THE COMMISSIONER OF INCOME -TAX V. M/S CANARA BANK

ITA/360/2016

AI Insights

The case revolves around the dispute concerning the depreciation claimed by M/s. Canara Bank on assets leased to various companies for the assessment years 1996-97 and 1997-98. The Income Tax Department disallowed the depreciation claims based on the non-existence of the leased assets, as found during searches conducted under Section 132 of the Income Tax Act, 1961. The Tribunal and the Commissioner of Income Tax (Appeals) later found in favor of the assessee, leading to the revenue's appeal to the High Court. The core legal issue was whether the Tribunal erred in holding that the denial of cross-examination opportunities violated natural justice, despite the assessing officer's efforts to trace the assessee.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 744361 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 03-11-2020
• Assessment Year: misc
• Other Referred Cases: SANTHOSH HAZARI VS. PURUSHOTTAM TIWARI, CIT VS. SOFT BRANDS (P) LTD., KULWANT KAUR S. GURDIAL SINGH MANN, VIJAY KUMAR TALWAR VS. CIT, K.RAVINDRANATHAN NAIR VS. CIT, SUDHARSHAN SILKS AND SAREES VS. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T RAO
• Assessee Lawyers: ARAVIND
• Keywords: Assessment Year 1997-98; Cross Examination; Cross-examination; Depreciation; Leased assets; Natural Justice
• Section: 143(3); 132; 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.360 OF 2016 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX LTU, JSS TOWERS BSK III STAGE, BANGALORE-560085. 2. THE ADDL. COMMISSIONER OF INCOME TAX LTU, JSS TOWERS BSK III STAGE BANGALORE-560085. ... APPELLANTS (BY SRI. ARAVIND K.V. ADV.) AND: M/S. CANARA BANK 112, J.C. ROAD BANGALORE PAN: AAACC 6106G. ... RESPONDENT (BY SRI. T. SURYANARAYANA RAO, ADV.) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED 11-12-2015 2 PASSED IN ITA NO.767/BANG/2011, FOR THE ASSESSMENT YEAR 1997-98, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN ITA NO.767/BANG/2011 DATED 11-12-2015 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the revenue. Mr.T.Suryanarayana, learned counsel for the assessee. This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 1997-98. The appeal was admitted by a Bench of this Court vide order dated 11.10.2017 on the following substantial question of law: 3 Whether the Tribunal was correct in holding that denial of opportunity of cross- examination results in violation of natural justice, despite efforts made by the assessing officer to trace the assessee? The object of cross examination is to test the veracity of version given in examination-in-chief? In the instance case, when it is proved with fair market amount certainty that leased equipments did not exit, whether allowing cross-examination would have made any difference? 2. Facts leading to filing of this appeal briefly stated are that the assessee, which is a Nationalized Bank filed its returns of income for Assessment Years 1996-97 and 1997-98 on 29.11.1996 and 28.11.1997, in which total income of Rs.1,92,45,20,300/- and Rs.2,96,99,47,660/- respectively was declared. In the assessments made under Section 143(3) of the Act, the Assessing Officer disallowed the depreciation claimed on the assets leased to M/s Rajender Steels Pvt. Ltd., M/s Kedia Castle Dellon Industries Ltd. and M/s Kedia Mills 4 and Distilleries Ltd. on the ground that the assets were not found to be in existence in a search conducted under Section 132 of the Act by the Department in March 1998 in the premises of Rajender Group and in September 1996 in Kedia Group of Companies. The assessee thereupon filed appeals before the Commissioner of Income Tax (Appeals) for the Assessment Years 1996-97 and 1997-98. The aforesaid appeals were dismissed vide order dated 26.7.1999 and 12.06.2000 respectively. The assessee thereupon approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal vide order dated 12.10.2004 held that Assessing Officer has failed to furnish the copies of the statements recorded during the course of search as well as other material and has also not provided sufficient opportunity to the assessee to cross examine the lessee. The tribunal therefore, remitted the matter to the Assessing Officer with a direction to furnish copies of all the material relied upon 5 by the Assessing Officer and to afford an opportunity to the assessee of cross-examination. 3. The Assessing Officer by an order dated 28.12.2006 once again disallowed the depreciation claimed by the assessee in respect of assets leased to M/s Rajender Steels Ltd., M/s Kedia Mills and Distilleries Ltd. and M/s Kedia Castle Dellon Industries Ltd. The assessee thereupon filed appeals before the Commissioner of Income Tax (Appeals), who by an order dated 01.06.2011 inter alia held that the assessee had discharged the onus to prove the genuineness of transaction by furnishing necessary documents viz., copies of sanction letter, lease agreements, invoices, inspection records on various dates and inspection reports pertaining to pre search and post search period in support of its claim and the Assessing Officer did not rebut the corroborative evidence filed by the assessee. Thus, on the basis of meticulous appreciation of evidence on record, the Commissioner of Income Tax 6 (Appeals) held that the assessee has been able to corroborate its claim of existence of leased equipment with incontrovertible evidence and directed the Assessing Officer to allow the depreciation of Rs.1,52,80,650/- and Rs.1,14,60,488/- for Assessment Years 1996-97 and 1997-98 respectively on the assets leased out to M/s.Kedia Castle Dellon Industries Ltd. and M/s. Kedia Mills & Distilleries Ltd. In the result, the appeals were allowed. Being aggrieved, the revenue preferred an appeal before the Income Tax Appellate Tribunal. The tribunal by order date 11.12.2015 affirmed the finding recorded by the Commissioner of Income Tax (Appeals) and dismissed the appeals preferred by the revenue. In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the revenue submitted that the tribunal grossly erred in holding that denial of opportunity of cross-examination results in violation of principles of natural justice. It is further submitted that 7 the tribunal ought to have appreciated that the leased assets were non-existent. On the other hand, learned counsel for the assessee submitted that whether or not the leased assets are in existence is a finding of fact which stands concluded in favour of the assessee by the Commissioner of Income Tax (Appeals) as well as the Income Tax Appellate Tribunal. Therefore, no substantial question of law arises for consideration in this appeal. 5. We have considered the submissions made by learned counsel for the parties and have perused the record. The issue whether or not the assets leased out by the assessee to various companies were in existence at the relevant time and whether the transactions in question were genuine or not is a pure question of fact. The Commissioner of Income Tax (Appeals) on the basis of meticulous appreciation of evidence on record has held that the assessee has produced sanction letters, master / supplemental lease agreements, purchase invoices, installation certificates and inspection reports, 8 a joint inspection conducted by the bank officials, independent valuation report in respect of assets leased out to the companies as well as inspection reports pertaining to pre search and post search period. On the basis of the aforesaid material on record, it was held that the transactions of the assessee with the companies in question was genuine and the assets, which were leased out were in existence and the assessee was entitled to depreciation. The aforesaid finding of fact has been affirmed by the Income Tax Appellate Tribunal. Thus, the matter stands concluded by concurrent findings of fact, which by no stretch of imagination can be said to be either based on no evidence or perverse. Even otherwise, no perversity in the findings could be pointed out to us. It is well settled in law, that this court in exercise of powers under Section 260A of the Act would not interfere with the finding of fact until the same is perverse [See: SANTHOSH HAZARI VS. PURUSHOTTAM TIWARI’, (2001) 3 SCC 179 and a 9 decision of this court in CIT VS. SOFT BRANDS (P) LTD.’, (2018) 406 ITR 513, ‘KULWANT KAUR S. GURDIAL SINGH MANN’, (2001) 4 SCC 262, ‘VIJAY KUMAR TALWAR VS. CIT 330 ITR 1 (SC), ‘K.RAVINDRANATHAN NAIR VS. CIT’, 247 ITR 178 (SC) and ‘SUDHARSHAN SILKS AND SAREES VS. CIT’, 300 ITR 205 (SC)] 6. In view of preceding analysis, the substantial question of law framed in the appeal is answered against the revenue and in favour of the assessee. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE RV "