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TMI Blog2008 (3) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... ving Head Office at Haldwani. These cylinders were leased to M/s. Advance Gas and Consultancy Ltd. (M/s. Advance Gas) and M/s. Aashi Supplies both situated atAgra. With a view to verifying the genuineness of the above parties, the Assessing Officer issued notices under section 133(6) but the same were returned by the postal authorities with the remarks 'no such person existed'. The Assessing Officer, therefore, asked the assessee to produce all these parties. The assessee produced Shri Ravinder Kumar Aggarwal husband of Smt. Anju Aggarwal who was the proprietor of Aashi Supplies. In statement recorded on oath under section 131, Shri Ravinder Kumar Aggarwal admitted that the assessee had leased out oxygen cylinders to M/s. Aashi Supplies. The Managing Director of M/s. Advanced Gases, Shri Shyam Aggarwal was also produced who admitted that the assessee had leased out gas cylinders to his company. The assessee also produced Shri Atul Gupta, director of Shri Balaji Engineering. In his statement, Shri Gupta stated that he was director since5-10-1998and his knowledge about the affairs of the company prior to that period, i.e., financial year 1995-96 was based only on the feedback given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. 2.2 In appeal, the assessee submitted before CIT(A) that it had discharged the onus placed on it regarding purchase and lease of cylinders. The assessee had filed the copy of formal purchase order dated 31-7-1995, the copies of relevant bills of supplier regarding supply of cylinders, names and address of transporters, copies of lorry receipts, the names and address of the parties to whom the cylinders were given on lease. The assessee had made the payment for purchase of cylinders by account-payee cheques. The assessee had also filed copies of lease agreement dated 25-8-1995 regarding lease of cylinders and hire charges of Rs. 12.60 lakhs had been received by cheque/demand drafts, which had been duly disclosed in the returns of income. The representatives of supplier of cylinders as well as lessees were produced who had confirmed the transactions. The Assessing Officer had disallowed the claim based on suspicion and surmises placing reliance on irrelevant material. The Assessing Officer had acted based on the report of the inspector, which was based on hearsay. The inspector had made inquiry from G.M. (Industries), Haldwani who dealt with manufacturing concern whereas Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, held that the depreciation on the cylinders was allowable and, accordingly, allowed the same, aggrieved by which the revenue is in appeal before the Tribunal. 2.4 Before us, the ld. Sr. DR appearing for the revenue strongly supported the order of the Assessing Officer. It was submitted that surrounding circumstances of the case clearly showed that the purchase of cylinders was not genuine. The purchases had been made from Shri Balaji Engineering but the statement of the Director of that concern shows that during the relevant period, the company had no business and no premises and could not set up unit due to non-availability of loan. However, it had claimed to have made purchases of cylinders in cash source of which was not known. The parties from whom Shri Balaji Engineering had claimed to have made purchases were found to be non-existent. It was also submitted that even the transport agency through whom the cylinders were transported, was not traceable. CIT(A) had no material to hold that transport agencies kept on changing addresses. The ld. DR also pointed out that though the agreement for lease of cylinders was dated25-8-1995, the cylinders have been supplied from1-8-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had requested for the examination of the Managing Director, which was not done. No proper inquiries were made regarding existence of Shri Balaji Engineering either from Registrar of Companies or at the registered office of the company atDelhi. The purchase by the assessee could not be held bogus only on the ground that the purchase in case of Shri Balaji Engineering was not established when there was evidence of transportation by Sawhney Transport Agency in respect of which, all bills and receipts of transportation had been given. He referred to the purchase bills available at pages 102-184 of the paper book. In most of the bills, truck number was also mentioned. Inquiry about Sawhney Motors had been made after five years from the event. Therefore, non-availability of the party at the address given did not prove that the goods had not been transported particularly when most of the transporters are forwarding agents who hire trucks as and when they get order and keep on changing addresses. As regards the payment of hire charges by demand draft, it was submitted that no inquiry had been made in the matter and there was no finding by the Assessing Officer that the evidence pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hney Motors and Forwarding Agency, who transported the cylinders, was also found to be in existence. The Assessing Officer also noted that Director of Shri Balaji Engineering during examination had stated that the company during the relevant period was trading in steel and was trying to set up the casting unit, which could not be done, as loans were not available. He also stated that the payment for purchase of cylinders had been made in cash. As the company was not having funds for setting up of units, the Assessing Officer formed the belief that it could not have purchased cylinders by paying cash. The entire transactions regarding purchase of cylinders by the assessee and lease of the same to the parties atAgrawas, therefore, treated as non-genuine and shown only to claim depreciation at the rate of 100 per cent. 2.7 On careful perusal of the entire material available on record, in our opinion, on the basis of material available, the Assessing Officer was not justified in coming to the conclusion that purchase and lease of cylinders by the assessee was not genuine. The assessee had placed entire material such as copy of the Board's resolution regarding authorizing the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be held to be bogus on the basis of local inquiry report of inspector, which was based on hearsay or on the ground that the seller of cylinders had made the payment in cash or the parties from whom the seller of cylinders had made purchases, were not found at the addresses or on some other technical grounds. No doubt, it is true that the assessing authorities are entitled to look into surrounding circumstances to arrive at a finding but surrounding circumstances must indicate impossibility of occurring of a particular event. In this case, the surrounding circumstances brought on record by the Assessing Officer do not show impossibility of purchase of cylinders by the assessee or lease thereof. Non-existence of the parties from whom the supplier purchased the cylinders or of the transport agency, that too after 4-5 years from the date of event, can only arouse suspicion but does not by itself establish that the purchases of cylinders by the assessee was not genuine. It is not a case that these parties had denied the supply/transport of cylinders. Similarly, the cash payment by the supplier for purchase of cylinders or payment of hire charges by draft made out of cash does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. It was pointed out that after the Assessing Officer raised objection, the assessee made a formal application vide letter dated30-12-1998to CIT,Delhi, which was still pending. It was also submitted that except for a sum of Rs. 59,691 entire amount was realized in convertible foreign exchange before the completion of assessment and this fact was within the knowledge of the Assessing Officer. It was also pointed out that in identical situation, in assessment year 1997-98, CIT(A), had allowed the claim of the assessee. CIT(A) was, therefore, satisfied with the explanation given by the assessee and following the decision of his predecessor in assessment year 1997-98, allowed the claim of the assessee aggrieved by which the revenue is in appeal. 3.2 Before us, the ld. Sr. DR appearing for the revenue supported the order of the Assessing Officer. It was pointed out that the assessee had filed return of income on29-11-1996with the Assessing Officer atDelhiand, therefore, it was not clear why the assessee filed application for extension of time with CIT,Allahabad. The plea of bona fide belief made by the assessee was, therefore, not correct and had rightly been rejected by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT,Allahabadallowing the extension. It has also been pointed out that the entire amount except sum of Rs. 59,691 had been received in convertible foreign exchange before the completion of assessment and this information was available with the Assessing Officer. The Assessing Officer was, therefore, required to allow the claim in a view of insertion of sub-section (13) of section 155 in the Income-tax Act as per which even if the claim was disallowed in assessment, the same is required to be rectified when the amount is actually received. Since the amount had been received before completion of assessment and this fact was known during the assessment proceedings, the Assessing Officer should have allowed the claim to the extent amount received in convertible foreign exchange. We agree with the submission of the ld. A.R. that in view of section 155(13) which provides for allowing the claim after the amount is received in convertible foreign exchange by rectifying the assessment order, the Assessing Officer was required to allow the same as the amount had been received before finalization of assessment and the application of the assessee seeking extension of time had not been reje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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