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TMI Blog2007 (6) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration and had claimed total depreciation of Rs. 30,85,97,317 in respect of 14 lease transactions on the assets leased out by it. As regards the remaining 3 transactions, the assessee itself did not claim any depreciation. The AO considered each of the lease transaction in detail and finally came to the conclusion that either some of the transactions were not genuine for the reason that they were more in the nature of finance transactions or in some of the cases the assessee was not found to be the owner of the assets and so on. Accordingly, the entire depreciation claimed by the assessee was disallowed. The assessee preferred an appeal before the CIT(A) before whom it was contended that the AO had recorded the statements of certain persons with which the assessee was not confronted and the AO had taken an adverse view against the assessee. Therefore, the CIT(A) by his order dt. 12th May, 1998 asked the AO to give an opportunity to the assessee to cross-examine the witnesses and to submit the remand report within 45 days. The CIT(A) waited for the remand report for almost 2 months but the same was not received from the AO. Therefore, by his order dt. 21st July, 1998, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bovesaid reasons, I have come to the conclusion that the assessment orders passed by the AO for the asst. yrs. 1995-96 and 1996-97 were prejudicial to the interests of Revenue and they require reassessment of income on the various issues involved. It has been held by the Hon'ble Madras High Court in the case of CIT vs. South India Shipping Corporation Ltd. (1998) 147 CTR (Mad) 433 : (1998) 233 ITR 546 (Mad) that on examination of records if there is a prima facie case, the assessment may be set aside to be framed afresh. Similar view has been expressed by the Hon'ble Madras High Court in the case of CIT vs. Seshasayee Paper Boards Ltd. (2000) 242 ITR 490 (Mad)." 5. The learned counsel for the assessee apprised us of the facts as are narrated in the preceding paras. It was then contended that the CIT in his order under s. 263 has not pointed out any specific error with regard to the assessment order. As regards the lease transactions, it was submitted that the line of enquiry in all the 14 cases was the same. Therefore, if there was no fault in those transactions where depreciation was disallowed by the AO, there cannot be any fault with those transactions where it was so allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and every item in his order. With regard to the issues other than lease transactions, it was contended that they do not find place in the assessment order as they are not new issues insofar as that they were already considered in asst. yrs. 1993-94 and 1994-95 by the AO. In support of this contention the learned counsel placed on record a copy of the reply furnished by the assessee to the queries raised by the AO during the assessment proceedings for asst. yrs. 1993-94 and 1994-95. 8. We have duly considered the rival contentions and the material on record. In order to resolve the dispute, it would be relevant to take note as to how the proceedings have taken place right from the beginning. The first assessment order was passed on 31st March, 1998 i.e. on the date when the assessment was getting time-barred. This only means that the notice under s. 143(2) and 142(1) must have been issued at the fag end of the limitation period to complete the assessment. After giving the preliminary remarks, the AO in his order straightaway started with the leasing transactions entered into by the assessee. Leaving aside the 3 transactions in which no depreciation was claimed, the AO proceeded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect for the determination of the total income. The new incumbent also devoted almost 30 pages of the 32 page order in discussing the lease transactions. No other issue having a bearing on the total income is discussed. In fact, both the assessment orders give a clear picture that, leave aside discussing any issue in the assessment order. no other issue has been enquired into by the AO either in the first round or in the second round. This has prompted the CIT to assume jurisdiction under s. 263 of the Act. 9. Sec. 263 can be invoked by the CIT when he feels that the order of the AO is erroneous and prejudicial to the interests of the Revenue. An order can be called erroneous under any of the two situations. One, when the AO has granted any relief which is not in accordance with law. Second situation in which the order can be called erroneous is when the AO has failed to make due enquiries as is expected of him. It has been held by the Delhi High Court in the case of Gee Vee Enterprises that unlike the Civil Court which is neutral, the AO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to arrange for cross-examination. Perhaps, this appears to be due to the passage of considerable time between the date of transaction and the proceedings. Being helpless to comply with the directions of the CIT(A), the AO did his best to consider the material on record and disallowed depreciation in 8 transactions and allowed it in the remaining 6 transactions. The argument of the learned Departmental Representative was as to how on the basis of same material the AO comes to a diametrically opposite decision with regard to the 6 transactions. We have mentioned earlier that the first assessment was completed at the fag end of the limitation period and there must have been some haste in completing it on the part of the AO. Moreover, the line of enquiry adopted by the AO in the second round was the same in all the 14 transactions. We fail to understand that if the CIT could not find any error in the 8 transactions where the AO disallowed the depreciation, how could he term the decision on the remaining 6 transactions to be erroneous. Merely because relief has been given to the assessee in respect of those 6 transactions, it does not become prejudicial to the interests of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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