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TMI Blog2012 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... the use of machinery before 31.3.1995 justifies the assessee’s stand that the plant and machinery was put to use before 31.3.1995. Therefore, the AO was not justified in disallowing the depreciation on the plant and machinery. Accordingly, the disallowance made by the AO is deleted. - Decided in favor of assessee. - I.T.A No. 427 & 685/Del/2005 - - - Dated:- 31-1-2012 - SHRI RAJPAL YADAV AND SHRI B.C. MEENA, JJ. Appellant by: Shri Pramod Kapur, CA Respondent by: Shri R.S. Negi, Sr. DR ORDER PER RAJPAL YADAV, JM: The assessee and revenue are in cross appeal against the order of Ld. CIT(A) dated 10.11.2004 passed for asstt. year 1995-96. First we take the appeal of assessee. The grounds of appeal taken by the assessee are not in consonance with Rule 8 of ITAT Rules. They are argumentative and descriptive in nature. In ground No. 1, assessee has taken 6 sub grounds which are in fact the arguments. It has pleaded that Ld. CIT(A) has erred in upholding the reopening of assessment u/s 147/148 of the Income Tax Act. 2. The brief facts are that assessee company at the relevant time was in the business of manufacturing of metalized Polyester and BOPP fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This notice was issued on 27th March, 2002. In response to the notice, assessee has filed its reply vide letter dated 27.1.2003. Ld. AO has rejected the explanation of assessee and proceeded to pass the reassessment order. The appeal to the Ld. CIT(A) did not bring any relief to the assessee. 5. Before us, Ld. Counsel for the assessee has submitted that notice u/s 148 has been served upon the assessee after expiry of four years. An assessment at the first instance was passed u/s 143(3). Therefore, the interdiction available in the proviso appended to section 147 would come in the way of AO for issuing the notice upon the assessee for reopening of the assessment. He pointed out that the embargo put by way of proviso contemplates that if four years have expired and scrutiny assessment u/s 143(3) was made by the AO, then the assessment can be reopened, if it is established that income has escaped assessment on account of failure of assessee to disclose all material facts fully and truly in connection with the income of the assessee for that asstt. year. Ld. Counsel for assessee while taking us through the reasons recorded by the AO contended that there is no allegation of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the course of search, material was found indicating the facts that these were bogus cash credits. Thus, in the original assessment proceeding assessee had not disclosed true and full facts in respect of share capital or share application money and the claim of depreciation. 8. Apart from this one aspect, we find that case of the assessee duly come within the ambit of explanation 2 and explanation 3 of section 153(3). Ld. First Appellate Authority has considered this aspect lucidly and elaborately. The order of the Ld. First Appellant Authority in this respect is worth to refer which read as under :- 1.10 Without prejudice to the observations in the earlier paragraphs, it would also be relevant to refer to the provisions of section 153(3). Just as section 150(1) provides that the time limit for issue of notice u/s 148 shall not apply to cases where assessment etc is in pursuance of a finding or direction contained in an order on appeal etc. section 153(3) excepts out such cases from the purview of the provisions of section 153(3) excepts out such cases from the purview of the provisions of section 153 (1) and 153(2) which prescribe time limit for completion of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The issue also came up before AP High Court in the case of B.A.R Abdul Rehman Sahib vs ITO 100 ITR 541 while interpreting explanation 2 to section 153 (3). In this case it was held by the court that the effect of section 150 and section 153(3) read with explanation 2 is that if any income is deleted from assessment in a higher proceedings on the ground that it is not the income of that year, steps may be taken u/s 147 to assess it as the income of another year without any limitation applying to the issue of notice u/s 148. This decision was followed by M.P. High Court in the case of Sukhdayal Pahwa vs CIT 140 ITR 206. It was held by the court that the provisions of section 150 override the provisions of section 149 and 151. The SLP against the said decision was dismissed by the Hon ble Supreme Court as reported in 160 ITR (St.) 74 (SC). Thus as per explanation 2 to section 153(3), where an income of a particular assessment year is excluded by an order in an appeal etc. its assessment in another year will be deemed to be in consequence of or in order to give effect to finding or direction in appeal etc. The intention of bringing this explanation is that the income of an assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es within the meaning of section 150 (i) and there was no time limit for issuing a notice u/s 148 in order to give effect to the finding of the ITAT. If the addition could not be made under the block assessment and the same had to be made in the regular assessment, then it would be unreasonable to say that this income could not be taxed either in the block assessment or in the regular assessment of the assessee. Ld. First Appellate Authority has considered this aspect also and has observed that observation of the ITAT may not be direction but it is a finding which can authorize the AO to initiate proceeding u/s 147 also. As far as the case law referred by the Ld. Counsel for the assessee is concerned, it is quite distinguishable on facts. The AO has not reopened the assessment on the directions of any authority, rather he applied his mind on the finding recorded in the appellate order of the Tribunal. He used it as an information for initiating the proceeding. He used it to tax the escaped income with the help of 150 (i) of the Income Tax Act. Taking into consideration the well reasoned order of Ld. First Appellate Authority covering all possible arguments of the assessee, we do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h entries is Rs. 21.80 lacs. The AO made the addition of this amount with the help of section 68. Similar is the position with regard to share application representing a sum of Rs. 27.40 lacs. 12. On appeal, Ld. First Appellate Authority has confirmed the addition after elaborate discussion on the issues the concluding paragraph on page 24 of the Ld. CIT(A) s order read as under :- The ratio in the above mentioned reasons is clearly applicable in this case. In the present case, the so called share applicants applied from the residential premises or the business premises of the assessee co. They came from far off places from all over the country to Delhi to apply for the shares of the assessee co. They came to the same bank and purchased drafts having consecutive numbers. Their share application forms were filled by the directors/employees of the assessee co. These persons were not found at the addresses given in the share application forms. The blank share transfer deeds signed by them alongwith acknowledgement slips were found at the premises of the assessee. Similarly, in some cases even the share certificates were found at the premises of the assessee. Therefore, considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted commercial production w.e.f. 23.3.1995. In support of this ground of appeal, it is pleaded by the revenue that Ld. First Appellate Authority has admitted additional evidence and has ignored the statement of Shri Sanjay Srivastava, who is a Works Manager of the Company . This statement was given by him u/s 132(4) on oath on 20.3.1996. In the statement he has deposed that operation of the plant was started sometime in April, 1995. The revenue has further pleaded that assessee at the relevant time was having power load of 350 KV whereas the plant and machinery imported by it could be run only on 500 KVA or above power load. Thus, there was no occasion for the assessee to demonstrate that machinery was put to use prior to 31st March, 1995. On the other hand, Ld. Counsel for the assessee relied upon the order of Ld. CIT(A) and submitted that Ld. First Appellate Authority has called for remand report from the AO which was given by the AO on 5th April, 2004. 18. We have duly considered the rival contention and gone through the record carefully.The assessee has claimed a depreciation of Rs. 67,92,780/-. It was claimed on the metalising plant on the ground that commercial production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority and it would not have issued such certificate without satisfying itself about the actual state of affairs. Therefore, this certificate cannot be simply brushed aside to determine the issue as to whether the production really started before 31.03.1995 or not. On the other hand, the statement of Shri Sanjay Srivastava during the course of search is not supported by any evidence on record. From the perusal of the assessment record it is also noticed that alongwith its reply dated 27.1. 2003 filed before the AO the assessee enclosed various evidences in support of its contention regarding use of machinery before 31.3.1995. This also contains a certificate dated 29.08.1995 issued by the Superintendent Central Excise-VIII, Division-II, Noida wherein it was mentioned that the metalizing plant imported by the assessee co. vide bill of entry dated 30.11.1944 was installed at the assessee s factory at Noida and the factory came into production on 28.3.1995. The goods produced by the assessee are excisable goods and come within the purview of the Central Excise Department. Therefore, the certificate issued by the Central Excise authorities to the effect that the production had star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a forecast and not an actual reality. Similarly, the mention in the prospectus that the co. had not received the pollution clearance certificate is not of any consequence as the assessee has placed on record before the AO a copy of the pollution clearance certificate dated 14.02.1995 issued by the UP Pollution Control Board. A copy of the same was placed by the AR on page 227 of the paper book. Therefore, no adverse inference can be drawn in respect of the same also. From the perusal of the tax audit report filed in the paper book it is noticed that on page 19 the auditors have given the quantitative details in respect of the purchases, sales, raw material consumed and production. The total production of metalized plastic film has been shown as 1049.80 kg out of which 431 kg is shown to have been sold and the balance quantity of 618.80 kg valued at Rs. 1,23,760/- has been shown as closing stock. This closing stock of finished goods appears in schedule 5 of the audited accounts at page 14 of the paper book. The AO has not challenged the correctness of the closing stock of finished goods and the same has been accepted by him as correct without giving any adverse comments about the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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