2019 (2) TMI 1274 - HC - Income Tax

Reopening of assessment - bogus claim of depreciation - HELD THAT - Tribunal in the instant case after taking note of all the factual details, in our view, rightly held that the entire transaction was bogus and the assessee claimed depreciation on a lease to M/s Bellary Steels & Alloys Ltd,which were also bogus. Further, the Tribunal rightly held that the intention of the assessee was clearly malafide from the beginning. It manufacture evidence which fell flat in the face of deposition of related parties and other evidence brought in by the Assessing Officer. With these findings, the Tribunal rightly confirmed the order passed by the CIT(A). Since the assessee has engaged in fraudulent activity by making a bogus claim of depreciation. The assessee s intention is tainted with malafide and it attempted to create evidence which was self serving as related parties had uttered the truth. It defies logic as to how the cargo of 67,700 kgs could have been transported in two lorries. The transporter who is said to have been transported only SGCI rolls has stated that he never transported any rolls but transported only scrap. Therefore, the assessee is not entitled for any relief. As already held that the assessee is guilty of fraud and has perpetuated fraud todefraud the revenue. The assessee having resorted to unscrupulous and illegal activity is not entitled to any indulgence. Further, the Tribunal has noted that identical transaction was done even in the year 2008 where penalty was levied respect of similar transaction making a bogus claim for depreciation on SCGI rolls from the very same M/s Bellary Steels & Alloys Ltd. 2014 (1) TMI 1641 - KARNATAKA HIGH COURT and this order of penalty was confirmed by the High Court in the case of CRN Investments (P)Ltd vs. CIT 2007 (2) TMI 166 - MADRAS HIGH COURT . - Decided against assessee.

Summary

Issues:
1. Reopening of Assessment under Section 147 of the Income Tax Act, 1961.
2. Disallowance of Depreciation on Special Grade Cast Iron (SGCI) Rolls.
3. Imposition of Penalty under Section 271(1)(c) of the Act.

Reopening of Assessment:
The appellant challenged the jurisdiction of the Assessing Officer in reopening the assessment under Section 147 of the Income Tax Act, 1961, contending it was merely based on opinion without proper jurisdiction. The Tribunal confirmed the disallowance of depreciation on SGCI Rolls, which was a key issue raised by the appellant.

Disallowance of Depreciation:
The appellant contested the disallowance of depreciation on SGCI Rolls, arguing against the decision of the Income Tax Appellate Tribunal. The Tribunal found the entire transaction by the assessee to be bogus, with evidence indicating discrepancies in the weight of the Rolls and denials from involved parties about the transportation of Rolls.

Imposition of Penalty:
The appellant challenged the imposition of penalty under Section 271(1)(c) of the Act, questioning the clarity in the notice issued by the Assessing Officer regarding concealment of income particulars. The Tribunal upheld the penalty, citing fraudulent activities by the assessee and previous instances of similar transactions leading to penalties.

The High Court, after detailed hearings, found the entire transaction to be sham and upheld the Tribunal's decision. The Court emphasized the malafide intentions of the assessee, who attempted to fabricate evidence to support their claims. The Court rejected any relief for the assessee, given the fraudulent nature of the activities. Additionally, the Court dismissed the plea for penalty reconsideration, citing past instances of penalties for similar transactions. Consequently, the Court dismissed the appeals, answering the substantial questions of law against the assessee.