2020 (11) TMI 380 - HC - Income Tax

Assets leased out to various companies - Whether assets were in existence at the relevant time and whether the transactions in question were genuine or not - finding of fact - HELD THAT - 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. On the basis of the aforesaid material on record, it was 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. Thus, the 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 against the revenue and in favour of the assessee.

Summary

Issues:
1. Denial of opportunity of cross-examination leading to violation of natural justice.
2. Disallowance of depreciation claimed on assets leased to various companies.
3. Findings of fact regarding existence and genuineness of leased assets.

Analysis:

Issue 1: Denial of opportunity of cross-examination leading to violation of natural justice
The appeal under Section 260A of the Income Tax Act, 1961 was filed by the revenue challenging the Tribunal's decision regarding the denial of the opportunity for cross-examination. The substantial question of law raised was whether the Tribunal was correct in holding that denial of cross-examination violates natural justice, especially when efforts were made to trace the assessee. The Court deliberated on the purpose of cross-examination to test the veracity of the version given in examination-in-chief. Despite the fair certainty that the leased equipment did not exist, the Court examined whether allowing cross-examination would have made any difference.

Issue 2: Disallowance of depreciation claimed on assets leased to various companies
The case involved a Nationalized Bank that filed its income tax returns for Assessment Year 1999-2000, declaring a total income. The Assessing Officer disallowed depreciation claimed on assets leased to certain companies as they were not found during a search conducted by the Department. The matter went through appeals and the Tribunal directed the Assessing Officer to provide copies of material and allow cross-examination. Subsequently, the Commissioner of Income Tax (Appeals) held that the assessee had proved the genuineness of the transaction with corroborative evidence, directing the Assessing Officer to allow depreciation. The Tribunal affirmed this finding, leading to the revenue's appeal.

Issue 3: Findings of fact regarding existence and genuineness of leased assets
The Court emphasized that the question of whether the leased assets existed and the transactions were genuine was a pure question of fact. The Commissioner of Income Tax (Appeals) had meticulously analyzed the evidence and concluded in favor of the assessee. The Court noted that the concurrent findings of fact by the Commissioner and the Tribunal were based on substantial evidence and not perverse. Referring to established legal principles, the Court highlighted that interference in findings of fact was not warranted unless they were perverse. Consequently, the Court dismissed the appeal, ruling in favor of the assessee based on the factual conclusions reached by the lower authorities.

In conclusion, the High Court of Karnataka upheld the decisions of the lower authorities, emphasizing the importance of factual findings and the principle of not interfering unless the findings were perverse. The Court dismissed the appeal, finding no merit in the revenue's contentions.