The commercial Corporation Of India Ltd, Manipal V. The DCIT,Circle-1, Udupi

ITSSA 7/BANG/2011

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3355 (ITAT-BANGALORE)
• Duration Of Justice: 9 year(s) 1 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-09-2019
• Assessment Year: misc
• Appeal Filed On: 28-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DILIP M JUNIOR DEPT
• Assessee Lawyers: SHEETAL BORKAR S
• Keywords: Gift; Revision of order; Depreciation; Retrospective amendment; Question of law; Wrong claim; Bad and doubtful debts; Block assessment
• Section: 250; 264; 113; 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 7/BANG/2011 (BLOCK PERIOD FROM 01.04.1987 TO 21.01.1997) M/S. THE COMMERCIAL CORPORATION OF INDIA LTD., MANIPAL 576104. PAN : CN - 0017 .. APPELLANT. VS. DCIT CIRCLE 1, UDUPI .. RESPONDENT. ASSESSEE BY : SHRI S. PARTHASARATHI & SMT. SHEETAL BORKAR, ADVOCATES REVENUE BY : SHRI DILIP M., JUNIOR STANDING COUNSEL FOR DEPT. DATE OF HEARING : 03.02.2020. DATE OF PRONOUNCEMENT : 28.02.2020. O R D E R PER A. K. GARODIA, A.M. : THIS APPEAL IS A DIRECT APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED BY THE AO ON 31.12.2010 FOR THE BLOCK PERIOD 01.04.1987 TO 21.01.1997. 2. IN COURSE OF HEARING, LEARNED AR OF THE ASSESSEE SUBMITTED THAT GROUND NO. 1 IS GENERAL AND GROUND NO. 2 ABOUT TIME BARRING ASPECT IS NOT PRESSED. ACCORDINGLY, IT IS HELD THAT NO SEPARATE ADJUDICATION IS CALLED FOR ABOUT GROUND NO. 1 AND GROUND NO. 2 IS REJECTED AS NOT PRESSED. 3. HE SUBMITTED THAT AS PER GROUNDS NO. 3 TO 7, THIS IS THE GRIEVANCE OF THE ASSESSEE THAT IMPUGNED ADDITIONS WERE ALL RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE ON WHICH THE RETURNS WERE FILED REGULARLY WELL PRIOR TO THE DATE OF SEARCH AND AS A CONSEQUENCE, NONE OF THE ADDITIONS MADE IS VALID. 4. LEARNED AR OF THE ASSESSEE ALSO SUBMITTED THAT SEARCH TOOK PLACE ON 19.11.1996 AND RETURNS OF INCOME UP TO A. YS. 1995 96 WERE FILED PRIOR TO SEARCH AND RETURN OF INCOME FOR A. Y. 1996 97 FOR WHICH TIME U/S 139 (1) DID NOT EXPIRE TILL DATE OF SEARCH WAS FILED ON 29.11.1997 I.E. 2 ITA NO. 7/BANG/2011 WITHIN TIME PERMITTED U/S 139 (1). HE SUBMITTED THAT COPY OF THE ASSESSMENT ORDER DATED 13.03.1996 FOR A. Y. 1991 92 PASSED U/S 143 (3) IS AVAILABLE ON PAGES 162 TO 163 OF THE PAPER BOOK AND SIMILARLY, COPY OF THE ASSESSMENT ORDER ALSO DATED 13.03.1996 FOR A. Y. 1991 92 PASSED U/S 143 (3) IS AVAILABLE ON PAGES 164 TO 168 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT COPY OF THE ASSESSMENT ORDER DATED 28.03.2002 FOR A. Y. 1993 94 PASSED U/S 143 (3) R.W.S. 250 IS AVAILABLE ON PAGES 169 TO 176 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT COPY OF THE ASSESSMENT ORDER DATED 25.03.1997 FOR A. Y. 1994 95 PASSED U/S 143 (3) IS AVAILABLE ON PAGES 177 TO 183 OF THE PAPER BOOK AND COPY OF INTIMATION DATED 29.06.1996 FOR A. Y. 1995 96 PASSED U/S 143 (1) (A) IS AVAILABLE ON PAGES 184 TO 185 OF THE PAPER BOOK. IN PARTICULAR, HE DRAWN OUR ATTENTION TO PARA 2 & 3 OF THE ASSESSMENT ORDER FOR A. Y. 1993 94 AVAILABLE ON PAGE 165 OF THE PAPER BOOK AND POINTED OUT THAT IN THIS PARA, THE AO HAS NOTED THIS FACT THAT THE ASSESSEE PURCHASED MACHINERY FROM CANARA STEEL LIMITED AND LEASED BACK THE SAME TO THE SAID PARTY AND CLAIMED DEPRECIATION OF RS. 993,326/- AND THIS TRANSACTION WAS IN FEBRUARY 1993. HE FURTHER POINTED OUT THAT IN THE SAME PARA, THE AO HAS ALSO NOTED ABOUT THE SIMILAR TRANSACTION OF PURCHASE AND LEASE BACK OF GAS CYLINDERS FROM M/S ELLENBARRIE INDUSTRIAL GASES LTD. AND CLAIM OF DEPRECIATION OF RS. 8.19 LACS. THEREAFTER, HE POINTED OUT THAT IN A. Y. 1994 95, THE AO MADE DISALLOWANCE OF DEPRECIATION OF RS. 58,12,159/- AND OF BAD DEBTS RS. 64,11,660/- TOTAL RS. 122,23,819/- BUT AS PER ORDER GIVING EFFECT TO ORDER OF CIT U/S 264 PASSED ON 30.03.1998, COPY ON PAGE 183 OF THE PAPER BOOK, BOTH THESE DISALLOWANCES WERE DELETED. HE FURTHER SUBMITTED THAT NO INCRIMINATING MATERIAL WAS FOUND IN COURSE OF SEARCH. HE SUBMITTED THAT UNDISCLOSED INCOME IS DEFINED U/S 158 B (B) OF INCOME TAX ACT, 1961 AND AS PER THE SAME, ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED BUT FOUND FALSE CAN BE CONSIDERED AS UNDISCLOSED INCOME IN ADDITION TO MONEY, BULLION, JEWELLERY AND ENTRY IN BOOKS OF ACCOUNT ETC. WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. HE SUBMITTED THAT PURCHASE AND LEASE BACK TRANSACTION IS DULY RECORDED IN BOOKS AND DISCLOSED TO THE DEPARTMENT AND HENCE, ONLY SITUATION UNDER WHICH IT CAN BE COVERED IN THE DEFINITION OF UNDISCLOSED INCOME CAN BE 3 ITA NO. 7/BANG/2011 THIS THAT IT IS FOUND TO BE FALSE. HE SUBMITTED THAT AS PER THE BLOCK ASSESSMENT ORDER, THE ALLEGATION OF THE AO IS THIS THAT THESE TRANSACTIONS OF LEASE ARE FINANCE LEASE AND THEREFORE, DEPRECIATION IS NOT ALLOWABLE AND THERE IS NO SUCH ALLEGATION THAT IT IS A FALSE CLAIM AND THE ASSETS ARE NOT IN EXISTENCE OR NOT LEASED OUT. HE SUBMITTED THAT UNDER THESE FACTS, THE CLAIM OF ASSESSEE OF DEPRECIATION IS NOT HIT BY SECTION 158B (B) AND IT CANNOT BE ASSESSED AS UNDISCLOSED INCOME IN BLOCK ASSESSMENT. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. MRS. MANISHA A. SADHWANI IN ITA NO. 414 OF 2007 DATED 25.11.2013, COPY ON PAGES 55 TO 66 OF THE CASE LAW PAPER BOOK. HE POINTED OUT THAT THE QUESTION OF LAW BEFORE HONBLE HIGH COURT WAS THIS AS TO WHETHER NRI GIFTS DETECTED IN COURSE OF SEARCH CAN BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD WHEN THE IDENTIFICATION OF DONOR, HIS CREDITWORTHINESS AND GENUINENESS OF TRANSACTION IS NOT PROVED. HE FURTHER POINTED OUT THAT THE FACTS OF THAT CASE ARE NOTED ON PAGE 5 OF THE JUDGMENT I.E. PAGE 59 OF THE PAPER BOOK AND AS PER THE SAME, IT WAS NOTED THAT THE ASSESSEE IN THE RETURNS FILED WITHIN THE DUE DATE HAS DISCLOSED THE GIFTS FROM NEARLY 25 DONORS ACROSS 20 COUNTRIES AND AFTER ENQUIRY, THE AO HELD THAT THESE GIFTS ARE NOT GENUINE. THE QUESTION WAS THIS AS TO WHETHER THE AO CAN ASSESS THE ASSESSEE IN RESPECT OF THE AMOUNTS COVERED UNDER THE GIFTS AS UNDISCLOSED INCOME AND HONBLE HIGH COURT CONSIDERED THE DEFINITION OF UNDISCLOSED INCOME U/S 158B(B). HE POINTED OUT THAT IN PARA 8 OF THIS JUDGMENT ON PAGE 65 OF THE PAPER BOOK, IT IS NOTED THAT THE SO CALLED UNDISCLOSED INCOME FINDS PLACE IN THE RETURNS FILED BY THE ASSESSEE U/S 139 (1) AND THE SEARCH IS AFTER THE FILING OF RETURNS AND IN SEARCH, NO INCRIMINATING MATERIAL OF UNDISCLOSED INCOME WAS FOUND. HE SUBMITTED THAT UNDER THESE FACTS, IT WAS HELD THAT THE AO WAS WRONG IN CONCLUDING THAT THE AMOUNTS SHOWN AS GIFT IN THE RETURNS CONSTITUTE UNDISCLOSED INCOME. HE SUBMITTED THAT IN THE PRESENT CASE, THIS JUDGMENT IS SQUARELY APPLICABLE AND THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. 5. AS AGAINST THIS, LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). HE ALSO SUBMITTED THAT SECTION 158B (B) IS APPLICABLE IN THE PRESENT CASE BECAUSE THE CLAIM OF THE ASSESSEE FOR DEPRECIATION IS A FALSE 4 ITA NO. 7/BANG/2011 CLAIM. HE SUBMITTED THAT IT IS NOTED BY THE AO ON PAGES 10 AND 11 OF THE ASSESSMENT ORDER THAT AFTER RETROSPECTIVE AMENDMENT OF SECTION 158B (B), ENTRY IN BOOKS OF ACCOUNTS WHICH REPRESENT A FALSE CLAIM OF ANY EXPENSE OR DEDUCTION IS ALSO UNDISCLOSED INCOME. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT ON PAGE 3 OF THE ASSESSMENT ORDER, THE AO HAS STARTED THE DISCUSSION ABOUT SALE AND LEASE BACK TRANSACTIONS. HE HAS NOTED THAT THE ASSESSEE COMPANY HAD ENTERED INTO SUCH TRANSACTIONS WITH SIX ENTITIES WHICH ARE DEALT WITH SEPARATELY. THE FIRST ENTITY DISCUSSED BY HIM IS M/S SOUTH INDIA INDUSTRIAL GASES PVT. LTD., MADRAS. ULTIMATELY, ON PAGE 5 OF THE ASSESSMENT ORDER, HE HAS CONCLUDED THAT THIS TRANSACTION IS FINANCIAL TRANSACTION ENTERED INTO BY THE ASSESSEE COMPANY WITH M/S SOUTH INDIA INDUSTRIAL GASES PVT. LTD., MADRAS AND HELD THAT DEPRECIATION CLAIMED BY THE ASSESSEE IN RESPECT OF CYLINDERS AMOUNTING TO RS. 50 LACS IS TO BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. THIS SHOWS THAT THE FINDING OF THE AO IS THIS THAT IT IS A FINANCE LEASE AND DEPRECIATION IS NOT ALLOWABLE. THIS IS NOT A FINDING THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM. 7. THE SECOND COMPANY DISCUSSED BY HIM IS M/S ELLENBARRIE INDUSTRIAL GASES LIMITED (EIGL). IT WAS HELD THAT THE TRANSACTION WITH THIS COMPANY IS OF FINANCIAL LEASE AND DEPRECIATION IS NOT ALLOWABLE. THIS IS NOT A FINDING ABOUT TRANSACTIONS WITH THIS COMPANY ALSO THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM. 8. THE THIRD COMPANY DISCUSSED BY HIM IS M/S CANARA STEEL LIMITED (EIGL). ABOUT TRANSACTIONS WITH THIS COMPANY, HE HAS HELD THAT THE NATURE OF TRANSACTION IS SIMILAR TO THAT OF THE TRANSACTIONS ENTERED WITH EIGL. ULTIMATELY, HE HELD THAT THE CLAIM OF DEPRECIATION OF RS. 17,08,159/- IS DISALLOWED AND TRANSACTION IS TREATED AS PURE FINANCIAL ASSISTANCE. THIS IS NOT A FINDING ABOUT TRANSACTIONS WITH THIS COMPANY ALSO THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM. 9. THE FOURTH COMPANY DISCUSSED BY HIM IS M/S JAY CYLINDERS LIMITED. ABOUT TRANSACTIONS WITH THIS COMPANY ALSO, HE HAS HELD THAT THE CLAIM OF DEPRECIATION IS DISALLOWED AND TRANSACTION IS TREATED AS FINANCIAL ASSISTANCE AND THIS IS NOT A FINDING ABOUT TRANSACTIONS WITH THIS COMPANY ALSO THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM. 5 ITA NO. 7/BANG/2011 10. THE FIFTH COMPANY DISCUSSED BY HIM IS M/S CHITRAKALA INVESTMENT, TRADE & BUSINESS FINANCE LIMITED & M/S SEA ROCK INVESTMENT LIMITED. ABOUT TRANSACTIONS WITH THESE TWO COMPANIES, HE HAS HELD THAT THE NATURE OF TRANSACTION IS SIMILAR TO THAT OF THE TRANSACTIONS ENTERED WITH CANARA STEELS LIMITED. ULTIMATELY, HE HELD THAT THE CLAIM OF DEPRECIATION OF RS. 4,50,000/- AND RS. 3,60,000/- IS DISALLOWED. THIS IS NOT A FINDING ABOUT TRANSACTIONS WITH THESE TWO COMPANIES ALSO THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM. 11. THE SIXTH COMPANY DISCUSSED BY HIM IS M/S SHIMOGA STEELS LTD., MYSORE. ABOUT TRANSACTIONS WITH THIS COMPANY, HE HAS HELD THAT THE NATURE OF TRANSACTION IS SIMILAR TO THAT OF THE TRANSACTIONS ENTERED WITH CANARA STEELS LIMITED. ULTIMATELY, HE HELD THAT THE CLAIM OF DEPRECIATION IS DISALLOWED AND THE TRANSACTION WITH THIS COMPANY IS OF FINANCIAL LEASE. THIS IS NOT A FINDING ABOUT TRANSACTIONS WITH THIS COMPANY ALSO THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM. 12. AS PER ABOVE DISCUSSION, WE FIND THAT WHEN THE AO DISCUSSED ABOUT THE TRANSACTIONS OF THE ASSESSEE COMPANY WITH THESE SIX COMPANIES, HE HAS HELD THAT THE TRANSACTIONS WITH THESE SIX COMPANIES IS OF FINANCIAL LEASE AND THEREFORE, DEPRECIATION IS NOT ALLOWABLE AND THIS IS NOT A FINDING ABOUT TRANSACTIONS WITH ANY OF THESE SIX COMPANIES THAT THE CLAIM OF DEPRECIATION IS A FALSE CLAIM ALTHOUGH ON PAGES 10 AND 11 OF THE ASSESSMENT ORDER, THAT HE IS INVOKING THE AMENDED PROVISIONS OF SECTION 158B (B) AS PER WHICH FALSE CLAIM OF ANY EXPENSE OR DEDUCTION AS PER BOOKS OF ACCOUNTS IS UNDISCLOSED INCOME. IN OUR CONSIDERED OPINION, IN THE ABSENCE OF ANY SPECIFIC FINDING BY THE AO THAT IN RESPECT OF THE TRANSACTIONS WITH ANY OF THESE SIX COMPANIES, THE CLAIM OF DEPRECIATION IS A FALSE CLAIM, IT CANNOT BE HELD THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY IN RESPECT OF TRANSACTIONS WITH ANY OF THESE SIX COMPANIES IS UNDISCLOSED INCOME ASSESSABLE IN BLOCK ASSESSMENT. WE HOLD SO BY RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. MRS. MANISHA A. SADHWANI (SUPRA). GROUND NO. 3 TO 7 ARE ALLOWED. 13. AS PER GROUND NO.20, THE ASSESSEE IS AGGRIEVED BY THE SURCHARGE LEVIED BY THE AO. LEARNED AR OF THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD., 367 ITR 466. HE SUBMITTED THAT THIS WAS HELD IN THIS CASE THAT INSERTION OF PROVISO TO SECTION 113 IS PROSPECTIVE AND NOT APPLICABLE TO BLOCK ASSESSMENT PERTAINING TO PERIOD PRIOR TO 01.06.2002 AND IN THE PRESENT CASE, THE BLOCK PERIOD 6 ITA NO. 7/BANG/2011 IS 01.04.1987 TO 21.01.1997 AND THEREFORE, NO SURCHARGE CAN BE LEVIED IN THE PRESENT CASE. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. RESPECTFULLY FOLLOWING THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. (SUPRA), WE HOLD THAT NO SURCHARGE CAN VE LEVIED IN THE PRESENT CASE. THIS GROUND IS ALLOWED. 15. NO ARGUMENT WAS ADVANCED BY THE LEARNED AR OF THE ASSESSEE ABOUT ANY OTHER GROUND EXCEPT GROUND NOS. 3 TO 7 AND 20 RELATING TO DISALLOWANCE/ADDITION IN RESPECT OF DEPRECIATION AND LEVY OF SURCHARGE AS DECIDED ABOVE AND HENCE, IT IS INFERRED THAT THE REMAINING GROUNDS ARE NOT PRESSED AND REMAINING GROUNDS ARE REJECTED AS NOT PRESSED. 16. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (N. V. VASUDEVAN) (ARUN KUMAR GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 28 TH FEBRUARY, 2020. /MS/ COPY TO: 1. APPELLANT 4. CIT (A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.