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2004 (4) TMI 33 - HC - Income TaxNon-consideration of evidence by tribunal - Whether the assessee is entitled to claim depreciation under rule 5H on failure to prove the existence or possession of the skimmer machine? - Whether the concurrent findings of facts based on the sufficient evidence arrived at by the Assessing Officer and the first appellant (appellate) authority that the whole transaction leading to the acquisition of skimmer machine was not genuine could be reversed by the second appellate authority (ITAT) by allowing the party to adduce further evidence particularly when ample opportunity was given to the assessee to prove its case before the lower authorities? - Whether the expenses incurred by the assessee for the purpose of foreign travel could be termed as business expenditure under section 37? As the Tribunal is the final court of facts the matter is required to be remanded to the Tribunal for recording a finding with reasons
Issues Involved:
1. Genuineness of the transaction involving the acquisition and lease of the skimmer machine. 2. Entitlement to claim depreciation under rule 5 of the Income-tax Rules on the skimmer machine. 3. Justification of the Income-tax Appellate Tribunal (ITAT) in setting aside the assessment based on book entries. 4. Classification of foreign travel expenses as business expenditure under section 37 of the Income-tax Act, read with rule 6D of the Income-tax Rules. Detailed Analysis: 1. Genuineness of the transaction involving the acquisition and lease of the skimmer machine: The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) (CIT(A)) found the transaction of the skimmer machine's acquisition and lease to be bogus. The AO issued notices to suppliers of raw materials and concluded that the transactions were not genuine. The CIT(A) upheld this finding, emphasizing that the assessee failed to prove the transaction's authenticity. However, the ITAT reversed these findings, concluding that the assessee had indeed acquired and leased the skimmer machine. The High Court held that the ITAT is entitled to reappreciate evidence and reach its own conclusions, and the findings of fact by the ITAT are final and cannot be interfered with under section 260A of the Act. The High Court found no error in the ITAT's reappreciation of evidence and concluded that the findings of the AO and CIT(A) were not sufficient to establish the transaction as bogus. Thus, questions 5A and D were answered against the Revenue. 2. Entitlement to claim depreciation under rule 5 of the Income-tax Rules on the skimmer machine: The ITAT allowed the assessee's claim for depreciation on the skimmer machine, finding the transaction genuine. The High Court upheld this decision, stating that the ITAT's findings on the genuineness of the transaction justified the depreciation claim. Therefore, question 5B was answered in the affirmative, favoring the assessee. 3. Justification of the ITAT in setting aside the assessment based on book entries: The ITAT set aside the assessment by the AO and CIT(A), which was based on their findings of the transaction being bogus. The High Court affirmed that the ITAT has the authority to reappreciate evidence and make its own findings. The ITAT's decision to set aside the assessment was based on a thorough consideration of evidence, and the High Court found no reasons to interfere with this conclusion. Thus, the ITAT's decision to set aside the assessment was justified. 4. Classification of foreign travel expenses as business expenditure under section 37 of the Income-tax Act, read with rule 6D of the Income-tax Rules: The AO disallowed the foreign travel expenses, including those of Mrs. S.P. Hede, wife of the vice-chairman, as no evidence was provided to show these expenses were incurred wholly and exclusively for business purposes. The CIT(A) upheld this disallowance. The ITAT, however, allowed the expenses, reasoning that the absence of tangible business outcomes does not justify disallowance. The High Court found that the ITAT did not adequately consider the specific contention regarding Mrs. S.P. Hede's travel expenses. The High Court remanded the matter to the ITAT to record a finding with reasons on the foreign travel expenses, particularly those of Mrs. S.P. Hede. Thus, the appeal was partly allowed, and the matter was remanded to the ITAT for further consideration on this issue. Conclusion: The High Court upheld the ITAT's findings on the genuineness of the skimmer machine transaction and the consequent depreciation claim. However, it remanded the issue of foreign travel expenses back to the ITAT for a detailed examination, particularly concerning the expenses of Mrs. S.P. Hede. The appeal was partly allowed, with no order as to costs.
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