9911796707
TMI Blog2014 (2) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... eciate that no business can be effectively conducted in the manner as demanded by the tribunal and business can be done only on trust and also by word of mouth which would not necessitate any paper work and there is no mandate in any law to bind the assessee to conduct its affairs as demanded by all the lower authorities? (4) Has not the Tribunal failed to first of all see that PESL had raised invoices on the assessee for all the 5000 lanterns purchased by the assessee and on that sole ground the suspicion on the transaction has to fail? At any rate this did not breach any statutory rule or provision and the tribunal basing this as a ground for disallowing depreciation is erroneous both in law and on facts?" 3.1 The assessee filed its return of income on 31.10.2001 declaring total income of Rs.50,09,340/-. The return was processed under Section 143(1) of the Income Tax Act (hereinafter referred to as (the Act ). Thereafter, notices under Sections 143(2) and 142(1) of the Act along with the questionnaire were served on the assessee. The Managing Director, Financial Manager, Senior Executive Accounts were issued notices and in response to that they have filed certain details. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere borne by PHOTON. Further, the invoices/delivery challans were raised by PHOTON and the Chief Executive Officer of PHOTON was orally authorised by the assessee to give invoices under the name of assessee. It was noticed that no payments were made during the financial year 2000-2001 towards the purchase of lanterns and in the financial year 2001-2002, the assessee paid Rs.34.5 lakhs as margin money and the balance amount of Rs.172.4 lakhs was paid by IREDA for purchase of lanterns and the payment was made by IREDA directly to PHOTON in the financial year 2001-2002. 3.4 Further it came to light that the assessee received major part of the lease rentals in advance during the financial year 2001-2002 and they credited these advance lease rental amount of Rs.1,51,18,057/- and debited the individual account of lessees. During the financial year 2001-2002 and 2002-2003, the assessee received Rs.1,40,49,304/- and Rs.6,22,000/- respectively from the lessees. The balance amount of Rs.4,46,753/- was shown as outstanding as on 31.03.2003. 3.5 The department found that though in the books of accounts it was shown by the assessee that the lease rentals were received from the lessees, in act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various lessees were even before the finalisation of the lease agreements and placement of purchase order by assessee on PHOTON. 3.10 As regards the lease rentals received from PHOTON, the Managing Director of the assessee in his statement has accepted that he was unable to produce any covering letter regarding the receipt of money towards lease rental and stated that there was no communication or instruction from PHOTON, linking the receipt of money towards lease rentals to a particular period. Similarly in respect of other transactions, the Managing Director had given a statement which was brought on record by the Assessing Officer in paragraph No.6.1 of the order of assessment. 3.11 The Assessing Officer on going through the above facts observed that the assessee having claimed depreciation for the assessment years 2001-2002 and 2002-2003, the onus is on the assessee to prove beyond doubt that the transaction was genuine, it was the owner of the assets and the assets were put to use during the relevant years. In view of the gross inconsistencies and discrepancies which were found, when the findings were put across to the Managing Director, the Managing Director was unable to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c Charities stated that they had not purchased the lanterns from the assessee and they had no transaction with them, but, subsequently gave a confirmation that they had procured the lanterns from PHOTON and two other parties stated that they purchased lanterns only from PHOTON. The assessee was unable to produce the books of accounts and bank transaction with respect to the said six parties in order to verify the treatment of assets in their books and to verify the transaction in totality. 3.16 The Assessing Officer pointed out that the sale took place directly between PHOTON and buyers, but, to enable the assessee to get the benefit of depreciation and long term finance from IREDA, PHOTON and the assessee colluded in making a facade of PHOTON raising invoices on the assessee, assessee delivering the lanterns to the buyers and assessee entering into lease agreements with buyers etc. and this is only some paper work done by PHOTON and the assessee to defraud revenue and to hoodwink IREDA to lend money to them. All the paper work is not reflecting the true intentions of the actual transaction and they are meant only to be ignored as mere pieces of paper. 3.17 The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence the money was shown as liability. 3.21 The Assessing Officer did not agree with the stand taken by the assessee and observed that the assessee had completed the entire work and taxed the amount of Rs.1,85,92,269/-. Further, the Assessing Officer noticed that in the TDS certificates filed along with the return of income, the contract amount credited by DLWL and the income offered by the assessee in the return of income was not reconciled. The assessee stated before the Assessing Officer that DLWL was following accrual basis of accounting and the assessee is recognising the income as per the Accounting Standard issued by the ICAI and further stated that the income was recognised based on the stages of completion of each project and thus there was mismatch between the contract amount shown in the TDS certificate and the income offered in the income tax return. The Assessing Officer further noticed that on 01.04.2000, the assessee had shown receipt of Rs.279 lakhs which should have been offered as income in the financial year 2000-2001. 3.22 When the Assessing Officer called upon the assessee to confirm with regard to the transaction between the assessee and DLWL, the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the lanterns having been received by the assessee were given on lease to six agencies, whose names were mentioned in the order of assessment and the income received by way of lease rentals has been shown in the return for a period of 5 years. 4.3 It is further reiterated by the learned Senior Counsel that the Tribunal erred in coming to the conclusion that the transaction is a sham transaction without taking into consideration the fact that it is a loan transaction with IREDA, which is a Government of India Undertaking, which could not have been doubted. 4.4. The learned Senior Counsel for the petitioner further contended that the Tribunal erred to appreciate the adverse inference in respect of the transaction in which one of the parties has not been examined by the department. 5. Though four questions of law have been framed at the time of admission of the appeal, particularly there are only two issues viz., (i) whether the lease agreements entered by the assessee with the six concerns are sham transactions and if the answer to such question is in the negative, whether they are entitled for a claim for depreciation and whether the assets purchased by the assessee before 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging Director, in respect of the queries, some of which have been extracted in the order passed by the Tribunal, it is evident that the Managing Director was not aware of any of the transactions and he was not able to give any explanation and he was unaware of the payments received by the assessee from PHOTON and the payments made by the assessee to PHOTON, which clearly shows that these payments were paper transactions and the assesee is not aware about the six lessees. 6.4 Taking note of all the above facts, the Tribunal held that the primary burden is on the assessee to establish that it has leased out the lanterns and only after their satisfactorily discharging the burden cast upon them, then only the burden will shift on the revenue. 6.5 Further, while rejecting the contention raised by the assessee regarding the genuineness of the lease transaction, the Tribunal after examining the nature of transaction pointed out that the assessee has already received the advance lease rentals even before entering into lease transactions and adjusted the advance sale consideration against the advance lease rentals and therefore came to the conclusion that the lease agreements were never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fact has been established that these lanterns were despatched after 31.03.2001 and the Assessing Officer has clearly brought out the details regarding the testing of the assets having been done only in the godown of M/s PHOTON on 25.03.2001, 08.05.2001 and 27.05.2001. The various statutory forms was valid from 01.04.2001 to 31.03.2002 and further the way bills and lorry receipts submitted by the assessee show that the goods were transported only after May 2001 to various agencies. Therefore, the Assessing Officer, rightly concluded that the assessee having not despatched the goods to the end users, the assets having not been put to use before 31.03.2001, not entitled for any depreciation. The findings recorded by the Tribunal in this regard stands confirmed. 11. The next issue relates to the amount received from DLWL, claimed as advance in the income of the assessee for the relevant assessment year. 12.1 The case of the assessee is that they have entered into a contract with DLWL for installation of wind mills in Andhra Pradesh. The execution of civil and electrical work was completed in March 1999 and March 2000 and the assessee received certain remittances from DLWL during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a letter of an Advocate. Further, it was contended that a notice has been received from the Police Department with regard to the Crime No.989 of 2003 and the FIR has already been lodged on 06.12.2003 and therefore, it was contended that MOU was not acted upon. When such contention was reiterated before the Tribunal, the assessee did not disputed the facts. It was contended that there were certain cases pending in various Courts and a criminal complaint has already been registered. The Tribunal, after perusing the materials placed viz., the letter given by the counsel, copy of the FIR and the MOU, noticed that the assessee has received payments against the bills raised by various orders and shown part as advance in its books and offered a part as income. The facts and figures were not disputed by the parties and the assessee was regularly receiving payments on the basis of the bills raised and a part of the said amount was consistently shown as advance. Referring to clause (9) of the MOU dated 01.04.2002, the Tribunal pointed out that the assessee as well as DLWL agreed in full and final settlement on account of the transactions referred to in MOU. Therefore, factually it becomes c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
