ACIT, NEW DELHI vs. M/S. NALWA SONS INVESTMENTS LTD., DELHI

Brief facts of the case stated for assessment year 1997-98 are that original assessment was made on 31/03/2005 at Rs. 165624966/– after making disallowance of Rs. 34387000/– on account of lease rent. Assessee before higher appellate forums contested this addition. On appeal before ITAT, coordinate bench set aside the issue back to the file of the Ld. assessing officer on the issue of reopening by directing A O to supply reasons recorded to the assessee and to dispose of ,if any ,objection filed by way of the speaking order. In the set aside proceedings Ld. assessing officer issued reasons recorded for reopening and assessee filed an objection against which was disposed of. In the set aside proceedings also Ld. assessing officer reiterated the ACIT V Nalwa Sons Investments limited 5669 and 5670 /Del/2013 A Y 1997-98 1998-99 1999-200 Page 4 of 8 same reasons for making a disallowance of Rs. 34387000/– on account of lease rent.

Succinctly stated the facts are that assessee is a company having multi location production units. On verification of the detail of rent paid unit wise it was noted by the Ld. assessing officer that company has obtained items on lease from various parties. It was also noted that the assessee company has paid lease rent of Rs. 34387000/– for 5 gearboxes worth Rs. 90 lakhs for the Raigarh unit. On inquiry by the Ld. assessing officer, it was found that gearboxes were purchased by the finance company from M/s Shankar Enterprises and in turn leased to the assessee company. On inquiries conducted by the inspectors of the Department, it was found that Shankar Enterprises was non- existent. The address mentioned in the bills was found that no such concern existed at the given address. The phone numbers found to be of another person. The cheques issued by the finance to the Shankar enterprises were also deposited and withdrawn in cash or transfer to the account of some other party in the same bank. Even the summons could not be served to the proprietor of that concern. The enquiries conducted under section 131A were also not satisfactory to prove existence of such concern . Therefore, the Ld. assessing officer reached at the conclusion that the purchase of plant and machinery from Shankar enterprises through the finance were simply paper transaction and that concern is accommodation entry provider by issuing bogus bills in the name of non-existing concern. It was further noted that during the course of original assessment proceedings the assessee could neither produce the evidence in ACIT V Nalwa Sons Investments limited ITA No 5668 5669 and 5670 /Del/2013 A Y 1997-98 1998-99 1999-200 Page 5 of 8 the form of original sale bills, vouchers, original lease deed and nor assessee could produce the proprietor of Shankar enterprises to support its claim. Therefore, the Ld. assessing officer disallowed lease rent of Rs. 34387000/-.

Against the order of the Ld. assessing officer assessee preferred an appeal before the Ld. CIT (A) who deleted the disallowance.

Aggrieved by the order of the Ld. CIT (A) revenue is in appeal before us. The Ld. DR reiterated the facts stated by the Ld. assessing officer in the assessment order and submitted that when the assessee could not produce even original bills, vouchers, original lease deed and neither the proprietor of Shankar enterprise therefore the claim of lease rent is bogus. He further submitted that Ld. CIT (A) has merely gone by written submission made by the assessee and allowed the claim disregarding all the facts, which have been recorded by the Ld. assessing officer in his assessment order. He further submitted that Ld. CIT (A) merely believed the submission of the assessee that the claim of the depreciation does not pertain to Raigarh unit but to Vasind unit. Irrespective of the unit it pertains to, the Ld. assessing officer has given the concrete facts for making disallowances, which has been completely ignored by the Ld. CIT (A). He therefore vehemently submitted that the Ld. CIT A erred in noting that revenue has been given two reassessment opportunities to examine the matter properly and it failed to do so. He submitted that in fact it is not revenue but the assessee has failed to produce the evidences called for despite any opportunities before ld AO and other authorities. He therefore submitted that the order of the Ld. CIT A is not sustainable. ACIT V Nalwa Sons Investments limited 5669 and 5670 /Del/2013 A Y 1997-98 1998-99 1999-200 Page 6 of 8 9. The Ld. authorized representative reiterated the same facts which are mentioned in Para No. 5.1 of the order of the Ld. CIT (A). He further submitted a chart to demonstrate that lease rent paid by the various units of the assessee for respective 3 years, and the proportionately rent on 5 gearbox was only Rs. 55110/– that too only for assessment year 98-99 only not for assessment year 97 – 98 and 99 – 00. He therefore submitted that disallowance of whole of lease rent by ld AO is erroneous.

We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present case the claim of the revenue is that the enquiry carried out by the investigation wing of the Department revealed that five gearboxes worth Rs. 90 lakhs taken by the appellant on lease for its Raigarh units through finance company was purchased from one M/s Shankar enterprise of Ghaziabad and its existence was doubted. The Ld. AO has also carried out detailed enquiries where the whereabouts of this party could not be found. During the course of assessment proceedings, the original bills vouchers etc with respect to the purchase of this asset taken on lease was also not submitted by the assessee. The assessee also could not produce the proprietor of the alleged bogus entity. In this background, the Ld. assessing officer made the addition/disallowances of lease rent paid. The Ld. CIT(A) deleted the above disallowance without discussing any of the facts, which are being stated by the Ld. assessing officer. He merely allowed the claim of the assessee believing that disallowance made by the revenue appears to be related to Vasind unit and not to raigarh unit. Further, he merely looking at the details ACIT V Nalwa Sons Investments limited 5669 and 5670 /Del/2013 A Y 1997-98 1998-99 1999-200 Page 7 of 8 filed by the assessee concluded rent of only Rs. 55110/- was paid for five gearboxes that too only for assessment year 1998 – 99. He further held that revenue had two reassessment opportunities to examine the matter properly yet it failed to do so. We do not agree with the opinion of the Ld. CIT appeal in deleting the disallowance without proper verification made by him and without controverting any of the facts stated by the Ld. assessing officer in his assessment order. We also could not make out that how the claim made by one unit or any other units make a difference when the assessee is one. Furthermore, the assessee has also not produced original bills vouchers etc despite to opportunities available to the assessee, not only at the assessment stages twice but at the appellate stages also, who is duty bound to support its claim of expenditure. It is for assessee to establish that its claim is properly supported by the evidence. Surprisingly, the Ld. CIT (A) has also not called for a remand report and giving ld AO an opportunity to examine the details submitted by the assessee. In view of this we set aside the whole issue of allowability of lease rent of Rs. 34387000/– to the file of the Ld. assessing officer with a direction to examine the claim of the assessee and assessee is also directed to produce the details called for with respect to the claim of the allowability of lease rent. In the result, appeal of the revenue is allowed with above direction.