2020 (11) TMI 344 - HC - Income Tax

Depreciation claimed in respect of assets leased - Question of fact or law - Whether or not the assets leased out by the assessee to various companies were in existence at the relevant time? - whether the transactions in question were genuine or not is a pure question of fact? - HELD THAT - CIT(A) on the basis of meticulous appreciation of evidence on record has held that the assessee has produced sanction letters, master / supplemental lease agreements, purchase invoices, installation certificates and inspection reports, a joint inspection conducted by the bank officials, independent valuation report in respect of assets leased out to the companies as well as inspection reports pertaining to pre search and post search period. As held that the transactions of the assessee with the companies in question was genuine and the assets, which were leased out were in existence and the assessee was entitled to depreciation. The aforesaid finding of fact has been affirmed by the Income Tax Appellate Tribunal. Matter stands concluded by concurrent findings of fact, which by no stretch of imagination can be said to be either based on no evidence or perverse. Even otherwise, no perversity in the findings could be pointed out to us. It is well settled in law, that this court in exercise of powers under Section 260A of the Act would not interfere with the finding of fact until the same is perverse. - Decided in favour of the assessee

Issues:
1. Denial of opportunity of cross-examination resulting in a violation of natural justice.
2. Disallowance of depreciation claimed on assets leased to companies due to non-existence of assets.
3. Assessment of the genuineness of transactions and existence of leased assets.
4. Appeal against the decision of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.
5. Whether the findings of fact are based on evidence and not perverse.

Analysis:

Issue 1: Denial of opportunity of cross-examination
The appeal raised the question of whether the denial of the opportunity of cross-examination by the assessing officer resulted in a violation of natural justice. The Tribunal held that the Assessing Officer failed to provide copies of statements recorded during the search and did not allow sufficient opportunity for cross-examination. The Tribunal remitted the matter to the Assessing Officer to provide copies of all material and afford the assessee the opportunity of cross-examination. The Tribunal affirmed the importance of cross-examination in testing the veracity of evidence presented.

Issue 2: Disallowance of depreciation on non-existent assets
The Assessing Officer disallowed depreciation claimed by the assessee on assets leased to companies due to the assets not being found during a search conducted by the Department. The Commissioner of Income Tax (Appeals) later directed the Assessing Officer to allow depreciation based on the evidence provided by the assessee, including lease agreements, inspection reports, and other corroborative evidence. The Income Tax Appellate Tribunal upheld this decision, leading to the appeal by the revenue.

Issue 3: Assessment of genuineness of transactions and existence of leased assets
The Commissioner of Income Tax (Appeals) found that the assessee had provided sufficient evidence to prove the genuineness of transactions and the existence of leased assets. This included sanction letters, lease agreements, purchase invoices, inspection reports, and independent valuation reports. The Tribunal affirmed these findings, concluding that the transactions were genuine and the assets existed, entitling the assessee to depreciation.

Issue 4: Appeal against decisions of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal
The revenue challenged the decisions of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, arguing that the denial of cross-examination was not a violation of natural justice and that the leased assets were non-existent. The assessee contended that the findings of fact were in their favor and no substantial question of law arose for consideration.

Issue 5: Findings based on evidence and not perverse
The High Court analyzed the evidence on record, noting that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal had made concurrent findings in favor of the assessee based on substantial evidence. The court cited legal precedents to support the principle that findings of fact would not be interfered with unless they were perverse. Ultimately, the court dismissed the appeal, finding no merit in the revenue's arguments and ruling in favor of the assessee based on the evidence presented.

This detailed analysis covers the key issues raised in the judgment, providing a comprehensive overview of the legal reasoning and conclusions reached by the High Court in this case.

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