IN COURSE OF INVESTIGATION INTO PRAKASH INDUSTRIES IT WAS FOUND THAT NO AIR POLLUTION CONTROL EQUIPMENT EVER EXISTED AT BILASPUR AND CHAMBA FACTORY ESTABLISHMENT BELONG ING TO PRAKASH INDUSTRIES. LETTER DTD. OF CIT - III, MU MBAI CIRCULATED AMONG AOS OF HIS CHARGE IN THIS CASE OF BOGUS LEASING TRANSACTION OF PRAKASH INDUSTRIES ALSO INDI CATED THE INVOLVEMENT OF UNICHEM LABS LTD. FROM A PERUSAL OF RECORDS OF UNICHEM LAB LIMITED. A.Y. 95-96, IT IS S EEN UNICHEM LABORATORIES LTD ITA 372/M/2010 3 THAT TOUGH LEASE AGREEMENTS DATED 24/09/1994, ONE TRANSACTION ON 100% DEPRECIABLE ASSET (AIR POLLUTIO N CONTROL EQUIPMENT) HAS BEEN ENTERED INTO FOR RS. 1,19,88,000/- BETWEEN UNICHEM LAB LTD. AND M/S. PRAKASH INDUSTRIES, WHICH HAS RESULTED IN A CLAIM O F DEPRECIATION OF RS. 1,19,88,000/- OF UNICHEM LAB LT D. FOR AY 95-96. THE ORDER U/S. 143(3) IN THIS CASE FOR AY 95-96 HAS APPARENTLY ALLOWED THIS CLAIM OF DEPRECIATION. NOW ON RECEIPT OF THIS REPORT FROM DI (INV) LUDHIANA, S INCE THERE IS PRIMA FACIE REASON TO BELIEVE THAT DEPRECI ATION OF RS. 1,19,88,000/- HAS BEEN WRONGLY ALLOWED TO THE ASSESSEE ON ITS SUBMISSION OF FALSE PARTICULARS OF TRANSACTION WITH PRAKASH INDUSTRIES, I ISSUE NOTICE U/S. 148 FOR A. Y. 95-96 TO RE-ASSESS THE ESCAPED INCOME . THE AO, THEREFORE, REOPENED THE CASE ON 12.03.1999. 5. AS MENTIONED EARLIER, THE LEGALITY AND FACTUAL ISSUES HAD EARLIER REACHED THE ITAT, BUT WERE SET ASIDE TO THE AO. THE REVENUE AUTHORITIES IN THE INSTANT PROCEEDINGS WENT ON THE SAME LINES AND THE CASE IS ONCE AGAIN BEFORE THE ITAT. 6. WE FIND THAT THE AO ASSUMED THE JURISDICTION U/S 148, ONCE A DEFINITE INFORMATION WAS RECEIVED FROM THE OFFICE OF DI T (INVT.), LUDHIANA. THIS, ACCORDING TO US IS A GOOD ENOUGH RE ASON TO INITIATE PROCEEDINGS FOR REOPENING. AS MENTIONED BY THE REVENUE AUTHORITIES THAT IT WAS NOT A CASE, WHERE FOUR YEARS HAD ELAPSED AND THAT THE AO NEEDED SOME EVIDENCE OF INCRIMINA TORY NATURE TO INITIATE THE REASSESSMENT PROCEEDINGS. 7. WE, THEREFORE SUSTAIN THE ORDER OF THE CIT(A) ON THIS IS SUE AND SUSTAIN THE REOPENING OF ASSESSMENT U/S 147/148. 8. GROUND NO. 2 PERTAINS TO DISALLOWANCE OF CLAIM OF DEPRECIATION OF RS. 1,19,88,000/-, CLAIMED BY THE ASSESSEE ON SUPPLY OF AIR POLLUTION CONTROL EQUIPMENT (APCE) TO M/S PRAKASH INDUSTRIES LTD. FOR THEIR UNIT AT CHAMPA, BILASPUR. 9. THE FACT IS THAT THE ASSESSEE ACQUIRED APCE FROM M/S ASHISH ENGINEERING WORKS, DURG, WHICH ACCORDINGLY WAS SUPPLIED TO PIL TO THEIR UNIT AT CHAMPA IN BILASPUR. FROM THE UNICHEM LABORATORIES LTD ITA 372/M/2010 4 DETAILS AS GATHERED BY THE AO, IT WAS FOUND THAT PIL HAD ACQUIRED APCE FROM M/S SAHIB ENGINEERING WORKS, LUDHIANA. ON THE OTHER HAND, THE DEPARTMENT HAD CRACKED THE R ACKET OF HAWALA TRANSACTIONS WHEREIN PIL WAS ONE OF THE BENEFICIARY . IT WAS ALSO NOTICED THAT THE NAME OF THE ASSESSEE ALSO AP PEARED IN THE LIST OF DUBIOUS TRANSACTIONS, PREPARED BY THE JOINT INVESTIGATION WINGS AT VARIOUS PLACES, FEATURING AT SL. NO. 68. 10. IN THE PROCEEDINGS BEFORE THE REVENUE AUTHORITIES, T HE ASSESSEE SUBMITTED DETAILED EVIDENCE TO PROVE THAT THE TRANSACTION IN QUESTION WAS AN ACTUAL TRANSACTION AND SUBMITTED COMPLETE DETAILS PERTAINING TO ACQUISITION OF THE ASSET AND SUPPLY THEREOF TO PIL AT BILASPUR AND AS TO HOW THE AS SESSEE CLAIMED DEPRECIATION ON THE EQUIPMENT. THE ENTIRE EVIDENCE AND SUBMISSIONS WERE REJECTED BY THE REVENUE AUTHORITIES ON THE BASIS OF PRESUMED HAWALA DEAL AND IN ANY CASE, DEPRECIATION WAS NOT AVAILABLE, AS HELD IN THE CASE OF ASEA BROWN BOVE RI LTD. VS IFCI, REPORTED IN 322 ITR 381 (BOM). HENCE THE CIT(A), SUSTAINING THE ORDER OF THE AO, DISALLOWED THE CLAIM OF DEPRECIATION, AS MADE BY THE ASSESSEE. 11. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IS IN AP PEAL BEFORE THE ITAT. 12. BEFORE US THE AR SUBMITTED THE ENTIRE FACTS, PERTAININ G TO THE CASE. THE AR SUBMITTED BEFORE US THE COPY OF LEASE AGREEMENT DATED 24.09.1994, SIGNED BY UNICHEM LABORATORIE S LTD. (ASSESSEE AS LESSOR) AND PIL (AS LESSEE) AND ALSO POIN TED OUT THAT THE ITAT IN ITS ORDER DATED 10.07.2007 HAVE HELD TH AT THE INSTANT TRANSACTION WAS A GENUINE TRANSACTION AND NOT J UST A PAPER TRANSACTION AS COMPREHENDED BY THE REVENUE AUT HORITIES ON THE INVESTIGATION DONE BY DI(INVT.) BHOPAL AND DI(INV.) LUDHIANA. THE AR ALSO PLACED BEFORE US THE EVIDENCE OF MOVEMENT OF EQUIPMENT FROM DURG TO PILS FACTORY AT CHAMPA. UNICHEM LABORATORIES LTD ITA 372/M/2010 5 13. SINCE THE ISSUE OF ACTUAL TRANSACTION ATTAINS FINALITY, W E ARE LEFT WITH THE ISSUE OF ALLOWANCE OF DEPRECIATION. 14. AS OBSERVED EARLIER IN THE ORDER, THE REVENUE AUTHO RITIES HAVE PLACED RELIANCE ON THE CASE OF ASEA BROWN BOVERI LT D. (SUPRA) TO DISALLOW THE CLAIM OF DEPRECIATION, ON TRUCKS FINANCED BY THE ASSESSEE IN THE NAMES OF THIRD PARTIES. THIS RATIO WAS APPLIED IN THE DECISION OF THE COORDINATE BENCH AT MUMBAI IN THE CASE OF DCB BANK LTD. VS DCIT, ITA NO. 3000/MUM/2001 AN D 4892/MUM/2003 AND OTHER CONNECTED APPEALS OF THE ASSE SSEE FOR VARIOUS ASSESSMENT YEARS (WHEREIN ONE OF US WAS A P ARTY). THE ISSUE OF DEPRECIATION CAME UP IN THE CASE OF INDUSIN D BANK LTD. VS ADD. CIT, REPORTED IN 135 ITD 165 (MUM SB), WHEREIN THE SB HELD THAT ONLY LESSOR CAN CLAIM DEPRECIATION IN CASE OF OPERATING LEASE . ACCORDINGLY, THE LESSOR, I.E. THE ASSESSEE, CLAIMED THE DEPRECIATION. AT A LATER STAGE, DURING THE LEASE PERIOD, DIFFERENCES AROSE BETWEEN THE ASSESSEE AND PIL WITH REGARD TO PAYMENT OF LEASE AMOUNT, THE ISSUE WAS TAKEN BEFORE THE ARBITRATION, WHO GAVE THE AWARD IN FAVOUR OF THE ASSE SSEE. AS A RESULT, THE APCE WAS REPOSSESSED BY THE ASSESSEE ON AS IS WHERE IS BASIS AND WAS SOLD AS SCARP FOR RS. 3,00,000/- (SALE BILL AT APB 78). 15. THE FACT THAT THE ASSESSEE TOOK THE ISSUE BEFORE T HE ARBITRATION ITSELF GOES TO PROVE THAT THE TRANSACTION WAS GENUINE. FROM THE DETAILS AS FILED BY THE ASSESSEE WE FIND THAT AS A CONSEQUENCE OF AWARD OF THE ARBITRATION IN FAVOUR OF THE ASSESSEE, THE ASSESSEE WAS ABLE TO REPOSSESS THE EQUIP MENT AND SELL THE SAME ON AS IS WHERE IS BASIS. THE FACTUAL ASPECT O F CLAIM AND ALLOWANCE OF DEPRECIATION HAS BEEN HELD TO BE IN FAVOUR OF THE LESSOR, BY THE COURTS. UNICHEM LABORATORIES LTD ITA 372/M/2010 6 16. RESPECTFULLY, THEREFORE, FOLLOWING THE RATIOS IN THE ABOVE CITED DECISIONS, AND THE FACT THAT THE ASSESSEE REPOSSES SED THE APEC EQUIPMENT AND SELL IT, GOES TO PROVE THE GENUINENESS OF THE TRANSACTION AND THE TITLE OF THE EQUIPMENT ALWAYS LAY WITH THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ASSESSEE WAS ENTITLED TO DEPRECIATION. 17. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DEPRECIATION AS CLAIMED B Y THE ASSESSEE AT RS. 1,19,88,000/- ON AIR POLLUTION CONTROL EQUIPMENT LEASED TO PRAKASH INDUSTRIES LTD. AT CHAMPA, BILASPUR. 17. GROUND NO. 2 IS THEREFORE ALLOWED. 18. AS A RESULT, THE APPEAL AS FILED BY THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015 . SD/- SD/- ( ) ( ''' ''' ''' ''' ) % % % % & & & & % % % % (R C SHARMA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 04/03/2015 '/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A) -9, MUMBAI. 4) THE CIT-5, MUMBAI/CIT -5, MUMBAI. 5) / THE D.R. H BENCH, MUMBAI. 6) ()* + COPY TO GUARD FILE. UNICHEM LABORATORIES LTD ITA 372/M/2010 7 ,%- / BY ORDER / / TRUE COPY / / . / / 0 , '1! , 2 3 DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI ! *CHAVAN, SR.PS