2011 (3) TMI 1043 - HC - Income Tax

Re-assessment order - bogus purchase of machinery - deleting the depreciation allowed on the aforesaid machinery - grievance of the assessee was that the copy of the statement of Mr. Viren Ahuja, on the basis of which addition was made, was not supplied to the assessee by the AO and no oppurtunity for cross examine - Held that - As it is clear that the CIT(A) as well as ITAT have arrived at a finding of fact, that too, on the basis of remand report submitted by the Assessing Officer himself that machinery was in fact purchased by the assessee.Detailed discussion in this order also confirmed transportation of the machinery from the factory of the supplier to the factory of the assessee where the machinery was installed. The ITAT has given an additional ground to set aside the order, namely, that Mr. Viren Ahuja was not even produced for cross-examination. As the actual statement of Mr. Viren Ahuja has not been produced on record & as it appears from the orders of the authorities below that Mr. Viren Ahuja had not disputed the supply of the machinery to the assessee. In fact he had stated that the machinery supplied to the assessee was not manufactured by the supplier itself and the benefit under section 80-IA was wrongly claimed by the said supplier and it is only on that account that the supplier had approached the Settlement Commission. Therefore, merely the fact that the supplier had gone to the Settlement Commission would not be of any relevance inasmuch the issue before the Settlement Commission was entirely different which pertain to the benefit wrongly availed by the supplier under section 80-IA of the Act - no question of law arises.

Summary

Issues:
Assessment of depreciation on machinery purchased by the assessee, Reassessment proceedings based on alleged bogus purchase, Cross-examination of supplier's representative, CIT(A) order setting aside reassessment, ITAT upholding CIT(A) decision.

Assessment of Depreciation on Machinery:
For the assessment year 1996-97, the respondent/assessee declared a loss and claimed depreciation on plant and machinery worth Rs. 6.97 crores purchased from a supplier. The Assessing Officer later issued a notice under section 148 seeking to reassess the proceedings, alleging the purchase was bogus. The re-assessment order deleted the depreciation based on the statement of the supplier's representative. However, the CIT(A) allowed the appeal, and the ITAT upheld this decision after verifying the machinery's physical presence and installation at the assessee's factory.

Reassessment Proceedings Based on Alleged Bogus Purchase:
The Assessing Officer's decision to disallow depreciation was based on the statement of the supplier's representative, indicating non-supply of the machinery. The assessee requested cross-examination of the representative and access to related documents, questioning the lack of opportunity for verification. The CIT(A) called for a remand report, which confirmed the physical presence and installation of the machinery, leading to the deletion of the addition by the Assessing Officer.

Cross-Examination of Supplier's Representative:
The assessee requested the opportunity to cross-examine the supplier's representative, Mr. Viren Ahuja, whose statement influenced the reassessment. The ITAT noted that Mr. Ahuja was not produced for cross-examination but highlighted that his statement did not dispute the supply of machinery to the assessee. The issue of the supplier approaching the Settlement Commission was deemed irrelevant to the machinery purchase dispute.

CIT(A) Order Setting Aside Reassessment:
The CIT(A) set aside the reassessment order after considering the remand report confirming the machinery's installation. The report detailed physical verifications and matched descriptions of the machinery, supporting the assessee's claim of genuine purchase. The ITAT upheld this decision, emphasizing the factual finding that the machinery was indeed purchased by the assessee.

ITAT Upholding CIT(A) Decision:
The ITAT upheld the CIT(A) decision based on the factual confirmation of the machinery's purchase and installation. Despite the additional ground raised regarding the non-production of Mr. Viren Ahuja for cross-examination, the ITAT affirmed the findings of fact supporting the genuine purchase of the machinery by the assessee.

In conclusion, the courts dismissed the appeal, stating that no legal question arose as the matter revolved around factual findings confirming the genuine purchase of machinery by the assessee. The detailed discussions and verifications supported the assessee's claim, leading to the rejection of the reassessment based on alleged bogus purchase.