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TMI Blog2014 (5) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination - The finding of CIT(A) is based on incorrect understanding of the law - the issue needs to be decided in the light of the principles of natural justice – thus, the matter relating to the transactions with M/s. Rajendra Steels Ltd. is remitted back to the AO – Decided in favour of Assessee. - ITA Nos. 3643 & 3644/Mum/2001, Int. T A No.39/Mum/2001 - - - Dated:- 2-5-2014 - Shri I. P. Bansal, JM And Shri N. K. Billaiya, AM,JJ. For the Petitioner : Shri A. C. Tejpal For the Respondent : Shri S. E. Dastur, Sr. Adv. Arati Vissanji ORDER Per N. K. Billaiya, AM 1. These appeals by the Assesse are directed against the order of CIT(A)-VII, Mumbai, pertaining to A.Ys. 1996-97 and 1997-98. All these appeals were heard together as common issues were involved and they are disposed off by this common order for the sake of convenience and brevity. ITA NO. 3643/Mum/2001 : 2. The Assessee has raised four substantive grounds of appeal with su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parties and in certain cases assets have been purchased from a party and leased back to the same party. The Assessee has claimed total depreciation at Rs.16,41,78,831/-. The Assessee was asked to furnish the details of the assets leased out during the year under consideration and depreciation claimed thereon. The Assessee was also asked to show cause as to why the depreciation should not be disallowed by treating the alleged lease transaction as in the nature of finance transaction. The Assessee was also asked to furnish the details of capital component and rental component comprised in the lease rental credited to the profit and loss account. The Assessee filed a detailed reply with necessary/required information. It was observed that the Assessee has entered into lease transactions of new equipment of the value of Rs.18.21 crores and two transactions of the value of Rs.12.90 crores of used/old equipment. Rent in respect of these lease transactions was credited to the profit and loss account at Rs.0.20 crore. The AO further observed that the cost of all the equipment/assets claimed to have been given on lease during the year is Rs.31.11 crores on which the Assessee has claimed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was without prejudice. Aggrieved by this, the Assessee carried the matter before CIT(A), but without any success. The grievances of the Assessee has been considered by the CIT(A) from para 9 onwards of his order. At para 16, the CIT(A) observed that insofar as the claim of depreciation to the tune of Rs.2,65,63,680/- on account of assets purchased from M/s. Rajendra Steels Ltd. and leased out to the same is concerned, it has clearly emerged on account of the search and seizure operation that the assets in the said case were non-existent. CIT(A) was of the opinion that the AO has rightly disallowed the same. Insofar as the depreciation claimed on other leased assets are concerned, CIT(A) was of the opinion that the Assessee was not the owner of the said leased assets as has been established by the AO from the various clauses of the lease agreement. CIT(A) was convinced that the Assessee was rightly denied the benefit of depreciation claimed on the leased assets and confirmed the disallowance of depreciation made by the AO. Aggrieved by this, the Assessee is before us. 4.1 The Ld. Sr. Counsel vehemently submitted that the revenue authorities have grossly erred in not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as considered the implications of Sec. 19 of Sale of Goods Act, 1930. 4.3.2 The Tribunal, Mumbai bench in the case of Development Credit Bank Ltd. (supra) has followed the decision of the Hon ble Supreme Court in the case of ICDS (supra) and the decision of Hon ble Delhi High Court in the case of Cosmos Films (supra) and allowed the claim of depreciation. 4.3.3 The Tribunal, Mumbai bench, in the case of L T (supra) has considered a similar issue at para 27 of its order and at para 28 followed the findings of the Hon ble Supreme Court in the case of ICDS (supra) and also of the co-ordinate bench in the case of Development Credit Bank Ltd. (supra) and allowed the claim of depreciation on sale of lease back assets. Considering all these judicial decisions in the light of the facts, we direct the AO to allow the depreciation except in respect of the transaction with M/s. Rajendra Steels Ltd., which we discuss hereinafter. 4.3.4 Insofar as the transaction with M/s. Rajendra Steels Ltd. is concerned, we find that the entire claim has been declined solely on the basis of the statement recorded at the time of the search. It is an undisputed fact that the Assessee was never allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or evidence used is of Collateral Nature. Since the finding of CIT(A) is based on incorrect understanding of the law, in our considered view, this issue needs to be decided in the light of the principles of natural justice. We, therefore, restore the issue relating to the transactions with M/s. Rajendra Steels Ltd. back to the file of the AO. AO is directed to allow an opportunity to the Assessee to cross-examine the deponent, whose statement was recorded at the time of search, and on the basis of whose statement the claim of depreciation has been disallowed. Here, we would like to make it clear that the matter is restored to the file of the AO only for the limited purpose of verification of the transaction with M/s. Rajendra Steels Ltd. Insofar as the claim of depreciation of other leased assets are concerned, we have allowed the claim following the decision of the Hon ble Supreme Court and Hon ble High Court discussed elsewhere. Ground (B) with its sub-grounds is allowed in part for statistical purpose. 5. Ground (C) relates to the charging of interest u/s 234B of the Act. Levy of interest is mandatory though would be consequential in the present case. AO is directed to r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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