Marg Constructions Ltd v. The Assistant Commissioner Of Income Taxcompany Circle Iv(1), Nungambakkam High Roadchennai 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 12.02.2014 Coram The Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Mr.Justice T.S.SIVAGNANAM T.C.M.P.No.1560 of 2006 MARG Constructions Ltd.,501, Apex Chambers,20, Thiagaraja RoadChennai 17rep. By its Managing DirectorMr.G.R.K.Reddy ... Appellant -vs- The Assistant Commissioner of Income TaxCompany Circle IV(1), Nungambakkam High RoadChennai 600 034 ... Respondent Civil Miscellaneous Appeal filed under Section 260-A of theIncome Tax Act, 1961, against the order of the Income Tax AppellateTribunal, Madras 'A' Bench, dated 24.03.2006 in ITA No.237/MDS/2005which is preferred against the order dated 13.12.2004 in ITANo.181/04-05 (received on transfer from Appeal – V- Vide ITA 197/04-05/A-V on the file of the Commissioner of Income Tax (Appeals)-VIChennai which is preferred against the Order dated 31.03.2004 on thefile of the Assistant Commissioner of Income Tax Company Circle IV(1)Chennai – 34 for the Assessment year 2001-2002. For Appellant:Mr.Vijay Narayan, Senior Counselfor Mr.C.V.Shyam Sundar For Respondent : Mr.T.R.Senthilkumar J U D G M E N T (The Judgment of the Court was made by T.S.SIVAGNANAM, J.) This appeal by the assessee is directed against the order passedby the Income Tax Appellate Tribunal in ITA No.237/Mds/2005 dated24.03.2006, for the assessment year 2001-2002. https://hcservices.ecourts.gov.in/hcservices/ 2. The above appeal has been admitted on the followingsubstantial questions of law:- “(1) Has not the Tribunal erred indisallowing the depreciation claimed by theassessee without examining the evidence let inby the appellant at all the stages and by merelyrelying on the evidence collected by theassessing officer behind the back of theappellant? (2) Has not the Tribunal erred in viewingthe entire transaction in a suspicious manner tothe disadvantage of the assessee? (3) Has not the Tribunal failed toappreciate that no business can be effectivelyconducted in the manner as demanded by thetribunal and business can be done only on trustand also by word of mouth which would notnecessitate any paper work and there is nomandate in any law to bind the assessee toconduct its affairs as demanded by all the lowerauthorities? (4) Has not the Tribunal failed to first ofall see that PESL had raised invoices on theassessee for all the 5000 lanterns purchased bythe assessee and on that sole ground thesuspicion on the transaction has to fail? At anyrate this did not breach any statutory rule orprovision and the tribunal basing this as aground for disallowing depreciation is erroneousboth in law and on facts?”€ 3.1 The assessee filed its return of income on 31.10.2001declaring total income of Rs.50,09,340/-. The return was processedunder Section 143(1) of the Income Tax Act (hereinafter referred toas “("the Act”). Thereafter, notices under Sections 143(2) and 142(1) of the Act along with the questionnaire were served on theassessee. The Managing Director, Financial Manager, Senior ExecutiveAccounts were issued notices and in response to that they have filedcertain details. The assessee claimed that they have purchased 5000solar phot voltaic lanterns ("Lanterns") during the last week ofMarch 2001 from M/s Photon Energy Systems Ltd (hereinafter referredto as the “(PHOTON”), which is a Hyderabad based company, said to bethe manufacturer of non-conventional energy devices. The rate atwhich the lanterns were purchased is stated to be at Rs.4260/- perlantern. The assessee further claimed that these lanterns were leased out to various parties in remote places and they were given on leaseto 6 agencies viz., 1) Kizhakethil Agencies, Kerala (2) SunlineEnergy Solutions, Hyderabad (3) Energy Management Society, Kerala (4)Catholic Charities, Bihar (5) Bhagalpur Social Service Society,Bhagalpur and (6) Solar Alternatives, Bihar. The assessee capitalizedassets (lanterns) worth Rs.2.13 crores during the financial year2000-2001 and claimed depreciation @ 50% of Rs.1.05 crores in theassessment year 2001-2002 on the ground that they used the same forless than 180 days. 3.2 A survey under Section 133 A of the Act was conducted in thebusiness premises of the assessee on 20.02.2004. Statement wasrecorded from the Managing Director with regard to the purchase andlease transactions as stated by them. On the same day, a survey wasalso conducted in the business premises of PHOTON and a statement wasrecorded from the Chief Executive Officer of the said Company. TheDepartment noticed that the assessee had received loan from IREDAvide sanction letter dated 14.02.2001, placed purchase order onPHOTON for purchase of 5000 lanterns @ Rs.4260 per lantern bypurchase order dated 19.03.2001. The lease agreements with thelessees were entered at Chennai on various dates between 23.03.2001and 31.03.2002 against the invoices raised by the supplier PHOTON andon 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 godownwhich was taken on rent at Hyderabad by PHOTON, which was under thecontrol of PHOTON for the period from March to July 2001. 3.3 It is the further case of the assessee that the employeesof PHOTON were authorised by them to take delivery of the lanterns atthe godown and undertook marketing of the lanterns on lease basis andthe lanterns were despatched to the end users after May 2001 and thefreight charges for delivery of the lanterns to the end users wereborne by PHOTON. Further, the invoices/delivery challans were raisedby PHOTON and the Chief Executive Officer of PHOTON was orallyauthorised by the assessee to give invoices under the name ofassessee. It was noticed that no payments were made during thefinancial year 2000-2001 towards the purchase of lanterns and in thefinancial year 2001-2002, the assessee paid Rs.34.5 lakhs as marginmoney and the balance amount of Rs.172.4 lakhs was paid by IREDA forpurchase of lanterns and the payment was made by IREDA directly toPHOTON in the financial year 2001-2002. 3.4 Further it came to light that the assessee received majorpart of the lease rentals in advance during the financial year 2001-2002 and they credited these advance lease rental amount ofRs.1,51,18,057/- and debited the individual account of lessees.During the financial year 2001-2002 and 2002-2003, the assesseereceived Rs.1,40,49,304/- and Rs.6,22,000/- respectively from thelessees. The balance amount of Rs.4,46,753/- was shown as outstandingas on 31.03.2003. https://hcservices.ecourts.gov.in/hcservices/ 3.5 The department found that though in the books of accountsit was shown by the assessee that the lease rentals were receivedfrom the lessees, in actuality, the alleged lease rentals werereceived from PHOTON. The margin money collected by PHOTON wasremitted back to the assessee. The assessee offered 1/5th of theadvance lease rentals as income for the financial year 2001-2002 andsubsequent year. 3.6 The assessee purchased lanterns at Rs.4260/- per piece andas per the lease deed, it was leased out at Rs.3,000/- for a periodof five years. It was claimed that the lanterns were distributed tothe end users at subsidized rate and the assessee could make good theloss on account of 100% depreciation availed and on account of lowrate of interest i.e., 2.5% on the IREDA loan. The assessee producedcopies of invoices raised by PHOTON towards the sale of lanterns. 3.6 The assessee purchased lanterns at Rs.4260/- per piece andas per the lease deed, it was leased out at Rs.3,000/- for a periodof five years. It was claimed that the lanterns were distributed tothe end users at subsidized rate and the assessee could make good theloss on account of 100% depreciation availed and on account of lowrate of interest i.e., 2.5% on the IREDA loan. The assessee producedcopies of invoices raised by PHOTON towards the sale of lanterns. 3.7 The Assessing Officer, on perusing the details of challanswhich were placed for consideration, by pointing out certain seriousdiscrepancies, held that "(a) the assessee had no role to play in the so calledpurchase and lease transactions; (b) the assessee made payments to PHOTONtowards its margin money during April and May2001 and they claimed to have received the entirelease rentals in advance during the financialyear 2001-2002. However, on enquiry, it was foundthat payment was made by PHOTON towards advancelease rentals through the account maintained atDena bank, Secunderabad; (c) it came to light that the paymentsmade by the assessee towards margin money forpurchase was received back instantaneously asadvance lease rental on the very next day of theremittance by the assessee to PHOTON and (d) the money that was received byPHOTON from IREDA was remitted back to theassessee towards lease rentals". 3.8 Thus from the above sequence of events, the AssessingOfficer concluded that there is no nexus between the receipt of leaserentals and payment of the same to the assessee towards advance leaserentals However, with respect to the loan received from IREDA ormargin 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 PHOTON on19.03.2001 and PHOTON sold lanterns in the last week of March 2001.The lease agreements were said to have been entered into during thelast week of March 2001 between the assessee and various parties andthe delivery of the lanterns was after May/June 2001. However, thepayments made by various lessees were even before the finalisation ofthe lease agreements and placement of purchase order by assessee onPHOTON. 3.10 As regards the lease rentals received from PHOTON, theManaging Director of the assessee in his statement has accepted thathe was unable to produce any covering letter regarding the receipt ofmoney towards lease rental and stated that there was no communicationor instruction from PHOTON, linking the receipt of money towardslease rentals to a particular period. Similarly in respect of othertransactions, the Managing Director had given a statement which wasbrought on record by the Assessing Officer in paragraph No.6.1 ofthe order of assessment. 3.11 The Assessing Officer on going through the above factsobserved that the assessee having claimed depreciation for theassessment years 2001-2002 and 2002-2003, the onus is on the assesseeto prove beyond doubt that the transaction was genuine, it was theowner of the assets and the assets were put to use during therelevant years. In view of the gross inconsistencies anddiscrepancies which were found, when the findings were put across tothe Managing Director, the Managing Director was unable to explain tothe various queries raised in this regard. Further, three parties whowere said to had taken lanterns on lease have stated that they had notransaction of lease or purchase with the assessee. 3.12 On the basis of the above evidence which was gathered,discrepancies and inconsistencies noticed as well as the statementgiven by the Managing Director, show cause notice was issued to theassessee as to why the entire purchase and lease transactions shouldnot be held as "sham" and depreciation claimed should not bedisallowed. 3.12 On the basis of the above evidence which was gathered,discrepancies and inconsistencies noticed as well as the statementgiven by the Managing Director, show cause notice was issued to theassessee as to why the entire purchase and lease transactions shouldnot be held as "sham" and depreciation claimed should not bedisallowed. 3.13 The assessee in their reply submitted that PHOTON had takenthe responsibility of marketing the lanterns on behalf of theassessee on lease basis and the marketing was started in August 2000and PHOTON started collecting lease rentals in advance. This wasdone in anticipation of the loan application of the assessee beingapproved by IREDA and giving an impression that it is likely tosanction the loan at any time. Further, the lease rentals wereutilized by PHOTON for working capital needs, since no margin moneywas received from the assessee and since the advance rentals utilizedby PHOTON, the margin money received from the assessee returned tothem later. 3.14 The assessee stated that the sale transactions are fairly reflected in the books of PHOTON and the said company had deliveredthe lanterns on the respective dates of invoices at the Godown hiredat Hyderabad and the dominion or title on the lanterns had beeneffectively transferred from PHOTON to the assessee. Further, thegenuineness of purchase of lantern is fortified by the fact that theassessee has obtained insurance policy for the theft and burglaryfrom the New India Insurance Co. Ltd., for lanterns stored and theassessee had produced confirmation from certain parties as regardsthe lease transactions. Further, the assessee placed reliance onthe loan which was extended by IREDA, which is a Government of IndiaOrganization. 3.15 The Assessing Officer, issued summons under Section 131 ofthe Act to the six concerns which were said to be the lessees of theassessee. Two of the parties returned the summons and another partyhad shifted to a new address and the assessee furnished the telephonenumber of those two agencies which were found to be different fromthe telephone numbers submitted in their earlier letter. One of theso called lessees viz., Catholic Charities stated that they had notpurchased the lanterns from the assessee and they had no transactionwith them, but, subsequently gave a confirmation that they hadprocured the lanterns from PHOTON and two other parties stated thatthey purchased lanterns only from PHOTON. The assessee was unable toproduce the books of accounts and bank transaction with respect tothe said six parties in order to verify the treatment of assets intheir books and to verify the transaction in totality. 3.16 The Assessing Officer pointed out that the sale took placedirectly between PHOTON and buyers, but, to enable the assessee toget the benefit of depreciation and long term finance from IREDA,PHOTON and the assessee colluded in making a facade of PHOTON raisinginvoices on the assessee, assessee delivering the lanterns to thebuyers and assessee entering into lease agreements with buyers etc.and this is only some paper work done by PHOTON and the assessee todefraud revenue and to hoodwink IREDA to lend money to them. Allthe paper work is not reflecting the true intentions of the actualtransaction and they are meant only to be ignored as mere pieces ofpaper. 3.17 The Assessing Officer further pointed out that the assesseenever produce lessees for examination inspite of repeatedopportunities; no correspondence with the lessees with regard to thepayment of advance lease rental was produced and the lease agreementswere not terminated and therefore, held that the it is the bigquestion whether the so called lessees executed the alleged leaseagreements or the assessee prepared them as it own to suit itsconvenience. 3.17 The Assessing Officer further pointed out that the assesseenever produce lessees for examination inspite of repeatedopportunities; no correspondence with the lessees with regard to thepayment of advance lease rental was produced and the lease agreementswere not terminated and therefore, held that the it is the bigquestion whether the so called lessees executed the alleged leaseagreements or the assessee prepared them as it own to suit itsconvenience. 3.18 The Assessing Officer, after taking note of the facts andafter analysing the role of assessee in the matter held that theassessee could not produce any details and concluded that the https://hcservices.ecourts.gov.in/hcservices/ transaction between the assessee and the PHOTON is a 'sham'transaction with a view to avoid tax and the claim of depreciation tothe tune of Rs.1.05 crores was disallowed and added back to thereturned income and since the assessee had not despatched the goodsat the end user, the assets have not been put to use before31.03.2001, the assessee is not entitled for depreciation.3.19 The next issue was regarding the addition made in thereturn of income as regard the transaction with M/s Das LaserwayWindforms Ltd. (DLWL). 3.20 The facts related to this dispute are that the assesseeentered into a contract with DLWL for execution of Civil andElectrical work in Andhra Pradesh for installation of wind mills.The work was completed in two phases in March 1999 and March 2000 andthe other related works like substation etc., were carried out duringthe period March 2000 and March 2001. The assessee receivedremittances from DLWL during the financial year 1999-2000 and 2000-2001 and showed a part of it as advance in its books as on 31.03.2001and only a part of it was shown as its income. As on 01.04.2000, asum of Rs.2,79,00,000/- was outstanding as credit. In the financialyear 2000-2001, the assessee received Rs.1.58 lakhs from DLWL andoffered only Rs.98 lakhs as income and the balance of Rs.185.9 lakhswas shown as outstanding as credit as on 31.03.2001, whereas theassessee was receiving payments on regular basis, only a part of theamount was shown as advance. The money was received by the assesseeon regular basis on bills raised upto October 2000. Thereafter, themoney was received consequent to signing of MOU dated 11.07.2001. Theassessee claimed that the advance was received but due to dispute,the work could not be completed and hence the money was shown asliability. 3.21 The Assessing Officer did not agree with the stand taken bythe assessee and observed that the assessee had completed the entirework and taxed the amount of Rs.1,85,92,269/-. Further, the AssessingOfficer noticed that in the TDS certificates filed along with thereturn of income, the contract amount credited by DLWL and the incomeoffered by the assessee in the return of income was not reconciled.The assessee stated before the Assessing Officer that DLWL wasfollowing accrual basis of accounting and the assessee is recognisingthe income as per the Accounting Standard issued by the ICAI andfurther stated that the income was recognised based on the stages ofcompletion of each project and thus there was mismatch between thecontract amount shown in the TDS certificate and the income offeredin the income tax return. The Assessing Officer further noticedthat on 01.04.2000, the assessee had shown receipt of Rs.279 lakhswhich should have been offered as income in the financial year 2000-2001. 3.22 When the Assessing Officer called upon the assessee toconfirm with regard to the transaction between the assessee and DLWL, the assessee stated that because of the dispute with DLWL,they werenot able to obtain any information from DLWL. 3.22 When the Assessing Officer called upon the assessee toconfirm with regard to the transaction between the assessee and DLWL, the assessee stated that because of the dispute with DLWL,they werenot able to obtain any information from DLWL. 3.23 Therefore, notice was issued to DLWL under Section 133(6)of the Act and in response to such notice, DLWL by reply dated31.03.2004 stated that no money or material is due from the assesseeand no money or material is due to the assessee and payments havebeen made for the work carried out by the assessee as per the MOUsdated 11.07.2001 and 01.04.2002 and final settlement against thebills have already been made. 3.24 Taking note of all these facts into consideration, theAssessing Officer confirmed the addition proposed in the show causenotice. 3.25 Aggrieved by such order, the assessee preferred an appealbefore the Commissioner of Income Tax (Appeals), who, by a speakingorder dated 13.12.2004 dismissed the same, confirming the order ofthe Assessing Officer. Aggrieved against such order, the assesseepreferred an appeal before the Income Tax Appellate Tribunal(hereinafter referred to as the Tribunal). 3.26 Before the Tribunal, two issues were raised forconsideration viz., (1) Whether the lease transactions entered bythe assessee with 6 parties are sham transactionsor genuine transactions for allowance of claimdepreciation in the given facts and circumstancesof the case. And further whether the asset waspurchased by the assessee before 31.03.2001 andput to use?(2) Whether the amount received from DasLagerway Windfarm Ltd. (DLWL)., being claimed asadvance is income of the assessee for the relevantassessment year or not, in the given facts andcircumstances of the case? 3.27 By order dated 24.03.2006, the Tribunal dismissed theappeal filed by the assessee. Aggrieved by the same, the assesseepreferred this Tax Case Appeal and the appeal was admitted on thesubstantial questions of law referred to above. 4.1 Mr.Vijay Narayan, learned Senior Counsel appearing for theassessee submitted that the assessee paid Rs.34.5 lakhs as marginmoney and a sum of Rs.172.4 lakhs was paid by IREDA for the purchaseof lanterns and the payments by IREDA was made directly to PHOTON inthe financial year 2001-2002 and therefore, the finding of theAssessing Officer, the First Appellate Authority as well as theTribunal that the transaction was a sham transaction is an incorrectone. 4.2 Further, the learned Senior Counsel for the petitionercontended that the lanterns having been received by the assessee weregiven on lease to six agencies, whose names were mentioned in theorder of assessment and the income received by way of lease rentalshas been shown in the return for a period of 5 years. 4.3 It is further reiterated by the learned Senior Counsel thatthe Tribunal erred in coming to the conclusion that the transactionis a sham transaction without taking into consideration the fact thatit is a loan transaction with IREDA, which is a Government of IndiaUndertaking, which could not have been doubted. 4.4. The learned Senior Counsel for the petitioner furthercontended that the Tribunal erred to appreciate the adverse inferencein respect of the transaction in which one of the parties has notbeen examined by the department. 5. Though four questions of law have been framed at the time ofadmission of the appeal, particularly there are only two issuesviz., (i) whether the lease agreements entered bythe assessee with the six concerns are shamtransactions and if the answer to such questionis in the negative, whether they are entitled fora claim for depreciation and whether the assetspurchased by the assessee before 31.03.2001 wereput to use and (2) whether the amount received by theassessee from DLWL, which was claimed by theassessee as advance, is income of the assesseefor the relevant assessment year? 5. Though four questions of law have been framed at the time ofadmission of the appeal, particularly there are only two issuesviz., (i) whether the lease agreements entered bythe assessee with the six concerns are shamtransactions and if the answer to such questionis in the negative, whether they are entitled fora claim for depreciation and whether the assetspurchased by the assessee before 31.03.2001 wereput to use and (2) whether the amount received by theassessee from DLWL, which was claimed by theassessee as advance, is income of the assesseefor the relevant assessment year? 6.1 The facts of the case have been elaborately set out in thepreceding paragraphs. The Tribunal, after noticing all the facts haspointed out that the money received by PHOTON from the assessee wasremitted back to the assessee on the very next day. It is seen thatthe payments were made by the assessee to PHOTON in the month ofApril and May 2001 and the advance lease rentals were received by theassessee from PHOTON only in April and May. Further, the Tribunalpointed out that the money received by PHOTON from IREDA was remittedback to the assessee towards lease rentals only in the month of May,June and November 2001 and the same was received by the assessee fromPHOTON as advance rentals received. Therefore, it was pointed outthat this would establish that the assessee secured a soft loan fromIREDA and utilized the same for making paper entries to show that thelanterns were leased out to six concerns, when as a matter of factthe lanterns were supplied to those six concerns by PHOTON and not bythe assessee. 6.2 Further, the Tribunal, had referred to the survey conductedin the business premises of the assessee and the statement of theManaging Director, wherein the Managing Director has stated that hewas not aware of these transactions except that they have purchasedlanterns in the financial year 2000-2001 and leased out to sixparties. In fact, the Tribunal has extracted the answers given bythe Managing Director with regard to the various questions which wereposed to him during the search conducted. In the answers he hadstated that the lanterns have been purchased from PHOTON and the samewere distributed to the end users on lease basis and PHOTON isregular in touch with the parties for servicing of the lanterns andthe required information is available with them and all thecorrespondence were done by PHOTON with the said lessees and furtherhe has stated that it is only PHOTON had contact with the saidlessees and the entire transaction was carried out by PHOTON onbehalf of the assessee and they have no role in the transaction andthat he would contact PHOTON and furnish further details. 6.3 After referring to various answers given by the ManagingDirector, in respect of the queries, some of which have beenextracted in the order passed by the Tribunal, it is evident thatthe Managing Director was not aware of any of the transactions and hewas not able to give any explanation and he was unaware of thepayments received by the assessee from PHOTON and the payments madeby the assessee to PHOTON, which clearly shows that these paymentswere paper transactions and the assesee is not aware about the sixlessees. 6.4 Taking note of all the above facts, the Tribunal held thatthe primary burden is on the assessee to establish that it has leasedout the lanterns and only after their satisfactorily discharging theburden cast upon them, then only the burden will shift on therevenue. 6.4 Taking note of all the above facts, the Tribunal held thatthe primary burden is on the assessee to establish that it has leasedout the lanterns and only after their satisfactorily discharging theburden cast upon them, then only the burden will shift on therevenue. 6.5 Further, while rejecting the contention raised by theassessee regarding the genuineness of the lease transaction, theTribunal after examining the nature of transaction pointed out thatthe assessee has already received the advance lease rentals evenbefore entering into lease transactions and adjusted the advance saleconsideration against the advance lease rentals and therefore came tothe conclusion that the lease agreements were never intended to beimplemented and there was no need for such agreements as the moneywas already received and the buyers received the goods and the entirelease rentals payable over a period of 5 years were received oradjusted mostly much before the delivery of lanterns. 6.6 In the light of the above factual finding, which have beenelaborately dealt with by the Tribunal, the Tribunal, accepted theview taken by the Assessing Officer, as confirmed by the FirstAppellate Authority that the transactions were mere paper https://hcservices.ecourts.gov.in/hcservices/ transactions and therefore, sham. The reasons assigned by theTribunal is perfectly justified especially by taking note of all thefacts and the conduct of the assessee. 7. The nature of events which have been elaborately culled outby the Assessing Officer and reiterated by the First AppellateAuthority goes to show that the transaction has been so made so as tomake it appear as if genuine and from the statement given by theManaging Director of the assessee as well as the records which wereproduced clearly establish that they were totally lacking ingenuinity, more so while the funds came back to the assessee evenwithin less than one or two days. 8. In the light of the above facts, as noticed by the assessingauthority, we have no hesitation in holding that the transaction is afraudulent transaction by noticing the conduct of the asessee in themanner in which the lease transactions were finalised, much prior tothe sanction of the loan by IREDA. Further, the certification of thelanterns were in the godown of PHOTON and not in the place where itwas installed or in the premises of the so called lessees to whom itwas stated to have been despatched. Therefore, we fully agree withthe findings recorded by the Tribunal on the basis of records. 9. Accordingly, the first issue relating to the genuineness ofthe transaction is decided against assessee and therefore theassessee is not entitled to the claim for depreciation. 10. Dehors the above conclusion, if it is seen as to whether theassessee was entitled to depreciation it has to be seen that theassets were purchased by the assessee before 31.03.2001 and put touse as claimed by them for being entitled for depreciation. Aspointed out by the Tribunal, the assessee purchased the assets forthe so called lease and the lanterns were not delivered to thelessees on or before 31.03.2001. This fact has been established thatthese lanterns were despatched after 31.03.2001 and the AssessingOfficer has clearly brought out the details regarding the testing ofthe assets having been done only in the godown of M/s PHOTON on25.03.2001, 08.05.2001 and 27.05.2001. The various statutory formswas valid from 01.04.2001 to 31.03.2002 and further the way billsand lorry receipts submitted by the assessee show that the goods weretransported only after May 2001 to various agencies. Therefore, theAssessing Officer, rightly concluded that the assessee having notdespatched the goods to the end users, the assets having not been putto use before 31.03.2001, not entitled for any depreciation. Thefindings 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 relevantassessment 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 March1999 and March 2000 and the assessee received certain remittancesfrom DLWL during the financial year 1999-2000 and 2000-2001 andtreated the remittances as advances in its books of accounts as on31.03.2001. Part of the remittances were offered as income. 12.2 The Assessing Officer, after going through the recordsplaced before him, assessed the amount of Rs.1,85,92,269/- as incomeof the assessee and this amount having been shown as the outstandingcredit as on 31.03.2001. When the assessee was called upon to explainas to why this should not be treated as income of the assessee, itwas stated that they are following accrual basis of accounting asrecognized by ICAI and the guidelines issued as per accountingstandards and the income is accounted for on the basis of stages ofcompletion of each project. Further, the assessee contended that inview of certain disputes between the parties and pendency of civilcases these amounts were retained as advances. 12.3 The Assessing Officer noticed from the books of accountsthat during the financial year 2000-2001, the assessee has showncredit as advances received as on 31.03.2001 amounting toRs.1,85,92,269/-, the details of those amounts were brought out inthe order of assessment, which has already been quoted by theTribunal in paragraph No.34 of its order. 12.4 When the Assessing Officer called upon the assessee toexplain the details, the assessee could not submit any reply.Thereafter, the Assessing Officer issued notice to DLWL under Section133(6) of the Act. M/s DLWL, vide their reply dated 31.03.2004stated that no money or material is due from or to the assessee andall the payments have been made for the execution of the civil andelectrical work at Andhra Pradesh for installation of three windmills for which the work was completed in two phases i.e., March 1999and March 2000. Further, the DLWL referred to two memorandum ofUnderstanding dated 11.07.2001 and 01.04.2002 regarding the paymentseffected, by way of settlement of accounts. 12.5 The Assessing Officer, on going through all these factsrecorded the finding that the advances shown by the assesssee arenothing but payment received on account of the completion of workexecuted by the assessee and the Assessing Officer made the addition. 13.1 Before the First Appellate Authority, the assesseesubmitted that the MOU dated 01.04.2002 has not been acted upon andthe matter is pending in various Courts, which was evidenced by aletter of an Advocate. Further, it was contended that a notice hasbeen received from the Police Department with regard to the CrimeNo.989 of 2003 and the FIR has already been lodged on 06.12.2003 andtherefore, it was contended that MOU was not acted upon. When such 12.5 The Assessing Officer, on going through all these factsrecorded the finding that the advances shown by the assesssee arenothing but payment received on account of the completion of workexecuted by the assessee and the Assessing Officer made the addition. 13.1 Before the First Appellate Authority, the assesseesubmitted that the MOU dated 01.04.2002 has not been acted upon andthe matter is pending in various Courts, which was evidenced by aletter of an Advocate. Further, it was contended that a notice hasbeen received from the Police Department with regard to the CrimeNo.989 of 2003 and the FIR has already been lodged on 06.12.2003 andtherefore, it was contended that MOU was not acted upon. When such contention was reiterated before the Tribunal, the assessee did notdisputed the facts. It was contended that there were certain casespending in various Courts and a criminal complaint has already beenregistered. The Tribunal, after perusing the materials placed viz.,the letter given by the counsel, copy of the FIR and the MOU, noticedthat the assessee has received payments against the bills raised byvarious orders and shown part as advance in its books and offered apart as income. The facts and figures were not disputed by theparties and the assessee was regularly receiving payments on thebasis of the bills raised and a part of the said amount wasconsistently shown as advance. Referring to clause (9) of the MOUdated 01.04.2002, the Tribunal pointed out that the assessee as wellas DLWL agreed in full and final settlement on account of thetransactions referred to in MOU. Therefore, factually it becomesclear that the assessee has completed the work and nothing is duefrom the assessee and there is no dispute on the said issue. 13.2 Further the FIR refers to the dispute relating to purchaseof a flat and not regarding the payment of contract and the disputewas between the Managing Director of the assessee and an official ofM/s Wescare India Limited. In fact, the Tribunal has also quotedthe relevant portion of the FIR and on a perusal of the same, itappears that it pertains to certain construction of a flat, whichaccording to complainant the construction has been left unfinishedand the party remained elusive. Therefore, the criminal case pertainsto purchase of flat and does not pertains to the contract betweenthe assessee and DLWL for the purpose of civil construction works forthe three wind mills project. 13.3 Thus, the Tribunal, after carefully analysing the entirefacts and referring to the MOU and the FIR rightly held that paymentsreceived by the assessee and shown as outstanding in the accounts areto be treated as income and assessed to tax. 14. In the light of the above factual findings based onrecords,the second issue is also answered in negative and we do notfind any ground to interfere with the same. 15. Accordingly, considering the factual findings rendered bythe appellate authority confirming the assessment, we do not find anyquestion of law much less substantial question of law to entertainthis appeal by interfering with the findings of the Tribunal. Consequently, the tax case appeal is dismissed. No costs.Connected miscellaneous petition is also dismissed.Sd/-Assistant Registrar(CS-IV)Dated: 20.02.2014 //True Copy// https://hcservices.ecourts.gov.in/hcservices/ To 1. The Assistant Commissioner of Income Tax Company Circle IV(1), Nungambakkam High Road Chennai 600 034 Company Circle IV(1), Nungambakkam High Road Chennai 600 034 2. The Income Tax Appellate Tribunal, Madras 'A' Bench. 3. The Commissioner of Income Tax (Appeals VI) Chennai. 1 CC to Mr.T.R.Senthilkumar, Advocate SR.No.6451 1 CC to Mr.B.K.Girish Neelakantan, Advocate SR.No.6475T.C.A.No.977 of 2006TMN(CO)JJM (20.02.2014)