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Disallowance of depreciation of leased plant and machinery. Analysis: The appeal was filed by the revenue against the order of CIT(A)-V, Ahmedabad for the assessment year 1996-97, challenging the deletion of disallowance of depreciation on leased plant and machinery. The Assessing Officer disallowed the depreciation claimed by the assessee-company on the grounds of lack of proof regarding the genuineness of the sale and transportation of the asset, as well as the non-existence of the selling party. The Assessing Officer added Rs. 25 lakhs to the total income of the assessee-company due to the disallowed depreciation. However, the CIT(A) allowed the claim of the assessee, highlighting that the Assessing Officer failed to verify essential aspects such as whether the payment for the machinery was in the books of account, whether lease rent was shown as income, and whether the machinery was actually purchased and used for business purposes. The CIT(A) noted that the appellant had shown lease rental income from the machinery in the books of account for multiple assessment years, indicating the genuine purchase and use of the machinery. The revenue, represented by the ld. DR, argued that the CIT(A) allowed the claim without proper verification of the issues raised by the Assessing Officer. It was contended that the CIT(A) should have either examined the facts himself or called for a remand report from the Assessing Officer before making a decision. The ld. AR for the assessee-company supported the CIT(A)'s order, emphasizing that the lease rental income shown by the assessee had been accepted by the department, thus justifying the claim. The Tribunal considered both submissions, along with the provisions of Section 32 of the Income Tax Act, which allows depreciation on owned assets used for business purposes. The Tribunal observed that the Assessing Officer's findings indicated the lack of existence of the asset and raised concerns about the transaction between related parties. The Tribunal noted that the CIT(A) failed to verify crucial facts and evidence, relying solely on the submissions made by the assessee. As a result, the Tribunal decided to send the matter back to the CIT(A) for a fresh decision after providing a reasonable opportunity for both parties to be heard, emphasizing the importance of complete and correct facts for a lawful conclusion. In conclusion, the Tribunal allowed the appeal of the revenue for statistical purposes, directing a reconsideration of the matter by the CIT(A) with proper verification and adherence to legal principles, ensuring a fair opportunity for both sides to present their case.
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