2019 (1) TMI 1647 - HC - Income Tax

Disallowance of depreciation on leased assets though the assessee could not substantiate its claim and also could not substantiate the existence of assets on which such depreciation was claimed - Revenue has contested the claim of the assessee of depreciation Crores on the leased assets on the ground that transactions was not genuine - HELD THAT - Tribunal discussed the same at some length and noted that the Assessee had produced reliable documentary evidence by making the following observations Revenue authorities have failed to demonstrate that the claim of depreciation is bogus. The documentary evidences submitted by the assessee have not been rebutted by the - CIT(A). In the light of the decisions discussed herein above and considering the fact that the matter pertains to A.Y. 1996-97 we failed to persuade ourselves to give one more opportunity to the Revenue as in our opinion that would cause unnecessary hardship on the assessee when the main Director has sine deceased. In the interest of justice and fair play we set aside the order of the CIT(A) and direct the AO to delete the impugned addition made on account of the disallowance of depreciation. The entire issue is based on appreciation of facts on record. The findings are purely factual in nature.

Summary

Issues:
1. Disallowance of depreciation on leased assets.
2. Justification of Tribunal's decision to delete disallowance of depreciation.

Issue 1: Disallowance of depreciation on leased assets
The Revenue appealed against the Tribunal's judgment regarding the disallowance of depreciation amounting to Rs. 3.76 crores on leased assets. The Revenue contended that the transactions were not genuine. However, the Tribunal examined the matter thoroughly and found that the Assessee had provided reliable documentary evidence to support the claim. The Tribunal observed that the Revenue authorities failed to prove the claim of depreciation as bogus and did not rebut the documentary evidence submitted by the assessee. The Tribunal, considering the totality of facts and the conduct of the Revenue authorities, concluded that there was no justification to deem the claim as false. The Tribunal, in the interest of justice and fairness, set aside the order of the Ld. CIT(A) and directed the AO to delete the disallowance of depreciation.

Issue 2: Justification of Tribunal's decision
The Tribunal's decision to delete the disallowance of depreciation on the leased assets was based on a thorough examination of the facts and documentary evidence submitted by the assessee. The Tribunal noted that the matter pertained to A.Y. 1996-97 and that providing an additional opportunity to the Revenue would cause unnecessary hardship to the assessee, especially since the main director had passed away. The Tribunal, in its order, emphasized the importance of justice and fair play, leading to the decision to overturn the Ld. CIT(A)'s order and direct the AO to delete the impugned addition. The Tribunal's decision was based on factual findings, and it concluded that no question of law arose in this case.

In conclusion, the High Court of BOMBAY upheld the Tribunal's decision to delete the disallowance of depreciation on leased assets. The Court dismissed the Tax Appeal, emphasizing that the matter was factually based, and no legal question was raised. The judgment highlighted the importance of considering the totality of facts and ensuring justice and fairness in tax matters.