Ita/360/2016 Of The Commissioner Of Income -Tax v. M/S Canara Bank

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF NOVEMBER 27072 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I1T.A. NO.360 OF 2016 BEITWEEN 1.THE COMMISSIONER OF INCOME-TAX. LTU, JSS TOWERS| BSK III STAGE, BANGALORE-560085. 2D.THE ADDL. COMMISSIONER OF INCOME TAX LTU, JSS TOWERS BSK III STAGE BANGALORE-560085. _.. APPELLANTS (BY SRI. ARAVIND K.V. ADV.) AND M/S. CANARA BANK112, J.C. ROADBANGALORE PAN: AAACC 6106G. ~-.. RESPONDENT (BY SRI. T. SURYANARAYANA RAO, ADV.) THIS I.T.A. IS. FILED UNDER SECTION 260-A OFI.T.ACT, 1961, ARISING OUT OF ORDER DATED 11-12-2015 PASSED IN ITA NO.767/BANG/2011, FOR THE ASSESSMENTYEAR 1997-98, PRAYING TO:I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAWSTATED ABOVE. I] ALLOW THE APPEAL AND SET ASIDE THE ORDERS|PASSED|BY|THE|ITAT, BENGALURUIN|ITANO. 767/BANG/2011 DATED 11-12-2015 AND CONFIRM THEORDER OF THE APPELLATE COMMISSIONER CONFIRMINGTHE ORDER PASSED BY THE ADDL. COMMISSIONER OFINCOME TAX, LTU, BENGALURU. THIS IL.T.A. COMING ON FOR HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the revenue. Mr.T.Suryanarayana,learnedcounselfortheaSSe@SSAEC This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matter|of the appeal pertains to the Assessment year 1997-98.The appeal was admitted by a Bench of this Court vide’order dated 11.10.2017 on the following substantialquestion of law: Whether the Tripunal was correct [n\holding that denial of opportunity of cross-examination results in violation of natural|justice, despite efforts made by tne assessing|officer to trace tne assessee? Tne object of|cross examination ts to test the veracity ofversion given in examination-in-cnief? In the)instance case, wnen it is proved witn fair’marketamount.certaintythatlCAaSedequipments did not exit, whether allowing|cross-examination would have made anydifference? 2.Facts leading to filing of this appeal brieflystated are that the assessee, which is a NationalizedBank filed its returns of income for Assessment Years1996-97 and 1997-98 on 29.11.1996 and 28.11.1997, in|whichtotal.incomeofRs.1,92,45,20,300/-and|Rs.2,96,99,47,660/- respectively was declared. In the)assessments made under Section 143(3) of the Act, theAssessing Officer disallowed the depreciation claimed on.the assets leased to M/s Rajender Steels Pvt. Ltd., M/s_Kedia Castle Dellon Industries Ltd. and M/s Kedia Mills. and Distilleries Ltd. on the ground that the assets were.not found to be in existence in a search conducted underSection 132 of the Act by the Department in March 1998in the premises of Rajender Group and in September1996 in Kedia Group of Companies. The assessee.thereupon filed appeals before the Commissioner ofIncome Tax (Appeals) for the Assessment Years 1996-97.and 1997-98. The aforesaid appeals were dismissed vide.order dated 26.7.1999 and 12.06.2000 respectively. Tribunal (hereinafter referred to as ‘thetribunal for short). The tribunal vide order dated12.10.2004 held that Assessing Officer nas failed to.furnisn the copies of the statements recorded during thecourse of searcn as well as otner material and nas also|not provided sufficient opportunity to the assessee tocross examine the lessee. The tribunal therefore,remitted the matter to the Assessing Officer with adirection to furnish copies of all the material relied upon by the Assessing Officer and to afford an opportunity tothe assessee of cross-examination. by the Assessing Officer and to afford an opportunity tothe assessee of cross-examination. 3.The Assessing Officer Dy an order dated —28.12.2006 once again disallowed the depreciationclaimed by the assessee in respect of assets leased toM/s Rajender Steels Ltd., M/s Kedia Mills and DistilleriesLtd. and M/s Kedia Castle Dellon Industries Ltd. The.aSS@CSSC2thereuponfiledappealsbeforetheCommissioner of Income Tax (Appeals), who by an orderdated 01.06.7011inter allaheld that the assessee haddischarged the onus to prove the genuineness of.transaction by furnishing necessary documents ViIZ.,copies of sanction letter, lease agreements, invoices,inspection records on various dates and inspectionreports pertaining to pre search and post search periodin support of its claim and the Assessing Officer did notrebut the corroborative evidence filed by the assessee.Thus, on the basis of meticulous appreciation ofevidence on record, the Commissioner of Income Tax (Appeals) held that the assessee has been able tocorroborate its claim of existence of leased equipmentwithincontrovertible evidenceanddirectedtheAssessingOfficer.CO allowthedepreciationOf Rs.1,52,80,650/- and Rs.1,14,60,488/- for Assessment.Years 1996-97 and 1997-98 respectively on the assetsleased out to M/s.Kedia Castle Dellon Industries Ltd. andM/s. Kedia Mills & Distilleries Ltd. In the result, theappeals were allowed. Being aggrieved, the revenuepreferred an appeal before the Income Tax AppellateTribunal. The tribunal by order date 11.12.2015 affirmedthe finding recorded by the Commissioner of Income Tax.(Appeals) and dismissed the appeals preferred by therevenue. In the aforesaid factual background, thisappeal nas been filed. 4Learned counsel for the revenue submittedthat the tribunal grossly erred in holding that denial ofOpportunity of cross-examination results in violation ofprinciples of natural justice. It is further submitted tnat the tribunal ought to Nave appreciated that the leased.assets were non-existent. On the other hand, learnedcounsel for the assessee submitted that whether or not|the leased assets are in existence is a finding of factwhich stands concluded in favour of the assessee by theCommissioner of Income Tax (Appeals) as well as theIncome Tax Appellate Tribunal. Therefore, no substantialquestion of law arises for consideration in this appeal. 5We have considered the submissions made bylearned counsel for the parties and have perused therecord. The issue whether or not the assets leased out.by tne assessee to various companies were in existenceat tne relevant time and whetner tne transactions iInquestion were genuine or not is a pure question of fact.The Commissioner of Income Tax (Appeals) on the basisof meticulous appreciation of evidence on record hasneid that the assessee nas produced sanction letters,master / Supplemental lease agreements, purchaseinvoices, installation certificates and inspection reports, a joint inspection conducted by the bank officials,independent valuation report in respect of assets leasedout to the companies as well as inspection reportspertaining to pre search and post search period. On thebasis of the aforesaid material on record, it was heldthat the transactions of the assessee with the companiesin question was genuine and the assets, which wereleased out were in existence and the assessee wasentitled to depreciation. Tne aforesaid finding of fact hasbeen affirmed by the Income Tax Appellate Tribunal.Thus, the matter stands concluded by concurrentfindings of fact, which by no stretch of imagination can.be said to be either based on no evidence or perverse.Even otherwise, no perversity in the findings could bepointed out to us. It is well settied in law, that this courtin exercise of powers under Section 260A of the Actwould not interfere with the finding of fact until the.Same is perverse |[See:SANTHOSH HAZARI VS.PURUSHOTTAM TIWARI, (2001) 3 SCC 179and a decision of this court inCIT VS. SOFT BRANDS (P).LTD.’, (2018) 406 ITR 513, ‘KULWANT KAUR S.|GURDIAL SINGH MANN’, (2001) 4 SCC 262, ‘VIJAYKUMARTALWARVS.CIT|330[TR1(SC), “‘K.RAVINDRANATHAN NAIR VS. CIT’, 247 ITR 178(SC)and‘SUDHARSHAN SILKS AND SAREES VS.)CIT’, 300 ITR 205 (SC)] 6. In view of preceding analysis, the substantialquestion of law framed in the appeal is answered against|the revenue and in favour of the assessee. In the result, we do not find any merit in this|appeal, the same fails and is nereby dismissed. | Sd/-JUDGE Sd/-' JUDGE