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TMI Blog2014 (2) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... e advances shown by the assesssee are nothing but payment received on account of the completion of work executed by the assessee and the Assessing Officer made the addition - The Tribunal after carefully analysing the entire facts and referring to the MOU and the FIR rightly held that payments received by the assessee and shown as outstanding in the accounts are to be treated as income and assessed to tax – Decided against Assessee. - T.C.A.No. 977 of 2006 and T.C.M.P.No. 1560 of 2006 - - - Dated:- 12-2-2014 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Appellant : Mr. Vijay Narayan, Senior Counsel for Mr. C. V. Shyam Sundar For the Respondent : Mr. T. R. Senthilkumar JUDGMENT (The Judgment of the Court was made by T. S. Sivagnanam, J.) This appeal by the assessee is directed against the order passed by the Income Tax Appellate Tribunal in ITA No.237/Mds/2005 dated 24.03.2006, for the assessment year 2001-2002. 2. The above appeal has been admitted on the following substantial questions of law:- (1) Has not the Tribunal erred in disallowing the depreciation claimed by the assessee without examining the evidence let in by the appellant at all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2001-2002 on the ground that they used the same for less than 180 days. 3.2 A survey under Section 133 A of the Act was conducted in the business premises of the assessee on 20.02.2004. Statement was recorded from the Managing Director with regard to the purchase and lease transactions as stated by them. On the same day, a survey was also conducted in the business premises of PHOTON and a statement was recorded from the Chief Executive Officer of the said Company. The Department noticed that the assessee had received loan from IREDA vide sanction letter dated 14.02.2001, placed purchase order on PHOTON for purchase of 5000 lanterns @ Rs.4260 per lantern by purchase order dated 19.03.2001. The lease agreements with the lessees were entered at Chennai on various dates between 23.03.2001 and 31.03.2002 against the invoices raised by the supplier PHOTON and on various dates from 24.03.2001 to 31.03.2001 for sale of lanterns. The assessee claimed that they took delivery of the goods at a godown which was taken on rent at Hyderabad by PHOTON, which was under the control of PHOTON for the period from March to July 2001. 3.3 It is the further case of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... role to play in the so called purchase and lease transactions; (b) the assessee made payments to PHOTON towards its margin money during April and May 2001 and they claimed to have received the entire lease rentals in advance during the financial year 2001-2002. However, on enquiry, it was found that payment was made by PHOTON towards advance lease rentals through the account maintained at Dena bank, Secunderabad; (c) it came to light that the payments made by the assessee towards margin money for purchase was received back instantaneously as advance lease rental on the very next day of the remittance by the assessee to PHOTON and (d) the money that was received by PHOTON from IREDA was remitted back to the assessee towards lease rentals". 3.8 Thus from the above sequence of events, the Assessing Officer concluded that there is no nexus between the receipt of lease rentals and payment of the same to the assessee towards advance lease rentals However, with respect to the loan received from IREDA or margin money, it was noticed that as soon as the money was received, the same was transferred to the assessee within two days. 3.9 Further, the purchase orders were placed on PHO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n impression that it is likely to sanction the loan at any time. Further, the lease rentals were utilized by PHOTON for working capital needs, since no margin money was received from the assessee and since the advance rentals utilized by PHOTON, the margin money received from the assessee returned to them later. 3.14 The assessee stated that the sale transactions are fairly reflected in the books of PHOTON and the said company had delivered the lanterns on the respective dates of invoices at the Godown hired at Hyderabad and the dominion or title on the lanterns had been effectively transferred from PHOTON to the assessee. Further, the genuineness of purchase of lantern is fortified by the fact that the assessee has obtained insurance policy for the theft and burglary from the New India Insurance Co. Ltd., for lanterns stored and the assessee had produced confirmation from certain parties as regards the lease transactions. Further, the assessee placed reliance on the loan which was extended by IREDA, which is a Government of India Organization. 3.15 The Assessing Officer, issued summons under Section 131 of the Act to the six concerns which were said to be the lessees of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end user, the assets have not been put to use before 31.03.2001, the assessee is not entitled for depreciation. 3.19 The next issue was regarding the addition made in the return of income as regard the transaction with M/s Das Laserway Windforms Ltd. (DLWL). 3.20 The facts related to this dispute are that the assessee entered into a contract with DLWL for execution of Civil and Electrical work in Andhra Pradesh for installation of wind mills. The work was completed in two phases in March 1999 and March 2000 and the other related works like substation etc., were carried out during the period March 2000 and March 2001. The assessee received remittances from DLWL during the financial year 1999-2000 and 2000-2001 and showed a part of it as advance in its books as on 31.03.2001 and only a part of it was shown as its income. As on 01.04.2000, a sum of Rs.2,79,00,000/- was outstanding as credit. In the financial year 2000-2001, the assessee received Rs.1.58 lakhs from DLWL and offered only Rs.98 lakhs as income and the balance of Rs.185.9 lakhs was shown as outstanding as credit as on 31.03.2001, whereas the assessee was receiving payments on regular basis, only a part of the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved against such order, the assessee preferred an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal). 3.26 Before the Tribunal, two issues were raised for consideration viz., (1) Whether the lease transactions entered by the assessee with 6 parties are sham transactions or genuine transactions for allowance of claim depreciation in the given facts and circumstances of the case. And further whether the asset was purchased by the assessee before 31.03.2001 and put to use? (2) Whether the amount received from Das Lagerway Windfarm Ltd. (DLWL)., being claimed as advance is income of the assessee for the relevant assessment year or not, in the given facts and circumstances of the case? 3.27 By order dated 24.03.2006, the Tribunal dismissed the appeal filed by the assessee. Aggrieved by the same, the assessee preferred this Tax Case Appeal and the appeal was admitted on the substantial questions of law referred to above. 4.1 Mr.Vijay Narayan, learned Senior Counsel appearing for the assessee submitted that the assessee paid Rs.34.5 lakhs as margin money and a sum of Rs.172.4 lakhs was paid by IREDA for the purchase of lanterns and the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HOTON as advance rentals received. Therefore, it was pointed out that this would establish that the assessee secured a soft loan from IREDA and utilized the same for making paper entries to show that the lanterns were leased out to six concerns, when as a matter of fact the lanterns were supplied to those six concerns by PHOTON and not by the assessee. 6.2 Further, the Tribunal, had referred to the survey conducted in the business premises of the assessee and the statement of the Managing Director, wherein the Managing Director has stated that he was not aware of these transactions except that they have purchased lanterns in the financial year 2000-2001 and leased out to six parties. In fact, the Tribunal has extracted the answers given by the Managing Director with regard to the various questions which were posed to him during the search conducted. In the answers he had stated that the lanterns have been purchased from PHOTON and the same were distributed to the end users on lease basis and PHOTON is regular in touch with the parties for servicing of the lanterns and the required information is available with them and all the correspondence were done by PHOTON with the said less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n so made so as to make it appear as if genuine and from the statement given by the Managing Director of the assessee as well as the records which were produced clearly establish that they were totally lacking in genuinity, more so while the funds came back to the assessee even within less than one or two days. 8. In the light of the above facts, as noticed by the assessing authority, we have no hesitation in holding that the transaction is a fraudulent transaction by noticing the conduct of the asessee in the manner in which the lease transactions were finalised, much prior to the sanction of the loan by IREDA. Further, the certification of the lanterns were in the godown of PHOTON and not in the place where it was installed or in the premises of the so called lessees to whom it was stated to have been despatched. Therefore, we fully agree with the findings recorded by the Tribunal on the basis of records. 9. Accordingly, the first issue relating to the genuineness of the transaction is decided against assessee and therefore the assessee is not entitled to the claim for depreciation. 10. Dehors the above conclusion, if it is seen as to whether the assessee was entitled to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e retained as advances. 12.3 The Assessing Officer noticed from the books of accounts that during the financial year 2000-2001, the assessee has shown credit as advances received as on 31.03.2001 amounting to Rs.1,85,92,269/-, the details of those amounts were brought out in the order of assessment, which has already been quoted by the Tribunal in paragraph No.34 of its order. 12.4 When the Assessing Officer called upon the assessee to explain the details, the assessee could not submit any reply. Thereafter, the Assessing Officer issued notice to DLWL under Section 133(6) of the Act. M/s DLWL, vide their reply dated 31.03.2004 stated that no money or material is due from or to the assessee and all the payments have been made for the execution of the civil and electrical work at Andhra Pradesh for installation of three wind mills for which the work was completed in two phases i.e., March 1999 and March 2000. Further, the DLWL referred to two memorandum of Understanding dated 11.07.2001 and 01.04.2002 regarding the payments effected, by way of settlement of accounts. 12.5 The Assessing Officer, on going through all these facts recorded the finding that the advances shown by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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