9911796707
TMI Blog2006 (3) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... per book I consisting of pp. 1 to 149. In this paper book, the assessee has filed the details of lease transactions. (2) Paper book II with pp. 1 to 127 consisting of details of lease transactions. (3) Paper book III in the shape of written submissions where Annexures are provided in regard to lease transactions including copies of lease agreements consisting of pp. 1 to 77. (4) Paper book IV with pp. 1 to 95 consisting of transactions between the assessee and DLWL. (5) Paper book consisting of Vol. 1 pp. 1 to 239, Vol. II pp. 243 to 509 and Vol. III pp. 510 to 732 comprising of various case laws. (6) Written submissions in the shape of paper book named as written submissions from pp. 1 to 41. 4. During the course of hearing, the learned counsel of the assessee however relied mainly on written submissions i.e. paper book III and paper book IV consisting of Annexures. 5. The learned Departmental Representative has also filed a paper book consisting of pp. 1 to 36 and written submissions. 6. In view of the Hon'ble jurisdictional High Court ordor dt. 2nd Feb., 2006, this case was taken up for hearing on day-to-day basis and it was heard. The Hon'ble High Court has exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------ From the payment details, it is noticed that the money that was received by PESL from the assessee, was remitted back to the assessee, the very next day. In all the instances money paid and received is same. It is also noticed that the money that was received by PESL from IREDA was remitted back to the assessee towards lease rentals. 8. The assessee capitalized these SPVL worth Rs. 2.13 crores during the relevant assessment year and claimed depreciation @ 50 per cent, being used for less than 180 days at Rs. 1.05 crores. The assessee got the loan from IREDA sanctioned vide letter dt. 14th Feb., 2001 and after that the assessee ordered for the purchase of 5000 SPVL @ Rs. 4,260 from PESL, Hyderabad, on 19th March, 2001. Subsequently the assessee entered into lease agreements for these SPVL with the lessees on various dates from 22nd March, 2001 to 31st March, 2001 against the invoices raised by the PESL on various dates from 24th March, 2001 to 31st March, 2001. The assessee claimed to have taken delivery of SPVL at a godown taken on rent at Hyderabad by PESL. One interesting feature in the purchase of these SPVL is that the employees of PESL were authorized by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the details, which read as under: ------------------------------------------------- Name Date Amount (Rs.) ------------------------------------------------- Catholic Charities 19-12-2000 3,85,000 Bhagalpur Society 14-2-2001 3,85,000 Sunline [including 18-9-2000 50,36,700 sub-lessees to 8-3-2001 (6 parties)] Cash 18-9-2000 43,900 to 8-3-2001 --------------- Total 58,50,600 ------------------------------------------------- 10. It is also a fact that the loan by IREDA was disbursed in the month of May, 2001, whereas the lease transactions by way of lease agreements were entered in the end of March, 2001. However, these SPVL were supplied to the endusers only in May, 200l. 11. The AO in view of these facts has narrated various discrepancies in his order at pp. 24 to 27 numbering (i) to (xxii). Even the AO found that the assessee had failed to produce the 6 lessees or their books of account during the course of assessment proceedings. 12. In view of these facts, the AO held that the lease transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided to the assessee. Further learned counsel of the assessee has drawn our attention to para 7(v) on p. 7 of the assessment order which clearly recalls as per him the bank statement which was highlighting the transaction and the lessee's personal accounts to corroborate the stand of the assessee, The AO in order to draw an adverse inference only questions the wisdom of the assessee in receiving a small portion in cash while generally all transactions have happened by cheque. The learned counsel of the assessee further reiterated the same arguments regarding three parties namely Catholic Charities, Solar Alternatives, Bhagalpur Societies which produced bills of purchase of lanterns from PESL and when these facts were put during the course of survey to the managing director, he cannot reply. It is also stated that that parties have denied the existence of the lease deed. He argued that apparently the AO has chosen to extract self-serving statement from these three parties. The AO in fairness should have confronted these three parties when the lease deeds are available and asked them for their reactions. In view of this, the learned counsel of the assessee argued that those statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate authenticating the transfer of money. Hence instead of passing journal entries, money was transferred between the PESL and Marg. (iii) With regard to point No. (iii) the assessee stated that Photon Energy Systems Ltd. had taken the responsibility of marketing the lanterns on behalf of Marg Constructions Ltd. on lease basis. The marketing exercise was started in August, 2000 and PESL started collecting lease rentals in advance. This was done in anticipation of the loan application of Marg being approved by IREDA and the said term-lending institution had been giving impression that it is likely to sanction at any time. These lease rentals were utilised by PESL for working capital needs since no margin money was received from Marg. Since advance rentals utilized by PESL, the margin money received from Marg returned to them later. (iv) With regard to point No (iv) the assessee stated that PESL started the marketing activity in August, 2000, in anticipation of IREDA loan, the prospective lessees had agreed to give lease rentals in advance because they were offered solar lanterns on lease at a lower price than the prevailing market rate at that time. The lessees prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not leased from us. It is now understood that Catholic Charities have now confirmed the lease transaction with Marg Constructions Ltd. to the AO and Bhagalpur Society and Solar Alternatives shall confirm the transaction shortly and their delay in confirmation is on account of Shri P.K. Jose, director, is out of station. The confirmations from them are awaited. (x) With regard to point No. (x) the assessee stated that Marg did not have Andhra Pradesh general sales-tax registration and waybills (Form X, issued by Andhra Pradesh Government). To facilitate free movement of goods through sales-tax check posts, at the request of Marg, PESL had issued their invoices and waybills for transportation of lanterns on behalf of Marg. The lessees had wrongly produced these bills meant for transportation instead of Marg bills leasing the lanterns. (xi) With regard to point No. (xi) the assessee stated that the AO in the earlier question stated that the Catholic Charities produced some invoices raised by Marg for the lanterns towards purchase. It may please be noted that first of all it is not a purchase by Catholic Charities from Marg. It is a transaction of lease. This has been specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attendance of the witnesses and enable a party to produce evidence of witness in his report. (b) In case of Munnalal Murlidhar vs. CIT (1971) 79 ITR 540 (All), the Allahabad High Court held that if the AO does not exorcise his power to call the witness, the assessee's version of the fact cannot be disbelieved for that reason. (c) In Nathu Ram Premchand vs. CIT (1963) 49 ITR 561 (All), the Court held that no inference can be drawn against an assessee merely because he had taken Dasti summons for production of witness. It was the duty of the ITO to enforce the attendance of the witness if his evidence is material, in exercise of his powers under s. 131 of the Act r/w order 16, r. 10 of CPC. (d) Sadaram Puranchand vs. CIT (1937) 5 ITC 459 (Cal) (e) Munnalal Murlidhar vs. CIT (f) S. Velu Palandar vs. Dy. CIT (1972) 83 ITR 683 (Mad) (g) Addl. CIT vs. Radhey Sham Jagdish Prasad (1979) 9 CTR (All) 143 : (1979) 117 ITR 186 (All). At last, the learned counsel of the assessee argued that broadly it might be stated that, assessment order up to para 13.8 is surmises and conjectures of the AO who presumed the transaction must happen in a particular manner and furtherance of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel of the assessee further discussed the following case law as regards to onus to prove that the lease transaction is sham on the person alleging the same. (a) Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC). (b) Smt. Panna Devi Chowdhary vs. CIT (1994) 119 CTR (Bom) 394 : (1994) 208 ITR 849 (Bom) wherein it was held "In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision". Further at p. 859A it was held that "the burden was on the Department to prove that the money belongs to the assessee by bringing proper evidence on record". (c) Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) (d) Parimisetti Seetharamamma vs. CIT (1965) 57 ITR 532 (SC) (e) CIT vs. Chari Chari Ltd. (1965) 57 ITR 400 (SC) (f) Janki Ram Bahadur Ram vs. CIT (1965) 57 ITR 21 (SC) (g) Sir Shadi Lal Sugar General Mills Ltd. Anr. vs. CIT (1987) 64 CTR (SC) 199 : (1987) 168 ITR 705 (SC) (h) Bhogilal H. Patel vs. CIT (1969) 74 ITR 692 (Bom) (i) Dilip Kumar Roy vs. CIT (1974) 94 ITR 1 (Bom) (j) Addl. CIT vs. S. Krishnaswamy Reddiar (1978) 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statement of sales made by PESL during that year. (3) Copies of lease agreements. (4) Detailed summary showing the LR and AWB and Form X for proof of deliveries to each individual lessees. Copies of bills. (5) Details of amount received by PESL as advance lease rentals on behalf of assessee. (6) Copy of Insurance taken by assessee. (7) The logo 'IREDA/KWF/MARG PROJECT No. 1371 engraved on all solar lanterns leased by assessee. (8) Names and addresses of individual lessees. (9) Copy of the confirmation letters from major parties with whom. the lease transaction has been entered into by the assessee. (10) Detailed summary showing the number of sets-sent to individuals lessees. (11) Confirmation from the PESL that it has collected the advance lease rental from the individual lessees on behalf of your appellant in the sworn statement. 21. In view of these arguments, the learned counsel of the assessee stated that the lease transactions entered by the assessee with the above six parties and with sublessees are genuine transactions and in no way it can be held as sham transactions and accordingly he urged the Bench to allow depreciation on these assets (SVPLs) leased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment of advance lease rentals as well as cooperation with the IT Department. Even after making full payments, the lease agreements were not terminated by the lessees. In view of these facts and circumstances of the case, the learned Departmental Representative further argued that the so-called lease agreements executed are prepared by the assessee to suit its own convenience. The assessee never wanted the documents to be examined in detail by putting them to strict test in the presence of the lessees. Actually the lessees who are none other than the buyers of SVPL from PESL and only the sales transactions of PESL to buyers were extrapolated and routed through the assessee's books to enable the assessee to make a bogus claim of depreciation and obtain soft loans from IREDA. The learned Departmental Representative further relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC). 24. As regards to the onus the learned Departmental Representative argued that to claim depreciation primary onus is on the assessee to prove beyond doubt the genuineness of the transactions. The assessee was requested to produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perfect correlation exists between the remittance back of margin money and loan received by PESL. (vii) It is seen that PESL issued invoices to the alleged lessees. If it was not sale, why invoices evidencing sale by PESL were issued? (viii) In such invoices issued by PESL to the alleged lessees rate of each unit was mentioned at Rs. 1,925 and Rs. 2,000 whereas lease agreements were for Rs. 3,000. (ix) It is seen that payments were made by the alleged lessees for the rate and price mentioned in the sale bills. (x) Two parties have confirmed (that) the invoices issued by PESL are for purchase and payments were made against this bill. (xi) The upfront lease advance for the entire period of 5 years was paid by the so-called lessees much in advance of receipt of the asset which is an unknown practice. Further, such a payment was alleged to assessee who does not have any previous experience in production/marketing of such a commodity. It is to be noted that such advance was made much before entering into the lease agreement which is also uncommon. (xii) The godown rent deed, lease agreements, receipt of goods at godown, delivery challans to end-users are all signed by employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into lease agreement with the 6 lessees during the same period, i.e., from 23rd March, 2001 to 31st March, 2001 for lease of these SVPLs for 5 years for a sum of Rs. 3,000 each. PESL raised invoices in the name of six lessees, i.e., (i) Kizhakethil Agencies, Kerala, (ii) Sunline Energy Solutions, Hyderabad, (iii) Energy Management Society, Kerala, (iv) Catholic Charties, Bihar, (v) Bhagalpur Social Service Society, Bhagalpur, and (vi) Solar Alternatives, Bihar and assessee took delivery of the SVPLs at the godown taken on rent by PESL. It is here pertinent to mention that the employees of PESL wore authorised to take delivery of the SVPLs and even the same employees of PESL did marketing of these SVPLs by way of lease. Ultimately PESL dispatched these SVPLs only after May, 2001. The invoices were raised during the period 24th March, 2001 to 31st March, 2001 by PESL on these six lessees and other sublessees. Even the freight charges were borne by PESL. The lease rentals were also collected by PESL. The assessee offered these lease rentals as income in each of the five years, i.e., 1/5th in each year and claimed 100 per cent depreciation on these assets but during the year the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s From PESL 31.12.2001 " 2,00,605 12.02.2002 Cash 3,00,000 31.3.2002 " 6,68,304 14.02.2002 Cash 99,800 31.3.2002 " 3,68,923 21.02.2002 Cash 1,00,000 Total 1,72,37,884 Financial year 1,12,21,104 2002-03 ----------------------------------------------------------- 27. It is further noticed that the money that was received by PESL from the assessee was remitted back to the assessee the very next day and, the money received and paid is the same. The details are as under: ----------------------------------------------------- Payments made Rentals received by assessee by assessee from PESL to PESL ----------------------------------------------------- Date DDNo. Amount Date DD.No. Amount ----------------------------------------------------- 17.4.2001 258496 9,14,250 18.4.2001 224429 9,14,250 11.5.2001 259248 4,00,000 12.5.2001 224480 7,59,000 11.5.2001 259248 1,59,000 25.5.2001 224509 4,83,000 11.5.2001 496554 2,00,000 29.5.2001 224520 8,62,500 24.5.2001 591706 4,83,000 28.5.2001 224518 4,31,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly replied that he is not aware of the addresses of the nodal agencies including the lessees. The question No. 11 along with reply is reproduced from the statement. Q. You have leased your assets to the nodal agencies, my question is how you have secured the payment towards lease rentals when you don't know the address of the nodal agencies which are controlled and supervised by Government agencies and IREDA. A. The lease rentals as per the lease agreement has been received by us in advance and the same is being apportioned every year in our books. The address of three people whom we have leased the lanterns are being collected from M/s Photon Energy Systems Ltd and we undertake to give the latest addresses along with the contact persons and telephone numbers at the earliest. Even vide question Nos. 18. 19 and 20 it is clearly stated by the managing director that he does not know about the lessee parties or about the correspondence. The relevant question and answer for 18, 19 and 20 are reproduced as under: Q. Do you have any correspondence from the lessees? A. I do not have any correspondence with the lessees. All the correspondences are done by the PESL with the lessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y at present. I will check with PESL and get back to you. Q. I will show you another reply from Solar Alternatives to whom you have leased 100 lanterns. They have stated that they have purchased these lanterns from PESL and they have made the payment by DD dt. 9th June, 2001 for Rs. 19,500. I will show you the invoice raised by PESL for the sale of 100 numbers of lanterns @ Rs. 1,925 to Solar Alternatives. You are requested to go through the reply and the invoice mention and to give your explanation regarding the same. A. I don't have any explanation right now. I have to check with PESL and get to back you. Even from question Nos. 49 and 50 it is clear that the assessee was not aware about the invoices raised and amount received. The relevant questions and answers are reproduced as under: Q. I'll now show you the invoices raised by Marg Constructions Ltd. and Catholic Charities for the sale of lanterns as received by them is in reply to summons under s. 131 directive No. 014/2000-01 dt. 30th March, 2001 for 300 numbers of lanterns @ Rs. 1,925 for Rs. 5,77,500. ------------------------------------------------- Sl. Invoice No. Date Qty.of Rate Total No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondence which I am not able to produce now. Q. We are in your office. You are requested to go through your documents and produce the details linking the receipts from PESL to lease rental deposits. A. I am not able to produce the correspondence. The Revenue vide question No. 67 put the query to the managing director of the assessee for giving any explanation about refusal to three lessee parties regarding lease transaction with the assessee, the assessee was not able to give any explanation. The relevant question No. 67 along with the answer reads as under: Q. Out of 6 nodal agencies, 3 are not traceable and the other 3 have denied any transaction with you? What is your explanation? They have further stated that they have purchased the lanterns from PESL directly. What is your explanation? A. I'll not be able to give any explanation." 28. The assessee was put to every allegations and he was confronted but the assessee could not offer any explanation and even the mode of payment received by the assessee from PESL and payments made by assessee to PESL clearly show that these payments are just paper transactions and the assessee is not aware about these six lessees, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates that was for the purpose of funding the end-users i.e., the tribal areas and to help the tribal people and not for the utilization of assessee for its own working capital. It is seen that the end-users have made full payments of these SVPLs, through the nodal agencies from these six lessees or sublessees not even over a period of five years but advance rentals. The assessee's counsel has argued purely on token issues, i.e., burden of proof, natural justice, ownership, interpretation of contract and evidences. Here the assessee has claimed lease transactions and in lieu of these lease transactions claimed depreciation. The primary burden is on the assessee to prove that it has leased these SVPLs only then the burden will shift on the Revenue. Here during the course of survey, the assessee has not offered any explanation regarding these lease transactions and he could not adduce any evidence that these are genuine lease transactions entered by way of lease agreements. The primary burden is on the assessee to prove the transactions only then the burden will shift on the Revenue. The assessee could not prove the lease transactions as genuine. Almost all the parties denied the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as purchased the assets for lease purpose. The assets will be put to use only if they are delivered to the lessees. In the present case, 5,000 lanterns were not delivered to the lessees on or before 31st March, 2001. In fact none of the lanterns were despatched from the godown on or before 31st March, 2001. This is established by various facts mentioned below: (a) IREDA has done inspection of lanterns before delivery to the end-users on various dates mentioned below at the god own: ------------------------------------------------- Date of No. of system Place of inspection inspection ------------------------------------------------- 25/3/2001 1325 Godown, Hyderabad 8/5/2001 1100 Godown, Hyderabad 27/5/2001 2575 Godown, Hyderabad ------------------------------------------------- (b) The way bills, Form X, issued by Andhra Pradesh Government is valid from 1st April, 2001 to 31st March, 2002 (c) From the way bills and lorry receipts submitted by the assessee it is noticed that the goods are transported only after May, 2001 to the various nodal agencies. 14.3 Since the assessee has not despatched the goods to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 185.9 lakhs was shown as outstanding credit as on 31st March, 2001. The assessee was receiving money on regular basis on the basis of bills raised upto October, 2000. Thereafter the money was received consequent to signing of MoU dt. 11th July, 2001 and 11th April, 2002. Before the AO it was claimed by the assessee that the advances were received but due to dispute the work could not be completed. Hence the money received was shown as liability. The AO after going through the documents placed before him assessed the amount of Rs. 1,85,92,269 as income of the assessee. It is a finding of fact by the AO that the assessee is following accrual basis of accounting and the assessee is recognising the income as per the Accounting Standards issued by the ICAI. Even the assessee vide letter dt. 6th March, 2004 stated that the company is following accrual basis of accounting as recognised by ICAI and guidelines issued as per Accounting Standards. The income is accounted for on the basis of stages of completion of each project. The moment the bills are submitted, the DLWL is making payments and the assessee is recognising the same as income from the very beginning. The AO noticed from the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee are nothing but payment received on account of completion of contract work executed by the assessee. The AO made the addition. Aggrieved the assessee preferred appeal before learned CIT(A). Learned CIT(A) confirmed the addition. Aggrieved the assessee is in appeal before us. 36. Before us learned counsel of the assessee filed the written submissions and relied on cl. XI of MoD dt. 1st April, 2002. He argued that MoD has not been acted upon and the matter is pending in various Courts and it is evidenced by the letter of advocate and copy of which is enclosed herewith in the paper book. He further argued that as late as 16th Dec., 2003 the notice from Police Department was received with reference to Crime No. 989/03 which is enclosed and in response to that notice, letters were handed over to the sub-inspector of Police; Central Crime Branch, Egmore, Chennai. He further stated that, in this respect, the FIR has already been lodged on 6th Dec., 2003 and the copy of the same is enclosed. In view of these facts he argued that MoD has not been acted upon. Accordingly, the payment is a liability standing in the name of DLWL as credit. 36.1 It is pertinent to note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the facts of the case are concerned neither the assessee nor the Departmental Representative has disputed. It is an admitted fact that the assessee received a sum of Rs. 279 lakhs and shown as credit received as advance as on 31st March, 2000. Similarly the assessee has also shown credit of Rs. 185.92 lakhs shown as advance received in its books as on 31st March, 2001. The assessee's contention in this regard is that this is a disputed amount and it is a liability. The assessee has produced a copy of letter dt. 26th Feb., 2004 written by the advocate to the sub-inspector of Police, City Crime Branch, Egmore, Chennai where he has referred Crime No. 989/03 and OS No. 595/01. Further the assessee has filed a copy of notice under ss. 160 and 91 Cr.PC by sub-inspector of Police to Shri G.R.K. Reddy of M/s Marg Constructions Ltd. Further a copy of FIR dt. 8th Dec., 2003 is filed. These documents are filed in assessee's paper book, i.e., written submissions. I at pp. 38 to 41. It is a fact that the assessee is a contractor executing civil and contract work for DLWL at Tadaperi in Ananthapur District, Andhra Pradesh for installation of wind mills. The civil and electrical work was comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or materials are due from party of the second part. The party of the first part hereby undertakes to indemnify and keep indemnified the party of the second part against all or any claims that may arise in respect of any statutory dues, wages payable to workers, any amount that may be payable to suppliers, sub-contractors or any of their dues in connection with the work at Pulturu/Tadipatri site, Anandapur District, Andhra Pradesh." Before that the assessee has also entered into an MoU dt. 11th July, 2001 and the assessee has settled the payment of Rs. 59.95 lakhs as per the schedule given in that MoU and relevant part of the schedule reads as under: "Now this MoU clearly states that upon signing of this agreement, the same will be submitted in the Courts where cases are filed by and on behalf both the parties and a compromise memo will be filed in the appropriate Courts by both the parties. Further, upon signing of this MoU and subsequent to honouring of the commitments mentioned above and clearance of payments on the said due dates all the transactions done before between both the parties become squared up and all liabilities stand cleared on both the parties." The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
