Jitender Kumar gupta, Meerut V. ACIT, Meerut

MA 445/DEL/2010

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8965 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2001-2002
• Appeal Filed On: 16-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M P RASTOGI ADV SH
• Keywords: Depreciation; Opportunity of being heard; Cost of acquisition; Fair market value; Onus to prove
• Section: 131; 28

Judgement Text

MA NOS. 445&446/DEL/2010 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH FRIDAY: NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER M.A. NOS. 445 & 446/DEL/2010 (IN ITA NOS. 3431 & 4342/DEL/2007) A.YRS. : 2001-02 & 2002-03 SH. JITENDER KUMAR GUPTA VS. ACIT, CIRCLE-I, 219, RAILWAY ROAD, MEERUT MEERUT (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : ASSESSEE BY : ASSESSEE BY : ASSESSEE BY :- -- - SH. M.P. RASTOGI, ADV. SH. M.P. RASTOGI, ADV. SH. M.P. RASTOGI, ADV. SH. M.P. RASTOGI, ADV. DEPARTMENT BY : DEPARTMENT BY : DEPARTMENT BY : DEPARTMENT BY :- -- - MS. VEENA JOSHI, D.R. MS. VEENA JOSHI, D.R. MS. VEENA JOSHI, D.R. MS. VEENA JOSHI, D.R. O R D E R O R D E R O R D E R O R D E R PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM BY WAY OF THIS MISC. APPLICATION, ASSESSEE SEEKS REC TIFICATION OF MISTAKE IN THE TRIBUNALS COMMON ORDER IN I.T.A. NO. 445/DEL/2010 FOR THE ASSESSMENT YEARS 2001-02 & I.T.A. NO. 446/DEL/2 010 FOR A.Y. 2002- 03. 2. THE GROUNDS OF APPEAL IN THIS REGARD WHICH IS SU BJECT MATTER IN THESE MISC. APPLICATION READ AS UNDER:- IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING TO ADOPT THE VALUE OF ASSET S AT RS. 89,10,245/- AS AGAINST OF RS. 22,45,000/- TAKEN BY THE ASSESSING O FFICER AND CONSEQUENTLY RELIEF OF DEPRECATION OF RS. 16,66,311 /- BY IGNORING THE FACTS THAT THE WORKING OF THE COST OF THE ASSETS DONE BY THE ADDL. COMMISSIONER OF INCOME TAX WAS DETERMINED U/S 43(1) /144-A OF THE INCOME TAX ACT. MA NOS. 445&446/DEL/2010 2 3. THE FACTS OF THE CASE AND ADJUDICATION BY THE TRI BUNAL IN THIS REGARD ARE AS UNDER:- 3. THE ASSESSEE CLAIMED THAT IT HAD INCURRED A COS T OF RS.89,10,245/- IN RESPECT OF CERTAIN ASSETS PURCHASED BY HIM FROM M/S BABA BUILD WELL ON WHICH THE ASSESSEE IS EARNING AMOUNT OF HIRE CHARGES FROM M/S MINERVA HOL DING (PVT) LTD. THE DETAILS OF ASSETS AND OTHER COST AS ATTRIBUTED TO THE VARIOUS ASSETS ALLEGED TO BE PURCHASED BY THE ASSESSEE FROM M/S BABA BUILD WELL AS DESCRIBED IN A SSESSMENT ORDER AT PAGE 6 OF THE ASSESSMENT ORDER IS AS UNDER:- 1. PURCHASE OF CENTRALLY AIR-CONDITIONING UNIT WITH GENERATOR, OTIS ELEVATOR AND FIRE FIGHTING EQUIPMENTS FROM M/S BABA BUILDWELL, D ELHI FOR A SUM OF RS.75,00,000/- 2. ASSESSEE HAS PAID COMMISSION FOR ARRANGING AND F INALIZING THE HIRING FACILITY TO M/S SHIVAYA LAMINATES AT RS.10,00,000/- 3. M/S LIGHT CARTS PVT. LTD. AT RS.8,00,000/- 4. HE HAS FURTHER PAID RS.3,92,377.50 TO SH. R.C. L AL 5. RS.1,50,000/- TO SH. C. LAL, 6. RS.85,000/- TO M/S CLASSIC ENGG. 4. IT HAS BEEN MENTIONED IN THE ANNEXURE J ANNEX ED TO THE ASSESSMENT ORDER WHICH IS STATED TO BE A COMMUNICATION RECEIVED BY T HE ASSESSING OFFICER FROM ADDITIONAL COMMISSIONER OF INCOME-TAX IN RESPECT OF DETERMININ G THE ACTUAL COST OF ABOVE MENTIONED ASSETS, THAT A GROUP CONCERN OF THE ASSES SEE, NAMELY, M/S CIVIC TRADERS PVT. LTD. HAD PURCHASED THE LAND AND BUILDING OF THE PRE MISES KNOWN AS NO.225, OKHLA INDUSTRIAL ESTATE PHASE III, NEW DELHI 110 020 FO R TOTAL CONSIDERATION OF RS.1,91,18,472/-. THE PORTION OF THE SAID BUILDING , NAMELY, BASEMENT, MEZZANINE FLOOR, FIRST FLOOR AND SECOND FLOOR WAS GIVEN BY THE SAID M/S CIVIC TRADERS PVT. LTD. TO M/S MINERVA HOLDINGS LTD. AT THE RENT OF RS.47,08,530/- PER ANNUM. THE GROUND FLOOR IS STATED TO BE WITH M/S SHARDA EXPORTS, A GROUP CONCE RN OF THE ASSESSEE AND AS THE ABOVE MENTIONED CENTRALLY AIR CONDITIONED UNIT, GEN ERATOR, OTIS ELEVATORS AND FIRE FIGHTING EQUIPMENTS WERE FITTED IN THAT BUILDING AN D FOR THOSE FACILITIES THE ASSESEE WAS MA NOS. 445&446/DEL/2010 3 TO GET RENT OF RS.47,08,530/- PER ANNUM I.E., EQUAL TO THE AMOUNT OF RENT EARNED BY M/S CIVIC TRADERS. IT IS ALSO MENTIONED IN ANNEXURE J THAT THOUGH THE COST OF PURCHASE PAID BY THE ASSESSEE WAS STATED TO BE RS.75 LAC, BUT AFT ER DEDUCTING HIRE CHARGES RECEIVED FROM M/S MINERVA HOLDINGS LTD. FOR GESTATION PERIOD , A SUM OF RS.11,70,132/-, THE BALANCE PAYMENT WAS MADE OF RS.63,22,868/-. THE AN NEXURE J IS REPRODUCED IN ITS ENTIRETY:- ANNEXURE-J THE AO HAS POINTED OUT THAT THE COST OF PURCHASE OF EQUIPMENT FROM M/S BABA BUILDWELL SHOWN = 75,00,000/- LESS: HIRE CHARGES RECD. FROM M/S MINERVA HOLDINGS = RS.11,7 7,132 LTD. FOR GESTATION PERIOD. _______________ = RS.63,22,868 ============== THE SAID EQUIPMENT AS PER DELIVERY NOTE CONSISTS OF : A) CENTRAL AIR CONDITIONING PACKED UNIT OF BLUE STA R WITH ORIGINAL BILL 3083/30.7.99, 3084/30.7.99 B) GENERATOR 320 KVA WITH ORIGINAL BILL 00594 DT 1 8.8.99 COMPRISING OF ENGINEMAKE CIL MODEL KT 1150 M/S NO.25244339 AND AL TERNATOR MAKE STAMFORD MODEL 320 KVA M/C NO.99050114 WITH OTHER ACCESSORIE S. C) OTIS ELEVATOR : ORIGINAL BILL DETAILS : DINH 6630 CONTRACT NO: 52, NH 6630 DT. : 8.4.99 D) FIRE FIGHTING EQUIPMENT : BILL NO.8,9, 10 DT. 9. 3.99 OF M/S CITY FINE SERVICES AND BILL NO.16 DT. 11.3.99 OF THE CITY FINE SERVICES, B ILL NO.3, 4 DT. 11.3.99 OF M/S SHREE GWIN NANAK FINE TECH. SERVICES. A) THE ASSESSEE HAS FAILED TO PRODUCE THE ORIGINAL BILLS AS MENTIONED IN THE DELIVERY NOTE. B) M/S BABA BUILD WELL HAS ALSO FAILED TO PRODUCE T HE BILL/ PHOTOCOPY OF BILL/ DETAILS/ PROOF PAYMENT TO ARRIVE AT COST TO M/S BAB A BUILD WELL. IT HAS BEEN POINTED OUT THAT THE BUILDING IS OWNED BY M/S CIVIC TRADERS PVT. LTD. AS PER BALANCE SHEET/P&L A/C OF M/S CIVIC TRADERS (PVT .) LTD. A GROUP CONCERN THE ASSETS HAVE BEEN SHOWN BY M/S CIVIC TRADERS (PVT.) LTD. AS UNDER: - TOTAL DEP. UPTO 31.3.2001 LAND 39,52,889.00 BUILDING 1,51,69,583.00 7,12,317.00 1,91,18,472.00 MA NOS. 445&446/DEL/2010 4 M/S CIVIC TRADERS (P) LTD. HAS GIVEN THE PREMISES N O. 225, OKHLA INDL. ESTATE, PH.- III, NEW DELHI CONSISTING OF BASEMENT MEZZANINE FLOOR, FIRST FLOOR SECOND FLOOR TO M/S MINERVA HOLDING LTD. @ RS. 47,08,530/-. P.A . (GROUND FLOOR IS ALLEGED TO BE WITH M/S SHARDA EXPO RTS A GROUP CONCERN). THE AFORESAID EQUIPMENT INSTALLED ALLEGEDLY BY M/S BABA BUILDWELL AT AFORESAID PREMISES I.E. 225, OKHLA INDL. ESTATE, PH-III, NEW DELHI. @ RS. 47,08,530/- P.A. [COSTING RS.63,22,868/-] APPARENTLY, IT IS CLEAR FROM THE AFORESAID FACTS TH AT ALL THE PERSONS ARE OF THE SAME GROUP I.E. MR. J.K. GUPTA/ M/S SHARDA EXPORTS/ M/S CIVIC TRADERS (P) LTD. M/S CIVIL TRADERS (P) LTD. HAS PURCHASED A BUILDING AT 225 OKHLA INDL. ESTATE, PH.-III, NEW DELHI AT A COST. OF RS. 1,91,18,472/-. GROUND FLOOR IS WITH GROUP CONCERN M/S SHARDA EXPOR TS. OTHER FLOORS NAMELY BASEMENT/MEZZANINE FLOOR/ FIRST FLOOR/ SECOND FLOOR HAVE BEEN GIVEN ON RENT TO M/S MINERVA HOLDING LTD. @ RS. 47,08,530/- P.A. (ESTIMATED PROPORTIONATE COST OF BASEMENT/MEZZANINE /FIRST/SECOND FLOOR OUT OF TOTAL BUILDING COST/INVT. (CONSISTING OF BASEMENT/G ROUND FLOOR/MEZZANINE/FIRST/SECOND FLOOR) = 4/5 X TOTAL COST (1,91,18,472) = RS. 1, 52,94,777/- AS IS CLEAR M/S MINERVA HOLDING (P) LTD. IS GIVING A TOTAL RENT TO THE GROUP WHICH HAS BEEN BIFURCATED AS UNDER: - BUILDING RENT = RS. 47,08,530/- P.A. EQUIPMENT RENT= RS. 47,08,530/- P.A. THE SAID ARRANGEMENT IS NOTHING BUT A COLOURABLE DEVICE TO BIFURCATE THE TOTAL PAYMENTS FROM M/S MINERVA HOLDING (P) LTD. IN THE M ANNER THAT SUITS THE GROUP CONCERN/PERSONS OF THE GROUP. (II) EQUIPMENT HIRE RENT BE ASSESSED IN THE HANDS OF MR. J.K. GUPTA ON PROTECTIVE BASIS. THIS IS THE OPINION OF THE UNDERSIGNED. AO IS NOT BOUND BY THIS OPINION NOR THE SAME SHOULD BE CONTINUED AS A FINDING/DIRECTION U/S 144A. HE SHOULD MAKE AN INDEPENDENT OPINION/FINDING. THE SCOPE OF REFERENCE IS LIMITED TO THE PURCHASE C OST OF EQUIPMENT FROM M/S BABA BUILDWELL. MA NOS. 445&446/DEL/2010 5 A) SINCE M/S BABA BUILDWELL HAS FAILED TO PRODUCE T HE PROOF OF PURCHASE COST (PHOTOCOPY OF BILLS/PAYMENTS MADE TO PURCHASE THE E QUIPMENT BY M/S BABA BUILDWELL). B) ASSESSEE HAS ALSO FAILED TO DISCHARGE ITS BURDEN TO PROVE THE PURCHASE COST BY M/S BABA BUILDWELL AS NO ORIGINAL BILL OF PURCHA SE BY M/S BUILDWELL HAS BEEN PRODUCED BY ASSESSEE EVEN THOUGH MENTIONED IN DELIV ERY NOTE TO MR. J.K. GUPTA. IN VIEW OF THESE FACTS ESTIMATED INFLATED COST MA Y BE TAKEN BY RS. 20,00,000/- (RUPEES TWENTY LACS). 5. THE ASSESSING OFFICER TAKEN THE COST OF RS.20 LA C AS DETERMINED IN THE AFOREMENTIONED ORDER AND THE ASSESSING OFFICER ALSO INCLUDED THE OTHER COST OF GENERATOR AND SOUND PROOF EQUIPMENT OF GENERATOR, E TC. DETERMINED THE VALUE AT RS.22,45,000/-. THUS, THE AO RESTRICTED THE CLAIM OF DEPRECIATION OF THE ASSESSEE TO A SUM OF RS.5,61,250/- AGAINST THE CLAIM OF THE ASSES SEE FOR A SUM OF RS.22,27,561/- AND, THUS, DISALLOWANCE OF RS.16,66,311/- WAS MADE ON AC COUNT OF DEPRECIATION AND SIMILAR DISALLOWANCE WAS MADE OF A SUM OF RS.15,51,168/- FO R ASSESSMENT YEAR 2002-03. 6. ASSESSEE APPEALED AGAINST AOS ORDER BEFORE TH E CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) REFERRED THE PROVISO TO SECTI ON 144A AND PROVISION OF SECTION 43A READ WITH EXPLANATION-3. ASSESSEE MENTIONED THAT THE PROVISO TO SECTION 144A READS THAT PROVIDED THAT NO DIRECTION WHICH ARE PRE-JUDI CIAL TO THE ASSESSEE SHALL BE ISSUED BEFORE AN OPPORTUNITY IS GIVEN TO THE ASSESSEE TO BE HEARD. WHEN THIS ASPECT WAS BROUGHT TO THE NOTICE OF THE AO BY THE CIT(A), AO R EFERRED TO EXPLANATION-3 TO SECTION 43(1) AND SUBMITTED THAT IN THIS CASE THE ASSETS GI VEN ON HIRE WERE PURCHASED BY ASSESSEE FROM M/S BABA BUILDWELL, Y-37, OKHLA INDUS TRIAL AREA, PHASE-II, NEW DELHI AFTER THEIR USE. AFTER MAKING ENQUIRIES FROM VARIO US PARTIES RELATED TO ASSETS AND HIRING OF ASSETS, THE MATTER WAS REFERRED TO THE ADDL. CIT , RANGE-I, MEERUT VIDE LETTER DATED 22.3.2004. THE LD. ADDL. CIT, RANGE-1, MEERUT H AS FURNISHED THE WORKING OF ACTUAL COST OF ASSETS AND THE SAME HAS BEEN TAKEN FOR CALC ULATION OF DEPRECIATION. 7. ASSESSEE HAS COUNTERED THIS WITH THE FOLLOWING I NTERPRETATIONS OF EXPLANATION-3 TO SECTION 43(1) AS UNDER:- FROM THE PROVISIONS OF THE SAID EXPLANATION-3, IT IS CRYSTAL CLEAR THAT THE ASSESSING OFFICER IS OBLIGED TO RECORD A SATISFACT ION THAT THE ASSETS WERE MA NOS. 445&446/DEL/2010 6 TRANSFERRED FOR REDUCING THE LIABILITY TO PAY INCOM E-TAX AND FOR THIS PURPOSE AN APPELLATE AUTHORITY CANNOT SUBSTITUTE ITS OPINION T O SUSTAIN THE APPLICABILITY OF THE SAID EXPLANATION-3 ONLY BECAUSE THE ASSETS WHICH AR E TRANSFERRED WERE USED BY ANY OTHER PERSON BEFORE THE DATE OF ACQUISITION. T HE DUTY CAST UPON THE ASSESSING OFFICER BY THE PROVISION IS TO DETERMINE THE ACTUAL COST AND NOT TO SUBSTITUTE A VALUERS OPINION. BUT AT THE SAME TI ME, IT NEEDS TO BE EMPHASIZED THAT EXPLANATION-3 DOES NOT REQUIRE DETERMINATION O F MARKET VALUE AT THE HANDS OF THE ASSESSING OFFICER BUT SPEAKS OF DETERMINATIO N OF ACTUAL COST BY THE ASSESSING OFFICER WITH THE PRIOR APPROVAL OF THE I NSPECTING ASSISTANT COMMISSIONER HAVING REGARD TO ALL THE CIRCUMSTANCES OF THE CASE ASHWIN VANSAPATI INDUSTRIES V. CIT (2002) ITR 26, 33-34 (G UJ)]. IN THE FACTS OF THE CASE, IT HAS BEEN HELD THAT AS THERE WAS RECORDED NO FIND ING BY ANY AUTHORITY TO THE EFFECT THAT THE MAIN PURPOSE OF THE TRANSFER WAS FO R CLAIMING DEPRECIATION AT AN ENHANCED COST, THE TRIBUNAL WAS NOT RIGHT IN LAW IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE ENHANCED VALUE OF THE ASSETS. THAT IT IS MOST RESPECTFULLY SUBMITTED THAT IN THE CASE OF THE APPELLANT THE LEARNED AO HAS NO WHERE RECORDED HIS SATISFACTION T HAT THE ASSETS WERE TRANSFERRED FOR REDUCING THE LIABILITY TO PAY INCO ME TAX; NEITHER ON THE ASSESSMENT ORDER NOR ANY WHERE ON THE ORDER SHEET I N THE ENTIRE ASSESSMENT PROCEEDINGS, SO THE STAND TAKEN BY THE LEARNED AO THAT THE DIRECTIONS OF ADD. CIT, RANGE-I, MEERUT WERE OBTAINED U/S 43(1) EXPLAN ATION-3 ARE AGAINST THE SPIRIT OF THIS SECTION 43(1) EXPLANATION-3. MOREOVER, I N THIS SITUATION THE COST IS TO BE DETERMINED BY THE LEARNED AO (OF COURSE, WITH THE P REVIOUS APPROVAL OF THE ADDITIONAL CIT) BUT IN THE CASE OF THE APPELLANT TH E COST HAS NOT BEEN DETERMINED BY THE LEARNED AO BUT IT WAS DICTATED BY THE HONBL E ADDITIONAL CIT, RANGE-1, MEERUT AND THAT TOO IN THE FOLLOWING WORDS:- ESTIMATED INFLATED COST MAY BE TAKEN BY RS. 20,00, 000/- (RUPEES TWENTY LACS) THESE WORDS DO NOT CARRY THE MEANING THAT THE COST IS DETERMINED AT RS. 20 LACS. IN THAT CASE THE WORDS USED SHOULD HAVE BE EN AS UNDER:- THE ESTIMATED COST MAY BE TAKEN AT RS. 20 LACS THE LEARNED AO HAS NOT APPRECIATED IT AND HAS TAKEN THE COST AT RS. 20 LACS; WHICH ARE CONTRARY TO THE FACTS AND LEGAL PO SITION OF THE CASE. 8. CONSIDERING THE ABOVE LD. CIT(A) HELD AS UNDER:- AFTER GOING THROUGH ALL THE MATERIAL ON RECORD, I HEREBY DIRECT THAT SINCE THE ACTUAL COST IS TO BE DETERMINED U/S 43(1) EXPLA NATION 3 AND NOT THE FAIR MARKET VALUE, AND ACCORDINGLY I DIRECT THE AO TO AM END THE ASSESSMENT ORDER ACCORDINGLY AND TO TAKE THE ACTUAL COST INCUR RED BY THE APPELLANT. MA NOS. 445&446/DEL/2010 7 9. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 10. IT WAS VEHEMENTLY SUBMITTED BY LD. DR THAT THE ASSESSING OFFICER HAS MADE OUT A CLEAR CASE ACCORDING TO WHICH THE COST SHOWN BY T HE ASSESSEE WAS EXORBITANT. IT WAS SUBMITTED THAT IF CERTAIN FACILITIES ARE INSTALLED IN THE PREMISES OF OTHER PERSON, THEIR VALUE COULD NOT BE IN EXCESS OF WHAT IS THE VALUE O F ORIGINALLY INSTALLED ASSETS. IT WAS SUBMITTED THAT IT WAS A CLEAR CASE WHERE THE ASSESS EE WITH A VIEW TO REDUCE THE TAX LIABILITY HAS CLAIMED HIGHER COST AND UNDER EXPLANA TION 3 TO SECTION 43(1), THE ASSESSING OFFICER IS EMPOWERED TO DETERMINE THE COS T WITH THE PREVIOUS APPROVAL OF JOINT COMMISSIONER/ADDITIONAL COMMISSIONER. HE SUB MITTED THAT THE ASSESSING OFFICER HAS DULY DETERMINED /ESTIMATED THE COST IN ACCORDAN CE WITH THE PROVISION OF ACT IN THIS REGARD. 10.1 LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT AO HAS NOT RECORDED ANY SATISFACTION THAT ASSESSEE HAS RESORT ED TO INFLATE THE COST OF PURCHASE IN ORDER TO CLAIM HIGHER DEPRECIATION. LD. COUNSEL CL AIMED THAT DE-HORSE SUCH SATISFACTION EXPLANATION 3 TO SECTION 43(1) CANNOT BE INVOKED. THE LD. COUNSEL FURTHER CLAIMED THAT THE SAID ESTIMATE ITSELF WAS WITHOUT ANY BASIS. HE CLAIMED THAT ASSESSEE HAD DULY GIVEN ITS DOCUMENT FOR PURCHASE OF ITS ASSETS. HE CLAIM ED THAT ASSESSEE CANNOT BE HELD RESPONSIBLE TO PRODUCE THE PURCHASE DOCUMENTS OF TH E PARTY FROM WHOM IT PURCHASED THE ASSET. LD. COUNSEL FURTHER CLAIMED THAT THE ASSETS WAS YIELDING VERY HIGH RENT AND THIS ALSO JUSTIFIED THE COST OF THE ASSETS. HENCE HE CLAIMED THAT THE ORDERS OF THE LD. CIT(A) BE SUSTAINED. 10.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN TH E LIGHT OF THE MATERIAL PLACED BEFORE US. FROM THE ASSESSMENT ORDER, IT IS CLEAR THAT THE AO HAS DOUBTED THE COST SHOWN BY THE ASSESSEE ON HIRED ASSETS AT OKHLA INDU STRIAL ESTATE, PHASE III, NEW DELHI, WHICH, ACCORDING TO THE ASSESSEE WAS RS.89,10,245/- . AFTER EXAMINING THE FACTS, IT IS OBSERVED BY THE AO THAT THE COST IN THE HANDS OF TH E ASSESSEE COULD NOT BE PROVED WITH THE HELP OF EVIDENCES AND IT IS ALSO MENTIONED THAT THE MATTER WAS REFERRED TO ADDL. COMMISSIONER OF INCOME-TAX FOR DETERMINATION OF ACT UAL COST. THUS, THE OBSERVATIONS OF THE AO CLEARLY SHOW THAT HE WAS SATISFIED THAT THE ASSETS BEFORE THE DATE OF ACQUISITION MA NOS. 445&446/DEL/2010 8 BY THE ASSESSEE WERE USED BY OTHER PERSON FOR THE P URPOSE OF HIS BUSINESS OR PROFESSION AND THE MAIN PURPOSE OF THE TRANSFER OF SUCH ASSETS DIRECTLY OR INDIRECTLY TO THE ASSESSEE WAS THE REDUCTION OF THE LIABILITY OF INCOME TAX (BY CLAIMING DEPRECIATION WITH REFERENCE TO ENHANCED COST) AND, THUS, IT IS A CLEAR CASE WHERE THE AO HAS INVOKED EXPLANATION 3 TO SECTION 43(1). 10.3 FROM ANNEXURE-J ENCLOSED TO ASSESSMENT ORDER , IT IS CLEAR THAT THE ASSETS ON WHICH THE DEPRECIATION HAS BEEN CLAIMED BY THE ASSE SSEE WERE INSTALLED AT 225, OKHLA INDUSTRIAL ESTATE PHASE III, NEW DELHI. IT IS ALSO MENTIONED THAT THE SAID PREMISES WAS PURCHASED BY THE GROUP CONCERN OF THE ASSESSEE, NAM ELY, M/S CIVIC TRADERS PVT. LTD. THE SAID PREMISES WAS PURCHASED IN THE SHAPE OF LAN D AND BUILDING FOR A CONSIDERATION OF RS.1,91,18,472/-. SUBSTANTIAL PORTION OF THE SA ID PREMISES, NAMELY, BASEMENT, MEZZANINE FLOOR, FIRST FLOOR AND SECOND FLOOR WERE GIVEN ON RENT BY THE GROUP CONCERN OF THE ASSESSEE TO M/S MINERVA HOLDING (PVT) LTD. FOR AN ANNUAL RENT OF RS.47,08,530/-. GROUND FLOOR OF THE SAID PREMISES IS BEING USED BY A GROUP CONCERN OF THE ASSESSEE, NAMELY, M/S SHARDA EXPORTS. THE ASSETS ON WHICH THE DEPRECIATION CLAIMED ARE IN THE SHAPE OF CENTRAL AIR CONDITIONING PACKED UNIT PURCH ASED ON 30 TH JULY, 1999, GENERATOR 320 KVA PURCHASED ON 18 TH OCTOBER, 1999, OTI ELEVATOR PURCHASED ON 8 TH APRIL, 1999 AND FIRE FIGHTING EQUIPMENTS PURCHASED ON 9 TH MARCH, 1999. ALL THESE ASSETS ARE STATED TO BE USED BY THE SAID M/S MINERVA HOLDINGS LTD. FO R A CONSIDERATION OF RS.47,08,530/- PER ANNUM I.E., EQUIVALENT TO THE AMOUNT OF RENT PA ID BY THEM TO THE GROUP CONCERN OF THE ASSESSEE. IT IS MENTIONED IN THE ANNEXURE-J THAT FROM THESE FACTS IT IS CLEAR THAT THE ASSESSEE, M/S SHARDA EXPORTS AND M/S CIVIC TRADERS PVT. LTD. ARE ALL OF THE SAME GROUP AND AFTER WORKING OUT THE COST OF THE PREMISES USED BY M/S MINERVA HOLDINGS LTD. WHICH IS CALCULATED AT 4/5 TH OF THE TOTAL PREMISES AND COST IS DETERMINED AT RS .1,52,94,777/-. IT IS OBSERVED IN THE ANNEXURE J THAT MINERVA HOLDIN GS LTD. IS GIVING TOTAL RENT WHICH HAS BEEN BIFURCATED INTO TWO PARTS EQUALLY BEING BUILDI NG RENT AND EQUIPMENT RENT AND THE SAID INSTRUMENT IS NOTHING BUT A COLOURABLE DEVICE TO BIFURCATE THE TOTAL PAYMENTS RECEIVABLE FROM M/S MINERVA HOLDINGS LTD. IN THE MA NNER WHICH SUIT THE GROUP CONCERN/PERSONS OF THE GROUP. IN THESE CIRCUMSTANC ES, IT IS MENTIONED IN THE ANNEXURE THAT EQUIPMENT HIRE RENT IS TO BE ARRIVED AT IN THE HANDS OF THE ASSESSEE ON PROTECTIVE MA NOS. 445&446/DEL/2010 9 BASIS AND HERE THE REMARKS OF THE ADDL. CIT IS THAT THIS IS ONLY THE OPINION OF THE UNDERSIGNED AND THE AO IS NOT BOUND BY THIS OPINION NOR THE SAME SHOULD BE CONSTRUED AS A FINDING/DIRECTION U/S 144A AND THE AO SHOULD G IVE HIS INDEPENDENT OPINION/FINDING. AFTER OBSERVING SO, IT HAS BEEN MENTIONED THAT THE SCOPE OF REFERENCE IS LIMITED TO THE PURCHASE COST OF EQUIPMENT FROM M/S BABA BUILD WELL . THEREAFTER, IT IS MENTIONED THAT SINCE BABA BUILD WELL HAS FAILED TO PRODUCE PROOF O F PURCHASE COST AND THE ASSESSEE HAS ALSO FAILED TO DISCHARGE ITS BURDEN TO PROVE TH E PURCHASE COST BY M/S BABA BUILD WELL AS NO ORIGINAL BILL FOR PURCHASE BY M/S BABA B UILD WELL HAVE BEEN PRODUCED BY THE ASSESSEE EVEN THOUGH MENTIONED IN DELIVERY NOTES GI VEN TO THE ASSESSEE AND AFTER REFERRING ALL THESE FACTS, THE VALUE HAS BEEN DETER MINED BY ADDL. COMMISSIONER BY A SUM OF RS.20 LAC. 10.4 FROM THE ASSESSMENT ORDER AND FROM THE ESTIMAT ION MADE BY ADDL. CIT, IT IS CLEAR THAT PROVISIONS OF EXPLANATION 3 TO SECTION 4 3(1) HAVE BEEN INVOKED AND ACTUAL COST HAS BEEN DETERMINED ACCORDINGLY. 10.5 THE FIRST QUESTION WE HAVE TO DETERMINE IS THA T WHETHER OR NOT THE AO WAS RIGHT IN DETERMINING THE ACTUAL COST OF THE ASSETS ON WHICH THE DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE. THE RELEVANT PORTION OF PROVISIONS O F SECTION 43 (1) AND EXPLANATION 3 ARE REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE:- 43. IN SECTIONS 28 TO 41 AND IN THIS SECTION, UNLE SS THE CONTEXT OTHERWISE REQUIRES (1) ACTUAL COST MEANS THE ACTUAL COST OF THE ASSE TS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST THEREOF, IF ANY , AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHO RITY: EXPLANATION 3. - WHERE, BEFORE THE DATE OF ACQUISI TION BY THE ASSESSEE, THE ASSETS WERE AT ANY TIME USED BY ANY OTHER PERSO N FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION AND THE ASSESSING OFFICE R IS SATISFIED THAT THE MAIN PURPOSE OF THE TRANSFER OF SUCH ASSETS, DIRECT LY OR INDIRECTLY TO THE MA NOS. 445&446/DEL/2010 10 ASSESSEE, WAS THE REDUCTION OF A LIABILITY TO INCOM E-TAX (BY CLAIMING DEPRECIATION WITH REFERENCE TO AN ENHANCED COST), T HE ACTUAL COST TO THE ASSESSEE SHALL BE SUCH AN AMOUNT AS THE ASSESSING OFFICER MAY, WITH THE PREVIOUS APPROVAL OF THE JOINT COMMISSIONER, DETERM INE HAVING REGARD TO ALL THE CIRCUMSTANCES OF THE CASE. 10.6 THE LAW REGARDING INVOCATION OF EXPLANATION 3 TO SECTION 43 (1) HAS BEEN ENUMERATED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DALMIA DADRI CEMENT LTD. 125 ITR 510 (DEL). IN THAT CASE, THE A O DURING THE COURSE OF ASSESSMENT FOUND THAT A SUM OF RS.16,46,617/- WAS CAPITALIZED AS COST OF PLANT AND MACHINERY INSTALLED DURING THE YEAR WHICH INCLUDED A SUM OF R S.7,70,000/- PAID TO BHAGWATI GLASS WORKS PVT. LTD. (BHAGWATI GLASS) VIDE AN AGREEMENT DATED 19 TH MAY, 1961 ENTERED INTO BETWEEN THE ASSESSEE IN THAT CASE AND BHAGWATI GLAS S ACCORDING TO THE LETTER HAD UNDERTAKEN TO FABRICATE AND INSTALL SUITABLE DRIER S FOR DRYING KANKAR WHICH WAS THE MAIN RAW MATERIAL FOR THE MANUFACTURE OF CEMENT AND IT W AS NOTED THAT THAT WAS A PRIMARY LABOUR CONTRACT AS ALL THE MATERIAL FOR FABRICATION OF DRIERS AND ACCESSORIES WAS TO BE SUPPLIED BY THE ASSESSEE. A SUM OF RS.3,50,000/- W AS TO BE PAID FOR THE JOB WORK, HOWEVER, FURTHER AGREEMENTS WERE ENTERED INTO ACCOR DING TO WHICH THE ASSESSEE PAID A TOTAL SUM OF RS.7,70,000/- TO BHAGWATI GLASS IN ORD ER TO COVER THE ADDITIONAL JOBS AND THAT AMOUNT WAS CAPITALIZED AND INCLUDED IN THE AMO UNT OF RS.16,46,617/- ON WHICH THE DEPRECIATION WAS CLAIMED. IT WAS NOTICED BY THE AO THAT 90% OF THE SHARE CAPITAL OF BHAGWATI GLASS WAS HELD BY SHRI R. DALMIA AND 75% O F THE SHARE CAPITAL OF DALMIA DADRI CEMENT LTD. WAS OWNED BY BHARAT DEVELOPMENT P VT. LTD. AND SOUTH ASIA INDUSTRIES PVT. LTD. WHICH WAS CONTROLLED BY SHRI R . DALMIA AND, IN THESE CIRCUMSTANCES, THE AO CAME TO THE CONCLUSION THAT THE COST OF ASS ETS WAS INFLATED. IT WAS NOTICED THAT BHAGWATI GLASS WAS HAVING BROUGHT FORWARD LOSS AND EVEN AFTER SHOWING THE PROFIT IN JOB WORK THERE WAS NO TAX LIABILITY IN THE HANDS OF BHAGWATI GLASS. THE COST OF ASSETS GOT FABRICATED FROM BHAGWATI GLASS WERE ESTIMATED A T RS.3,11,954/- PLUS 15% THEREOF AND, THUS, DEPRECIATION WAS ALLOWED BY ROUNDING OFF THE FIGURE AT A SUM OF RS.3,60,000/- IN PLACE OF CLAIM OF THE ASSESSEE OF DEPRECIATION O N COST OF ASSET OF A SUM OF RS.7,70,000/-. THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT THE TERM ACTUAL COST AS MENTIONED IN SECTION 43(1) OF THE ACT SUGGEST TWO ASPECTS; FIRSTLY, WHAT MAY BE CALLED THE ASPECT OF ACTUAL AND, SECONDLY, W HAT MAY BE CALLED THE ASPECT OF COST MA NOS. 445&446/DEL/2010 11 OF THE ASSET TO THE ASSESSEE. THE FORMER, IT WAS N OTED WOULD DENOTE THE REALITY OR GENUINENESS OF THE PAYMENT. THE SECOND ASPECT WOUL D INDICATE WHAT EXACTLY THE ASSESSEE HAD TO SURRENDER OR GIVE TO ACQUIRE THE AS SET. BY REFERRING TO EXPLANATION 3 TO SECTION 43, IT WAS POINTED OUT THAT IN CASES COVERE D BY THE SPECIFIC EXPLANATION, IT AUTHORITY COULD DETERMINE THE ACTUAL COST HAVING RE GARD TO ALL THE CIRCUMSTANCES. APART FROM THIS SITUATION, NO OTHER CASE OF INFLATED COST , WOULD JUSTIFY SUBSTITUTION .BY THE ITO OF A FIGURE OF ACTUAL COST DIFFERENT FROM THE ACTUAL C OST PAID BY THE ASSESSEE. IT WAS OBSERVED THAT SUCH A CASE OF SALE EVEN THOUGH COMPL ETED IN THE CIRCUMSTANCES WHICH WOULD SUGGEST COLLUSION, WOULD NOT ENTITLE THE IT A UTHORITIES TO SUBSTITUTE THEIR OWN FIGURE TO THE ACTUAL COST. THE DEPARTMENT WENT IN APPEAL AGAINST THAT. IT WAS HELD BY HONBLE HIGH COURT THAT FROM THE FACTS IT IS CLEAR THAT TOT AL EXPENSES INCURRED BY BHAGWATI GLASS ON THE CONTRACT WERE ONLY A SUM OF RS.3,11,954/- AG AINST WHICH THE ASSESSEE PAID A SUM OF RS.7,70,000/-. THE CONCERNS WERE CONNECTED CONCERNS, THEREFORE, IT AUTHORITIES WERE RIGHT IN OBSERVING THAT THERE WAS CONSIDERABLE ELEMENT OF COLLUSION IN THE ENTIRE WHICH COULD NOT BE TREATED AS THE RESULT OF NORMAL COMMERCIAL CONSIDERATION. THE CAPITAL COST UNDOUBTEDLY WAS INFLATED IN THE HANDS OF THE ASSESSEE TO ENABLE IT TO CLAIM HIGHER DEPRECIATION. THEIR LORDSHIPS REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GUZDAR KAJORA C041 MINES LTD. VS. CI T 85 ITR 599 WHEREIN CONSIDERING THE TERM ACTUAL COST, IT WAS OBSERVED THAT ORIGIN AL COST OF A PARTICULAR ASSET IS A QUESTION OF FACT WHICH HAS TO BE DETERMINED ON THE EVIDENCE OF THE MATERIAL PRODUCED OR AVAILABLE TO THE IT AUTHORITIES. ANY DOCUMENT OR FO RMAL DEED MENTIONING THE CONSIDERATION OR THE COST PAID FOR THE PURCHASE OF AN ASSET BY AN ASSESSEE WOULD BE A PIECE OF EVIDENCE, BUT, IF CIRCUMSTANCES EXIST SHOW ING THAT A FICTITIOUS PRICE HAS BEEN PUT ON THE ASSET OR THERE IS A PLOT OR COLLUSION BETWEE N THE VENDOR AND THE VENDEE AND THERE HAS BEEN INFLATION OR DEFLATION OF THE VALUE FOR UL TERIOR PURPOSE, IT IS OPEN TO THE IT AUTHORITIES TO REFUSE TO ACCEPT THE PRICE MENTIONED IN THE DEED OR ALLEGED BY THE ASSESSEE AND TO ASCERTAIN WHAT THE ACTUAL COST WAS. REFERRING TO THESE OBSERVATIONS, HONBLE HIGH COURT HELD THAT THE APPROACH ADOPTED B Y THE TRIBUNAL WAS UNSUSTAINABLE AS THE IT AUTHORITIES COULD SUBSTITUTE THEIR OWN FI GURE OF ACTUAL COST. THEIR LORDSHIPS ALSO REFERRED TO THE DECISION OF CALCUTTA HIGH COUR T IN THE CASE OF JOGTA COAL COMPANY LTD. VS. CIT 55 ITR 89 (CAL) IF THE CIRCUMSTANCES S HOWED, THAT AN ASSESSEE HAD MA NOS. 445&446/DEL/2010 12 ARRANGED TO PUT A FICTITIOUS PRICE ON HIS ASSETS IN A CONTRACT OR CONVEYANCE, IT WAS OPEN TO THE IT AUTHORITIES TO REFUSE TO ACCEPT THAT PRIC E AND GO BEHIND THE CONTRACT OR CONVEYANCE AND ASCERTAIN WHAT THE ORIGINAL COST WAS . WHILE HOLDING SO, RELIANCE WAS PLACED ON THE DECISION OF PINDI KASHMIR TRANSPORT COMPANY LTD. 26 ITR 595. THEREAFTER, THEIR LORDSHIPS OF HONBLE HIGH COURT R EFERRING TO EXPLANATION 3 TO SECTION 43 HAVE OBSERVED THAT SUCH EXPLANATIONS ARE ONLY EL ABORATIVE AND DID NOT BRING OUT SOME OF THE CIRCUMSTANCES IN WHICH MAIN PROVISION O F LAW CAN OPERATE AND THEY CAN BY NO STRETCH BE TREATED AS EXHAUSTIVE OR TO OTHERWISE LIMIT THE VIDE SCOPE WHICH THE PROVISION OF LAW MAY EMBRACE. INCORPORATION OF SOM E OF THESE EXPLANATIONS BY ITSELF SHOWS THAT THE LEGISLATURE ENVISAGE INTERFERENCE IN GIVEN CIRCUMSTANCES IN THE AMOUNT OF PURPORTED ACTUAL COST. THUS, IT WAS HELD THAT TH E TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING THE OPERATION OF THE ACTUALITY OF THE COST TO CASES WHERE PART OF THAT CONSIDERATION WAS NOT PAID OR PLOUGHED BACK OR COVERED SOME OTHER ITE MS. IN THOSE CASES THE COST WOULD BE WHAT IS IN FACT PAID. WHAT WAS NOT PAID OR WAS RETURNED WOULD NEVER BE CONSIDERED AS COST AND THIS WILL BE INDEPENDENT OF THE PROVISI ONS CONTAINED IN IT ACT. THE PROVISIONS OF INCOME-TAX ACT HAVE NOT BEEN INTRODUC ED FOR THAT PURPOSE. THEY HAVE RATHER A SPECIAL OBJECTIVE AND IS DIRECTED TOWARDS NULLIFYING THE MALPRACTICES CAME IN SOME QUARTERS BY DISPROPORTIONATELY INFLATING THE C APITAL COST IN ORDER TO EARN HIGHER DEPRECIATION AND PASS ON IN COLLUSION SUBSTANTIAL A MOUNT TO SISTER CONCERN OR CLOSELY CONNECTED PARTIES TO WHOM THOSE AMOUNTS MAY HAVE LI TTLE OR NEGLIGIBLE BEARING ON THE INSTANCE OF TAXATION. THE ACTUAL ADDED TOWARDS C OST WAS HELD TO BE EMPHASIZING ON THE REALITY AND GENUINENESS THEREOF AND EXCLUDE COL LUSIVE, INFLATED, DEFLATED OR FICTITIOUS COST. 10.7 THE FACTS OF THE PRESENT CASE HAS TO BE EXAMIN ED IN THE LIGHT OF THE PRINCIPLES OF LAW LAID DOWN BY JURISDICTIONAL HIGH COURT. THE NA TURE OF THE ASSETS HAS ALREADY BEEN DESCRIBED IN THE ABOVE PART OF THIS ORDER WHICH IS IN THE SHAPE OF AIR CONDITIONER UNIT, GENERATOR, ELEVATOR AND FIRE FIGHTING EQUIPMENTS. ALL THESE ASSETS ARE HIGHLY DEPRECIATED ASSETS. THEIR VALUE AFTER THE USE CANNOT ENHANCE, BUT HAS TO BE DEPRECIATED. THE AO WAS REQUIRING THE ASSESSEE TO PROVE THE COST STATED TO BE PAID FOR THAT, BUT THE EVIDENCES WERE NOT PRODUCED OR THE EVIDENCES PRODUC ED WERE ONLY PHOTO COPIES. MA NOS. 445&446/DEL/2010 13 DURING THE COURSE OF HEARING, IT WAS SUBMITTED THAT NOW THE ASSESSEE HAS BEEN ABLE TO GET THE ACTUAL COST IN THE HANDS OF PREVIOUS OWNER I.E., M/S BABA BUILD WELL AND THOSE EVIDENCES WERE FILED BEFORE THE CIT (A) AND, THESE EVIDENCES ARE ENCLOSED IN THE PAPER BOOK. THE AIR CONDITIONER WAS PURCHASED BY M/S BAB A BUILD WELL ON 30 TH JULY, 1999 VIDE TWO BILLS OF BHARAT STORE LTD NO.3084 AND 3083 AMOUNTING TO RS.11,17,500/- AND RS.4,57,750/- RESPECTIVELY AND THE TOTAL COST IN TH E HANDS OF BABA BUILD WELL WAS AN AGGREGATE SUM OF RS.15,75,250/- ON WHICH DEPRECIATI ON OF RS.3,93,813/- WAS CLAIMED FOR THE YEAR ENDING ON 31 ST MARCH, 2000 AND A VALUE IN THAT ACCOUNT WAS CARRIE D FORWARD AT RS.11,81,437/-. GENERATOR SET WAS PURCHASED BY BABA BUILDWELL ON 18 TH AUGUST, 1999 VIDE BILL NO.00594 FOR A TOTAL CONSIDERATION O RS.10,61,400/- ON WHICH DEPRECIATION WAS CLAIMED AT RS.2,65,350/- LEAVING THE CLOSING BA LANCE AT RS.7,96,050/-. FIRE FIGHTING EQUIPMENT ARE BROUGHT FORWARD IN THE HANDS OF BABA BUILDWELL AT A VALUE OF RS.1,03,050/- AS ON 1 ST APRIL, 1999 ON WHICH DEPRECIATION IS CLAIMED AT RS .10,305/- AS ON 31 ST MARCH, 2000 BY LEAVING THE CLOSING BALANCE AT RS. 92,745/-. OTIS ELEVATOR WAS PURCHASED ON 8 TH APRIL, 1999 FOR A CONSIDERATION OF RS.5,52,046/- O N WHICH DEPRECIATION WAS CLAIMED AT RS.55,204.60 FOR THE YEAR ENDING 31 ST MARCH, 2000 BY TAKING THE BALANCE CARRIED FORWARD AT A SUM OF RS.4,96,841/-. THUS, T OTAL COST WHEN CLAIMING ANY DEPRECIATION IN THE HANDS OF M/S BABA BUILDWELL CAN BE SUMMARISED AS UNDER:- I) AIR CONDITION UNIT RS.15,75,250/- II) GENERATOR SET RS.10,61,400/- III) FIRE FIGHTING EQUIPMENT RS. 1,03,050/- IV) OTIS ELEVATOR RS. 5,52,046/- TOTAL RS.32,91,746/- 10.8 THE ASSESSEE WAS REQUIRED TO JUSTIFY THE COST STATED TO BE PAID BY HIM WITH REGARD TO THESE ASSETS TO M/S BABA BUILDWELL WHICH APPARENTLY IS ABNORMALLY HIGH. IT IS EVEN MORE THAN DOUBLE OF THE COST OF SUCH NEW ASSET S IF THEY ARE TO BE INSTALLED FRESHLY. IF IT IS SO, THEN, IT CAN BE SAID THAT THERE WERE E XISTENCE OF CIRCUMSTANCES IN WHICH THE COST SHOWN BY THE ASSESSEE OF THESE ASSETS COULD RA ISE DOUBT IN THE MINDS OF IT AUTHORITIES WHICH IS NATURAL. IT IS IN THESE CIRCU MSTANCES THE AO HAS DOUBTED THE COST MA NOS. 445&446/DEL/2010 14 SHOWN BY THE ASSESSEE WITH REGARD TO THESE ASSETS A ND THE ASSESSEE WAS REQUIRED TO PROVE THE COST. THE ASSESSEE COULD NOT PRODUCE ANY JUSTIFICATION FOR PAYMENT OF SUCH A HUGE COST OF THE ASSETS WHICH WERE ALREADY PUT TO U SE AND HAS ALREADY DEPRECIATED TO SOME EXTENT BY THE PREVIOUS USE. ONE OF THE ARGUMEN TS OF THE ASSESSEE IS THAT SUCH ASSETS WERE YIELDING HIGH RENT. THEREFORE, THE COS T OF THESE ASSETS TO THE ASSESSEE WAS NOT HIGH IF THE AMOUNT OF RENT EARNED IS KEPT IN MI ND. HERE ALSO, THERE ARE SOME MISSING GAPS. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SH OW THAT THESE ASSETS EARLIER WERE ALSO FETCHING SO MUCH RENT FROM THE USER OF THESE A SSETS. THE RENT RECEIVED BY THE ASSESSEE WITH REGARD TO THESE ASSETS IN ITSELF IS D OUBTFUL AS ENTIRETY OF FACTS AND CIRCUMSTANCES TO BE SEEN. THE BUILDING WAS PURCHAS ED BY THE GROUP CONCERN OF THE ASSESSEE IN WHICH SUCH FACILITIES ARE INSTALLED AND THE OCCUPIER OF THE PREMISES HAS TO PAY RENT TO THE BUILDING OWNER AT A SPECIFIC PRICE AND IT DOES NOT MATTER TO THE OCCUPIER THAT IN WHAT MANNER THE PAYMENT IS BEING RECEIVED B Y THE OWNER OF THE BUILDING. IN THE PRESENT CASE TOTAL RENT RECEIVABLE HAS BEEN BIFURCA TED AS PER OBSERVATIONS IN ANNEXURE J. HALF OF THE PORTION OF RENT HAS BEEN ATTRIBUTE D TO THE BUILDING AND HALF OF THE PORTION AHS BEEN ATTRIBUTED TO THESE ASSETS. SUCH A HIGH P AYMENT RECEIVED FOR THESE ASSETS IN ITSELF CREATES DOUBT IN THE MIND. IT HAS WELL BEEN OBSERVED IN ANNEXURE-J THAT THE INCOME SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE DOES NOT BELONG TO HIM AS IT IS A CONSOLIDATED RENT EARNED ON THAT PROPERTY WHICH HAS BEEN PURCHASED BY THE GROUP CONCERN OF THE ASSESSEE. WHEN A DOUBT IS RAISED, I T IS THE PRIMARY DUTY OF THE ASSESSEE TO BRING ALL THE MATERIAL ON RECORD. HERE, IN THE PRESENT CASE, THERE IS A LACK OF MATERIAL TO SHOW THAT SUCH FACILITY EARLIER WERE ALSO FETCHI NG SO MUCH RENT. IN THE ABSENCE OF ANY SUCH MATERIAL, IT CANNOT BE HELD THAT PAYMENT STATE D TO BE RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR USING THESE ASSETS FROM M/S MINER VA HOLDINGS PVT. LTD. WAS GENUINE ONE. IN ANNEXURE J IT HAS BEEN CLEARLY OBSERVED THAT THIS HAS TO BE ASSESSED ON PROTECTIVE BASIS. THUS, THERE WAS A DOUBT IN THE M IND OF THE INCOME-TAX AUTHORITIES THAT THE INCOME WHICH DOES NOT BELONG TO THE ASSESSEE HAS BEEN SHOWN IN THE HANDS OF THE ASSESSEE. HERE, NOT GOING INTO THAT CONTROVERSY BECAUSE THE AO HIMSELF HAS CHOSEN TO DETERMINE ONLY THE VALUE OF ITS ASSETS IN VIEW O F EXPLANATION 3 TO SECTION 43, WE WILL EXAMINE ONLY THE QUESTION THAT WHETHER OR NOT THE A O WAS RIGHT IN DETERMINING THE ACTUAL COST OR WHETHER CIT (A) WAS RIGHT IN HOLDIN G THAT THE COST SHOWN BY THE ASSESSEE MA NOS. 445&446/DEL/2010 15 SHOULD BE ADOPTED. IT HAS ALREADY BEEN DISCUSSED TH AT COST IN THE HANDS OF THE PREVIOUS OWNER WAS ONLY A SUM OF RS.32,91,746/- ON WHICH DEP RECIATION WAS ALSO CLAIMED AND KEEPING IN VIEW THE AGE OF THE ASSETS AND KEEPING I N VIEW THE NATURE OF THESE ASSETS THAT VALUE OF THESE CANNOT INCREASE IN THE INSTALL ED SHAPE, WE ARE OF THE OPINION THAT THE AO WAS RIGHT IN TAKING THE VALUE AT RS.20 LAC WHICH WILL BE THE DEPRECIATED COST OF THESE ASSETS ON WHICH THE ASSESSEE COULD CLAIM THE DEPREC IATION. THE CIT (A) WAS WRONG IN HOLDING THAT UNDER EXPLANATION 3 TO SECTION 43, THE AO IS NOT AUTHORIZED TO TAKE FAIR MARKET VALUE, INSTEAD, IT WAS TO BE TAKEN AS ACTUAL COST WHICH IS INCURRED BY THE ASSESSEE. IT HAS ALREADY BEEN DISCUSSED THAT ACT UAL COST AS PER DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DALMIA DADR I CEMENT LTD. (SUPRA) IS NOT ACTUAL COST IN THE HANDS OF THE ASSESSEE PARTICULARLY WHIL E CONSTRUING EXPLANATION 3 TO SECTION 43 WHICH IS THE COST IN REALITY AND GENUINENESS WHI CH EXCLUDE COLLUSIVE, INFLATED, DEFLATED OR FICTITIOUS COST. IT HAS ALREADY BEEN D ISCUSSED THAT THE COST SHOWN TO HAVE BEEN INCURRED BY THE ASSESSEE IS INFLATED AND FICTI TIOUS COST WHICH HAS NO REALITY. THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL ON RECORD TO SHOW THAT THE COST PAID BY HIM WAS GENUINE COST AND THE COST IN REALITY. THEREFOR E, WE SET ASIDE THE ORDER OF THE CIT (A) IN THIS REGARD AND RESTORE THAT OF AO. ACCORDI NGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE. 4. AGAINST THE ABOVE ORDER THE ASSESSEE HAS FILED THIS MISC. APPLICATIONS AND IN WRITTEN SUBMISSIONS WHEREIN THE ASSESSEES AVERM ENTS ARE AS UNDER:- AGAINST THE ORDER OF CIT (APPEALS), THE REVENUE HA D PREFERRED AN APPEAL BEFORE THE ITAT. BEFORE THE ITA T, THE ASSESSEE SUBMITTED THAT: (A) NO OPPORTUNITY OF BEING HEARD WAS GRANTED BY THE ADDITIONAL COMMISSIONER TO THE ASSESSEE U/S 144A OF THE ACT IN TERMS OF PROVISO TO SECTION 144A BEFORE DIRECTING THE AO TO ADOPT THE COST OF THE PLANT AND MACHINERY SO PURCHASED AT RS.20 LAKHS INSTEAD OF RS. 75 MA NOS. 445&446/DEL/2010 16 LAKHS BECAUSE THIS DIRECTION WAS PREJUDICIAL TO THE INTEREST OF THE ASSESSEE. (B) THE AO HAS NOT RECORDED HIS SATISFACTION IN T ERMS OF EXPLANATION 3 TO SECTION 43(1) THAT THE MAIN PURP OSE OF THE TRANSFER OF SUCH ASSETS, DIRECTLY OR INDIREC TLY TO THE ASSESSEE, WAS THE REDUCTION OF LIABILITY TO INCOME- TAX BY CLAIMING DEPRECIATION WITH REFERENCE TO AN ENHANCED COST. FOR THAT PURPOSE, THE ASSESSEE HAD RELIED UPON THE JUDGMENT OF ALLAHABAD HIGH COURT, WHICH IS A JURISDICTIONAL HIGH COURT OF THE ASSESSEE IN THE CA SE OF JASWANT SUGAR MILLS LTD. VS. CIT IN 1973 TAX LR 133 6 - COPY OF THE JUDGEMENT WAS ALSO FILED. (C) MERE NON-PRODUCTION OF ORIGINAL BILLS OF PURCH ASE OF THE PLANT AND MACHINERY BY BBW CANNOT BE A GROUND IN THE REDUCTION OF VALUE OF COST OF AN ASSET BECAU SE THE ASSESSEE CANNOT COMPEL SBW TO PRODUCE SUCH ORIGINAL BILLS, MORE PARTICULARLY WHEN THE BILLS ARE IN THE POSSESSION OF BBW. (D) THE ADDL. COMMISSIONER HAS NOT GIVEN ANY BASIS FOR ESTIMATING THE VALUE OF THE PLANT AND MACHINERY S O PURCHASED FROM SSW AT RS.20 LAKHS. (E) IN THE STATEMENT AS RECORDED BY THE AO U/S 13 1 OF THE ACT, SSW HAD NOT ONLY DULY ACKNOWLEDGED THE RECEIPT OF RS.75 LAKHS BUT HAS ALSO STATED THAT THE PLANT AND MACHINERY WHICH HAS BEEN INSTALLED IN THE BUILD ING AS PER THE INSTRUCTION OF THE OLD OWNER HAD BEEN SO LD ON 'AS IS WHERE IS' BASIS AND THE MARKET VALUE OF THE MA NOS. 445&446/DEL/2010 17 EQUIPMENT WAS ARRIVED AT ON THE BASIS OF COST PRICE + LABOUR AND INSTALLATION CHARGES. THE BASIS OF MARKET VALUE OF RS.75 LAKHS WAS EXPLAINED BEFORE THE CIT (APPEALS) VIDE SUBMISSION DATED 17TH AUGUST 2004 - C OPY PLACED AT PAGE 70 OF THE PAPER BOOK. CONCLUSION OF I TAT 4.1 HOWEVER, THE !TAT, AFTER FOLLOWING THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. DALMIA DADRI CEMENT LTD. IN 125 ITR 510 HAS DECIDED THE ISSUE AGA INST THE ASSESSEE, THEREBY TREATING THE DELHI HIGH COURT AS JURISDICTIONAL HIGH COURT. THE CONCLUSIVE PARAGRAPH S OF THE ITAT ORDER ARE PARAGRAPHS NO. 10.2 TO 10.8. 4.2 IN PARAGRAPH 10.2, THE HON'BLE ITAT MENTIONED, 'AFTER EXAMINING THE FACTS, IT IS OBSERVED BY THE AO THAT T HE COST IN THE HANDS OF THE ASSESSEE COULD NOT BE PROV ED WITH THE HELP OF EVIDENCES AND IT IS ALSO MENTIONED THAT THE MATTER WAS REFERRED TO ADDL. COMMISSIONER OF INCOME TAX FOR DETERMINATION OF ACTUAL COST. THUS THE OBSERVATION OF THE AO CLEARLY SHOWS THAT HE WAS SAT ISFIED THAT THE ASSETS BEFORE THE DATE OF ACQUISITION BY T HE ASSESSEE WERE USED BY OTHER PERSONS FOR THE PURPOSE OF HIS BUSINESS AND PROVISION OF THE MAIN PURPOSE OF TH E TRANSFER OF SUCH ASSETS DIRECTLY OR INDIRECTLY TO T HE ASSESSEE WAS THE REDUCTION OF THE LIABILITY OF INCO ME-TAX (BY CLAIMING DEPRECIATION WITH REFERENCE TO ENHANCEM ENT OF COST)'. MA NOS. 445&446/DEL/2010 18 4.3 IN PARAGRAPH 10.3, THE HON'BLE ITAT HAS REFERRE D THE REPORT OF THE ADDL. COMMISSIONER FORMING PART OF THE ASSESSMENT ORDER AS ANNEXURE 'J' OF THE ACT AND THE N IN PARAGRAPH 10.4 THE HON'BLE BENCH HAD MENTIONED THAT FROM THE ASSESSMENT ORDER AND FROM THE ESTIMATION MADE BY THE ADDL. CIT, IT IS CLEAR THAT THE PROVISIO NS OF EXPLANATION 3 TO SECTION 43(1) HAVE BEEN INVOKED AN D ACTUAL COST HAS BEEN DETERMINED ACCORDINGLY. 4.4 IN PARAGRAPH 10.6, THE HON'BLE BENCH HAS DISCUSSED THE FACTS OF THE CASE OF THE CIT VS. DALMI A DADRI CEMENT LTD. 4.5 IN PARAGRAPH 10.7, THE HON'BLE ITAT HAS COMPARED THE FACTS OF THE INSTANT CASE IN THE LIGHT OF THE . PRINCIPLES OF THE DELHI HIGH COURT JUDGMENT TREATING THE DELHI H IGH COURT AS JURISDICTIONAL HIGH COURT AND HELD THAT AL L THESE ASSETS ARE HIGHLY DEPRECIATED ASSETS AND THEIR VALU E AFTER THE USE CANNOT ENHANCE BUT HAS TO BE DEPRECIATED. THEREAFTER IN THE SAID PARAGRAPH, THE ITAT HAS NOTE D DOWN THE COST OF THE MAIN EQUIPMENTS PURCHASED BY BSW AND THE DEPRECIATION AS CLAIMED BY THE SAID SBW -IN THEIR BOOKS OF ACCOUNTS IN RESPECT OF THOSE VERY AS SETS. 4.6 IN THE LAST PARAGRAPH, THE HON'BLE ITAT HAS NOT ED DOWN THE COST OF THE MAIN EQUIPMENTS PURCHASED BY BBW ON THE BASIS OF PHOTOCOPIES OF THE BILLS AS PRO VIDED BY BBW AS UNDER: (I) AIR CONDITIONING UNIT RS.15,75,250 MA NOS. 445&446/DEL/2010 19 (II) GENERATOR SET RS.10,61,400 (III) FIRE FIGHTING EQUIPMENTS RS. 1,03,050 (IV) OTIS ELEVATOR RS. 5,52,046 TOTAL = RS.32,91,746/- 4.7 ON THE BASIS OF SUCH FIGURES OF THE MAIN EQUIPMENT,_ IN PARAGRAPH 10.8 OF THE ORDER, THE HON' BLE ITAT OBSERVED: (I) THE COST STATED TO BE PAID TO BSW IS ABNORMALLY HIGH AND EVEN MORE THAN DOUBLE THE COST OF SUCH NEW ASSE TS IF THEY ARE TO START AFRESH AND THESE CIRCUMSTANCES COU LD RAISE DOUBT IN THE MIND OF IT AUTHORITIES AND IN TH ESE CIRCUMSTANCES THE AO HAS DOUBTED THE COST SHOWN BY T HE ASSESSEE WITH REGARD TO THESE ASSETS. (II) THE ASSESSEE COULD NOT PRODUCE ANY JUSTIFICATI ON FOR PAYMENT OF SUCH HUGE COST OF ASSETS WHICH WERE ALREADY PUT TO USE AND HAS ALREADY DEPRECIATED TO S OME EXTENT BY THE PREVIOUS USER. (III) NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHO W THAT THESE ASSETS EARLIER WERE ALSO FETCHING. SO MUC H RENT FROM THE USER OF THESE ASSETS. (IV) THE RENT RECEIVED BY THE ASSESSEE WITH REGARD TO THESE ASSETS IN ITSELF IS DOUBTFUL. (V) SUCH HIGH PAYMENT RECEIVED FOR THESE ASSETS IN ITSELF CREATES A DOUBT IN THE MIND. MA NOS. 445&446/DEL/2010 20 (VI) THERE IS A LACK OF MATERIAL TO SHOW THAT SUCH FACILITY EARLIER WAS ALSO FETCHING SO MUCH OF RENT A ND IN THE ABSENCE OF ANY SUCH MATERIAL IT CANNOT BE HELD THAT PAYMENT STATED TO BE RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR USING THESE ASSETS FROM MINERVA WAS GENUINE ONE. MISTAKE COMMITTED BY ITAT A. THE ASSESSEE IS FROM MEERUT AND THE JURISDICTIONAL HIGH COURT IS ALLAHABAD HIGH COURT AND NOT DELHI HIG H COURT. ACCORDINGLY, THE CONCLUSION DRAWN BY ITAT TH EREBY RELYINGON THE JUDGMENT IN THE CASE OF DALMIA DADRI CEMENT LTD. IS WRONG AND IN LIEU OF THE JUDGMENT OF ALLAHABAD HIGH COURT IN THE CASE OF JASWANT SUGAR M ILLS LTD. IN 1973 TAX LR 1336 SHOULD BE FOLLOWED. FACTS OF JASWANT SUGAR MILLS IDENTICAL TO ASSESSEE IN THE CASE OF JASWANT SUGAR MILLS LTD. VS. CIT IN 1973 TAX LR 1336, THE SAID COMPANY WAS IN THE BUSINESS OF MANUFACTURE OF SUGAR. THE SAID COMPANY HAD PURCHASED CERTAIN MACHINERY IN ASSESSMENT YEAR 1954-55 FOR A SUM OF RS.1,26,040/- FROM SETH BANARSI DASS WHO WAS USIN G THIS MACHINERY AT THE BIJNAUR SUGAR MILLS WHICH WAS B EING MANAGED BY HIM. SUCH MACHINERY WAS PURCHASED BY SETH BANARSI DASS IN THE YEAR 1948 FOR A SUM OF RS.90,000/-. THE AO HAD ESTIMATED THE VALUE OF SUCH MACHINERY AT RS. ONE IAKH U/S 10(5) OF THE INDIAN IN COME- TAX ACT, 1922 WITH THE APPROVAL OF THE INSPECTING ASSISTANT COMMISSIONER (WHICH IS PARIMATERIA TO THE MA NOS. 445&446/DEL/2010 21 PROVISION OF SECTION 43(1) READ WITH EXPLANATION 3 OF THE ACT) AND ALLOWED THE DEPRECIATION AT RS. ONE LAKH I NSTEAD OFRS.1,26,040/-. BEFORE THE TRIBUNAL, THE SAID ASSESSEE .CONTENDED T HAT THERE WAS NO SATISFACTION RECORDED BY THE AO AS IS REQUIRED UNDER THE PROVISO TO SECTION 10(5)(A) OF T HE ACT. THE TRIBUNAL HELD THAT THE REQUIREMENT OF SECTION 10(5)(A) OF THE ACT WAS FULFILLED ON ACCOUNT OF THE FACT THAT THE INSPECTING ASSISTANT COMMISSIONER HAD GRANT ED APPROVAL. ON FURTHER APPEAL TO THE ALLAHABAD HIGH COURT, THE HONBLE HIGH COURT HELD THAT THE TRIBUNAL ERRED IN HOLDING THAT THE REQUIREMENT OF SECTION 10(5)(A), OF THE AC T WAS FULFILLED ON ACCOUNT OF THE FACT THAT THE INSPECTIN G ASSISTANT COMMISSIONER HAD GRANTED APPROVAL. IT WAS FURTHER HELD THAT THE ITO HAS NOT RECORDED A NY REASON DISCLOSING THE GROUNDS ON WHICH HE PURPORTED TO BE SATISFIED THAT THE TRANSFER WAS FOR REDUCING TAX LIABILITY AND THEN HELD THAT THE TRIBUNAL WAS IN ERROR IN ASS UMING THAT THE ITO HAS APPLIED HIS MIND TO THE EFFECT THAT THE TRANSFER WAS FOR THE PURPOSE OF REDUCTION OF TAX. THE ALLAHABAD HIGH COURT IN PARAGRAPH 4A OF THE ORD ER OBSERVED AS UNDER: '4A. THUS FOR THE PURPOSE OF ALLOWING THE DEPRECIAT ION, THE ACTUAL COST TO THE ASSESSEE IS TAKEN TO BE 'WRI TTEN DOWN VALUE' EXCEPT IN THOSE CASES WHERE THE ,INCOME -TAX MA NOS. 445&446/DEL/2010 22 OFFICER IS SATISFIED THAT THE MAIN PURPOSE OF THE TR ANSFER OF THE ASSETS WAS TO REDUCE THE TAX LIABILITY BY CL AIMING DEPRECIATION WITH REFERENCE TO AN ENHANCED COST. BE FORE, HOWEVER, THE INCOME-TAX OFFICER CAN DEPART FROM THE PRICE PAID BY THE ASSESSEE FOR THE MACHINERY IN QUES TION, HE HAS TO BE SATISFIED THAT THE PURPOSE OF THE TRAN SFER WAS THE REDUCTION OF THE LIABILITY TO TAX BY CLAIMIN G AN ENHANCED COST. IN THE PRESENT CASE, THE INCOME-TAX OFFICER HAS NOT RECORDED ANY REASON DISCLOSING THE GROUNDS ON WHICH HE PURPORTED TO BE SATISFIED THAT THE TRANSFER WAS FOR REDUCING TAX LIABILITY. THE TRIBUN AL HAS INFERRED THE SATISFACTION OF THE INCOME-TAX OFFICER FROM THE FACT THAT HE OBTAINED THE APPROVAL OF THE INSPE CTING ASSISTANT COMMISSIONER TO HAVE RECOURSE TO THE PROVIS O TO SECTION 10(5)(A) OF THE ACT. THE SATISFACTION OF THE INCOME-TAX OFFICER HAS TO BE AN OBJECTIVE ONE. HE HA S TO DETERMINE AS TO WHETHER THE TRANSFER WAS FOR THE PURPOSES OF EFFECTING A REDUCTION IN TAX LIABILITY. WE HAVE ALREADY NOTICED THAT THERE IS NOTHING ON THE RECORD TO SHOW THAT THE INCOME-TAX OFFICER WAS SO SATISFIED A ND NEITHER IS THERE ANYTHING TO DISCLOSE THE MATERIAL O N WHICH HE REACHED THE SATISFACTION CONTEMPLATED BY SECTION 10(5)(A) OF THE ACT. THIS BEING SO, THE TRI BUNAL ERRED IN HOLDING THAT THE REQUIREMENTS OF SECTION 10 (5)(A) WERE FULFILLED ON ACCOUNT OF THE FACT THAT THE INSP ECTING ASSISTANT COMMISSIONER HAD GRANTED APPROVAL. IT ALSO DOES NOT APPEAR THAT THE ASSESSEE WAS GIVEN ANY OPPORTUNITY TO SHOW THAT THE TRANSFER IN QUESTION W AS A MA NOS. 445&446/DEL/2010 23 GENUINE ONE, AND NOT MADE FOR THE PURPOSES OF EVADI NG TAX. IN VIEW OF THE FACT THAT THE SATISFACTION OF T HE INCOME-TAX OFFICER HAS TO BE BASED ON OBJECTIVE FAC TS, IT WOULD BE NECESSARY FOR THE INCOME-TAX OFFICER BEFORE HAVING RECOURSE TO THE PROVISO TO AFFORD AN OPPORTU NITY TO THE ASSESSEE TO ESTABLISH THAT THE TRANSFER WAS NOT MADE WITH A VIEW TO EVADE TAX. THE PROCEDURE ADOPTED BY THE INCOME-TAX OFFICER FOR OBTAINING APPROVAL FROM THE INSPECTING ASSISTANT COMMISSIONER DOES NOT APPEAR TO HAVE BEEN IN ACCORDANCE WITH THE LAW. WE ARE OF THE VIEW THAT THE TRIBUNAL WAS IN ERROR IN ASSUMING THAT THE INCOME-TAX OFFICER HAD APPLIED HIS MIND TO THE FACT THAT THE TRANSFER WAS FOR THE PURPOSES OF EVADING TAX, F ROM THE MERE FACT THAT THE INSPECTING ASSISTANT COMMISSI ONER HAD PERMITTED THE INCOME-TAX OFFICER TO DETERMINE THE COST OF THE MACHINERY. THE ASSESSEE IN THE CIRCUMST ANCES WAS ENTITLED TO DEPRECIATION ON THE ACTUAL COST OF THE MACHINERY PURCHASED FROM SETH BANARSI DASS, AND THE PROVISO TO SECTION 1O(5)(A) OF THE ACT COULD NOT BE APPLIED.' NOT FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH CO URT AMOUNTS TO MISTAKE WHICH DESERVES TO BE RECTIFIED U/S 254(2) OF THE IT ACT. 305 ITR 227 (ACIT VS. SAURASHTRA KUTCH STOCK EXCHAN GE LTD. 338 ITR 371 (MP), NATIONAL TEXTILE CORP LTD. VS. CIT 327 ITR 267 (ALL), CIT VS. S.K. GUPTA MA NOS. 445&446/DEL/2010 24 B. THE ITAT, WHILE CONSIDERING THE COST, HAS FAILED TO CONSIDER THE FOLLOWING FACTS WHICH RESULTED INTO WO RKING OF. COST OF PLANT AND MACHINERY PURCHASED AT A LESSE R FIGURE: (I) IN PARAGRAPH 10.7 OF THE ORDER, THE COST OF T HE EQUIPMENT HAS BEEN ONLY TAKEN AT RS.32,19,746/- IN T HE HANDS OF BBW WHICH DOES NOT INCLUDE THE COST OF DUC TING AND OTHER NECESSARY PARTS AND SPARES REQUIRED FOR T HE OPERATION OF AIR CONDITIONING SYSTEM IN A MULTI-STORE YED BUILDING HAVING THE AREA OF ABOUT 25,000 SQUARE FEE T AS EXPLAINED BEFORE THE AO AND CIT (APPEALS) BECAUSE T HE ASSESSEE HAD PURCHASED COMPLETE AIRCONDITIONING PACKAGE UNIT. (II) BBW HAD COMPLETED THE ERECTION AND INSTALLATI ON OF ALL THE EQUIPMENTS ONLY IN THE MONTH OF SEPTEMBER 1999 WHICH CANNOT BE DEPRECIATED AT SUCH A FIGURE A S CONSIDERED BY THE ITAT IN PARAGRAPHS 10.7 AND 10.8 OF THE ORDER. (III) THE ITAT IN PARAGRAPH 10.8 AT PAGE 15 OF TH E ORDER HAD MADE THE FOLLOWING OBSERVATIONS: (A) IN LINES 7 AND 8 FROM THE TOP: 'NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE ASSETS WERE ALSO FETCHING SO MUCH RENT FROM TH E USER OF THESE ASSETS.' (B) AND THEREAFTER IN LINES 21 AND 22 AS UNDER: MA NOS. 445&446/DEL/2010 25 'HERE, IN THE PRESENT CASE, THERE IS A LACK OF MATE RIAL TO SHOW THAT SUCH FACILITY EARLIER WAS ALSO FETCHING S O MUCH RENT.' THE ABOVE OBSERVATIONS OF THE ITAT ARE' AGAINST THE FACTS ALREADY ON RECORD. AS ALREADY ON RECORD, THE ASSESSEE HAD PURCHASED TH E AIR CONDITIONING PACKING UNITS INSTALLED IN THE BUILDIN G IN A RUNNING CONDITION ON 'AS IS WHERE IS' BASIS AND DUE TO SUCH AGREEMENT, HAD RECEIVED THE RENT FROM MINERVA IN RESPECT OF LAST QUARTER OF THE FINANCIAL YEAR ENDIN G 31 ST MARCH 2000 AT RS. 1177,132/ - WHICH HAD' BEEN ADJUST ED BY THE ASSESSEE AGAINST THE COST INCURRED AT RS. 75 1AKHS (SEE PAGE 4 OF THE ITAT ORDER). THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES, IT IS PRAYED THAT PARAGRAPHS 10 TO 10.8 OF THE ORDE R OF THE ITAT MAY KINDLY BE RECALLED IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT OF ALLAHABAD IN THE C ASE OF JASWANT SUGAR MILLS LTD. (SUPRA) AND BE DISPOSED OF AFRESH AFTER TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND/OR BE MODIFIED ACCORDINGLY. IT IS PRAYED ACCORDINGLY. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THE TRIBUNALS ORDER WAS CORRECT AND THERE IS NO MISTAK E APPARENT FROM RECORDS IN THIS ORDER. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN THESE CASES, AS THE ASSESSEE IS FRO M MEERUT THE JURISDICTIONAL HIGH COURT IS HONBLE ALLAHABAD HIGH COURT. AS SUC H MENTION OF HONBLE DELHI MA NOS. 445&446/DEL/2010 26 HIGH COURT DECISION IN C.I.T. VS. DALMIA DADRI CEME NT LTD. 125 ITR 510 AS JURISDICTIONAL HIGH COURT DECISION IS A MISTAKE BY THE TRIBUNAL. 6.1 FURTHERMORE, WE ALSO FIND THAT ASSESSEE HAS REF ERRED TO THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF JASWANT SUGAR MILLS LTD. VS. C.I.T. IN 1973 TAX LR 1336 AND COPY OF THE JUDGEMENT WAS ALSO FILE D. BUT IN THE ORDER THE TRIBUNAL AS REPRODUCED HEREINABOVE THERE IS NO REFE RENCE TO THIS JURISDICTIONAL HIGH COURT DECISION. 6.2 WE FIND THAT HONBLE APEX COURT IN THE CASE OF C.I.T. VS. SAURASTARA KUTCH STOCK EXCHANGE LIMITED (SUPRA) HAS EXPOUNDED AS UND ER:- RECTIFICATION OF AN ORDER STEMS FROM THE FUNDAMENT AL PRINCIPLE THAT JUSTICE IS ABOVE ALL. IT IS EXERCISED TO REM OVE THE ERROR AND TO DISTURB THE FINALITY. A PATENT, MANIFEST AND SELF-EVIDENT ERROR WHICH DO ES NOT REQUIRE ELABORATE DISCUSSION OF EVIDENCE OR ARGUM ENTS TO ESTABLISH IT, CAN BE SAID TO BE AN ERROR APPARENT ON THE FAC E OF THE RECORD AND CAN BE CORRECTED WHILE EXERCISING CERTIORARI JURIS DICTION. AN ERROR CANNOT BE SAID TO BE APPARENT ON THE FACE OF THE RE CORD IF ONE HAS TO TRAVEL BEYOND THE RECORD TO SEE WHETHER THE JUDGEME NT IS CORRECT OR NOT. AN ERROR APPARENT ON THE RECORD MEANS AN ERR OR WHICH STRIKES ONE ON MERE LOOKING AN DOES NOT NEED A LONG DRAWN O UT PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVAB LY TWO OPINIONS. SUCH ERROR SHOULD NOT REQUIRE ANY EXTR ANEOUS MATTER TO SHOW ITS INCORRECTNESS. TO PUT IT DIFFERENTLY, IT SHOULD BE SO MANIFEST AND CLEAR THAT NO COURT WOULD PERMIT IT TO REMAIN ON RECORD. IF THE VIEW ACCEPTED BY THE COURT IN THE ORIGINAL JUDGEMEN T IS ONE OF POSSIBLE VIEWS, THE CASE CANNOT BE SAID TO BE COVER ED BY AN ERROR APPARENT ON THE FACE OF THE RECORD. MA NOS. 445&446/DEL/2010 27 WHERE AFTER THE APPELLATE TRIBUNAL RENDERED ITS DE CISION ON APPEAL, A MISCELLANEOUS APPLICATION WAS FILED BY T HE ASSESSEE UNDER SECTION 254(2) OF THE INCOME TAX ACT, 1961, S TATING THAT A DECISION OF THE JURISDICTIONAL HIGH COURT WAS NOT B ROUGHT TO THE NOTICE OF THE TRIBUNAL : HELD, THAT THERE WAS A MIS TAKE APPARENT FROM THE RECORD WHICH REQUIRED RECTIFICATION. 6.3 FURTHERMORE, WE FIND THAT HONBLE ALLAHABAD HI GH COURT IN C.I.T. VS. S.K. GUPTA (SUPRA) HAS HELD AS UNDER:- UNDER SECTION 254(2) OF THE INCOME TAX ACT, 1961, THE TRIBUNAL HAS POWER TO RECTIFY MISTAKES WHICH ARE A PPARENT ON THE RECORD. IF THE MISTAKES GO TO THE ROOT OF THE MATTER, IT IS THE DISCRETION OF THE TRIBUNAL TO CORRECT THE MIST AKES IN THE FACTS OF THE ORDER, OR THE OPERATIVE PORTION OF THE ORDER OR HEAR THE APPEAL DE NOVO. 6.4 NOW CONSIDERING THE TRIBUNAL ORDER ON THE TOUCH STONE OF ABOVE MENTIONED CASE LAWS, WE FIND THAT THERE ARE FOLLOWING MISTAKE S IN THE TRIBUNAL ORDER. 1. REFERENCE TO HONBLE DELHI HIGH COURT DECISION I N C.I.T. VS. DALMIA DADRI CEMENT LTD. 125 ITR 510 AS JURISDICTIO NAL HIGH COURT DECISION. 2. NON CONSIDERATION OF DECISION OF HONBLE ALLAHAB AD (JURISDICTIONAL) HIGH COURT IN THE CASE OF JASWANT SUGAR MILLS LTD. VS. C.I.T. (SUPRA). MA NOS. 445&446/DEL/2010 28 6.5 UNDER THE CIRCUMSTANCES, ON THE BASIS OF AFORES AID DISCUSSIONS AND PRECEDENTS, WE RECALL THE IMPUGNED TRIBUNAL ORDER FOR CONSIDERATION OF THE ABOVE TWO MISTAKES. 7. IN THE RESULT, BOTH THE MISC. APPLICATIONS FIL ED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/8/2012. SD/- SD/- [I. C. SUDHIR] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBE R D ATED: 03/8/2012 SRBHATNAGAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3.CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DR, ITAT, DELHI BENCH