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TMI Blog2013 (11) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... earch, it was found that the M.S.Rolls given on lease by the assessee-Company to the BSAL were not in existence. On verification of the records of BSAL, it was found that BSAL is claiming bogus leased rentals and accommodating other financial companies in claiming depreciation at 100% in respect of non-existing assets. The Managing Director of BSAL Mr.Madhavan admitted vide letter dated 03-10-2000 that all lease transactions are only financial transactions. During the financial year 1995-96, the assessee has claimed to have leased assets worth Rs.1,49,23,582/- consisting of 103 M.S.Rolls. The assessee has claimed that these rolls were manufactured by M/s. B.H.International, Mumbai. The said Rolls were purchased by the assessee under the Hire Purchase Agreement from Kotak Mahindra Finance Limited (for short 'KMFL) and the same was leased to the BSAL. On verification of the records, it was found that these lease transactions are bogus transactions and there is no transaction of 103 M.S.Rolls from Mumbai to Bellary. On the basis of the said survey report, a show cause notice was issued to the assessee calling upon them to furnish certain information as to why remedial action be not ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined on lease. It could not explain the discrepancy and whereabouts of the remaining rolls. (vii) None of the Rolls in its possession contained distinctive markings of the financiers lessors who leased these Rolls. (viii) All the three transporters viz., Noble Roadlines, Mumbai, Sri.Balaji Roadways and M/s. Madras Goods Movers, Chennai have clearly stated that they transported only bulk scrap and coal to the above company and denied to have transported M.S.Rolls. Further, both the Chennai transporters stated that the bills and signature found in assessee's premises are forged. (ix) Any machinery parts including SCGI Rolls transported into Karnataka State is liable for 2% of entry tax but, lessee could not produce any evidence for payment of entry tax. (x) The so called suppliers viz., M/s. B.H. Enterprises, M/s. B.H.International at Mumbai and B.M.Steels (P) Ltd., Chennai were enquired as to whether they had supplied the Rolls to the lessee. Both the suppliers of Mumbai have denied that they have supplied any Rolls to the assessee but confirmed the fact that these bills were raised to facilitate financing from credit instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olls. In the Check-Post at Mumbai as well as Karnataka, there is no entry with regard to movement of goods from Mumbai to Bellary. The BSAL has made similar transactions with other financial institutions, and one of the financial institutions admitted that it is only a financial transaction and sought for withdrawal of 100% depreciation on the basis of the alleged lease of M.S. Rolls to BSAL. The Appellate Authority taking into consideration all these aspects of the matter by its order dated 4-3-2005 dismissed the appeal. Being aggrieved by the said order, the assessee preferred an appeal before the Income Tax Appellate Tribunal (for short 'the Appellate Tribunal'). The Appellate Tribunal after considering the matter in detail and taking note of the Xerox copy produced by the assessee with regard to transaction of M.S.Rolls from Mumbai to Bellary; the agreement entered into between the respondent and KMFL, and also payment of Central Sales Tax, Policy of Insurance and finance charges by its order dated 16-09-2005 allowed the appeal in part and observed that lease agreement entered into by the assessee is genuine operating lease. The assessee would be in a position to identify its a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivery of the machinery from the supplier." First defendant is the appellant. In para 5 of the affidavit of Shri Ramesh, the fact of delivery of machinery is mentioned. It shows that KMFL recognized that delivery of machinery has been made. 5.6 Another important aspect is that the revenue has not allowed deduction of hire purchase amount. In case, the transaction was purely a financial transaction, then amount paid as hire purchase to KMFL was to be allowed as deduction. By not allowing this deduction, revenue has accepted that assets have been delivered. The appellant has not claimed deduction of amount paid under hire purchase, corresponding to the cost of machinery as depreciation has been claimed. Such deduction has not been claimed in subsequent years also. The department in consistent with its finding that depreciation is not to be allowed should have allowed the amount paid under hire purchase. In case depreciation is not allowed then lease rental in its entity are not to be taxed. Lease rental in subsequent years have been offered for tax assessment for Assessment Year 1997-98 has become final as no reopening is possible at this moment. Moreover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and installation of the same by correctly re-opening assessments?" 8. Sri.M.Thirumalesh, learned counsel appearing for the Revenue contended that the order passed by the Appellate Tribunal is contrary to law and materials available on record. The Managing Director of BSAL in his letter dated 30-10-2000 admitted that all the lease transactions are only financial transactions obtained to repay the earlier loans outstanding and he is not in a position to prove the existence of supplier of the M.S.Rolls or his capacity to manufacture or produce the equipment which are supplied to them as per their invoices. Further, the supplier of the M.S.Rolls i.e. M/s. B.H. International, Mumbai and M/s. B.M. Steel Private Limited, Chennai have denied the supply of M.S.Rolls to the Lessee. However, they have confirmed the fact that these bills were raised to facilitate financing from the Credit Institutions and the sale proceeds received from the Credit Institutions were returned to the Lessee immediately. Pass Book of the said Companies clearly disclose the said aspect of the matter. There is no actual movement of M.S.Rolls from Mumbai to Bellary. Sri.Dinesh, Executive of KMFL stated that all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y leased to BSAL. In the survey conducted under Section 133A of the Act in the premises of the BSAL, Bellary, it was found that M.S.Rolls said to have been leased by the assessee were not in existence. The M.S.Rolls was obtained by the assessee under hire purchase from KMFL and the assessee is not the real owner of the goods. The entry tax is payable on the goods entering into a local area for consumption or for sale. The assessee has neither consumed nor used the Rolls. No document has been produced with regard to payment of tax and also with regard to transportation of the goods from Mumbai to Bellary. While surveying, authorities noticed that no documents were found to support the lease, no stock register was found. The photocopies of the delivery challans do not bear the seal of sales-tax check post either in the State of Maharashtra or in the State of Karnataka. There is no evidence for payment of entry tax. The transporter has denied the transportation of Rolls from Mumbai to Bellary. The Supplier of M.S.Rolls also denied the supply of M.S.Rolls either to the Transporter or to BSAL. The Managing Director of BSAL admitted that it is only a paper transaction. There is no actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased by the assessee was available in the premises of BSAL. The Inspector in the presence of assessee's representative verified that 103 Rolls with identification marks of the assessee were available at the premises of BSAL is contrary to the records. The records clearly disclose that during the course of survey 361 Rolls were found. As per the information furnished by the BSAL, they were in possession of 3702 Rolls which were obtained on lease. No explanation was offered with regard to whereabouts of the remaining Rolls. There was no marking as on the date of survey. For the purpose of the case, subsequently, marking has been made on the said M.S.Rolls. Apart from that, the life of the M.S.Rolls is around 3 to 5 years. According to the assessee, the lease of M.S.Rolls has been made for the period of five years in the year 1995-96. The fresh inspection has been made in 2004. It is impossible to believe that the very same Rolls which have been leased by the assessee were still available in the premises of BSAL. Further finding of the Appellate Tribunal that M.S.Rolls can be transported in four lorries cannot be acceptable. The weight of 103 M.S.Rolls coil is about 204.34 ton. The sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Division Bench of this court in a judgment reported in 266 ITR 178 (Supra) held as under: "When an assessee makes a claim for depreciation on the grounds allowed by law, it would always be open to the Assessing Officer to lift the veil of the transaction put forward and find out as to whether the transaction put forward for the purpose of claiming depreciation is a genuine transaction or only a make believe one intended to avoid payment of tax. An assessee who claims depreciation has to satisfy the revenue that he is entitled for grant of depreciation on items claimed by it. The burden of proof is on the assessee." 18. In the instant case, the Assessing Officer on the basis of the survey conducted in the premises of BSAL found that lease has been created on the basis of the non-existing assets. Accordingly, notice has been issued. All the above facts go to prove that hire purchase and lease transaction between the assessee and KMFL on one hand and the assessee and BSAL on the other hand were only paper transactions and there was no genuine purchase of lease of assets. By entering into paper transaction, the assessee has benefitted by availing depreciation at th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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