2015 (9) TMI 429 - AT - Income Tax

Validity of reopening of assessment - Held that - AO assumed the jurisdiction u/s 148, once a definite information was received from the office of DIT (Invt.), Ludhiana. This, according to us is a good enough reason to initiate proceedings for reopening. As mentioned by the revenue authorities that it was not a case, where four years had elapsed and that the AO needed some evidence of incriminatory nature to initiate the reassessment proceedings.We, therefore sustain the order of the CIT(A) on this issue and sustain the reopening of assessment u/s 147/148. - Decided against assessee. Disallowance of depreciation on the Air Pollution Control Equipment leased to Prakash Industries Ltd on the ground that the real nature of the transaction is finance lease and the appellant is not entitled to depreciation - Held that - The fact that the assessee took the issue before the Arbitration itself goes to prove that the transaction was genuine. From the details as filed by the assessee we find that as a consequence of award of the Arbitration in favour of the assessee, the assessee was able to repossess the equipment and sell the same on as is where is basis. The factual aspect of claim and allowance of depreciation has been held to be in favour of the lessor, by the courts. As the fact that the assessee repossessed the APEC equipment and sell it, goes to prove the genuineness of the transaction and the title of the equipment always lay with the assessee. In these circumstances, we are of the opinion that the assessee was entitled to depreciation. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of initiation of reassessment proceedings u/s 148.
2. Disallowance of claim of depreciation on Air Pollution Control Equipment leased to Prakash Industries Ltd.

Issue 1: Legality of initiation of reassessment proceedings u/s 148

The appeal was filed against the order of CIT(A) regarding the validity of reopening the assessment. The AO reopened the case based on information received from the office of DIT (Invt.), Ludhiana, regarding a bogus leasing transaction involving the assessee and Prakash Industries Ltd. The AO reopened the case on 12.03.1999. The legality of the reassessment proceedings under section 147/148 was questioned. The ITAT upheld the reopening of the assessment, stating that the AO had jurisdiction to initiate proceedings once definite information was received, even though four years had not elapsed, and incriminatory evidence was not necessary for initiation.

Issue 2: Disallowance of claim of depreciation on Air Pollution Control Equipment

The second ground of appeal pertained to the disallowance of depreciation claimed on Air Pollution Control Equipment supplied to Prakash Industries Ltd. The AO disallowed the claim based on a presumed hawala deal and the decision in the case of Asea Brown Boveri Ltd. The assessee provided evidence to prove the transaction's genuineness, including lease agreements and movement details of the equipment. The ITAT noted that the transaction was genuine, upheld by a previous order, and that the assessee repossessed and sold the equipment after an Arbitration award in their favor. The ITAT held that the assessee was entitled to depreciation and directed the AO to allow the claim of depreciation on the Air Pollution Control Equipment.

In conclusion, the ITAT upheld the reopening of the assessment under section 147/148 and allowed the claim of depreciation on the Air Pollution Control Equipment leased to Prakash Industries Ltd. The appeal was partly allowed in favor of the assessee.