2003-VIL-328-P&H-DT

Equivalent Citation: [2004] 267 ITR 779, 190 CTR 594, 143 TAXMANN 30

PUNJAB AND HARYANA HIGH COURT

Date: 24.11.2003

PUNJAB LEASING PVT. LTD.

Vs

ASSISTANT COMMISSIONER OF INCOME-TAX.

BENCH

Judge(s)  : J. S. KHEHAR., HEMANT GUPTA.

JUDGMENT

The judgment of the court was delivered by

J.S.Khehar J.- The petitioner, i.e., M/s.Punjab Leasing Private Limited, Amritsar, is engaged in the business of financing of vehicles and consumer H durables on "hire-purchase basis" as well as on "lease/rent basis". On account of the income earned by the petitioner during the assessment year 1993-94 ; the petitioner filed an income-tax return declaring income of Rs.1,05,190. The return filed by the petitioner was accepted.

The case of the petitioner in respect of income for the assessment year 1993-94 was taken up for scrutiny and the assessment under section 143(3) of the Income-tax Act, 1961, whereupon the authorities determined the taxable income of the petitioner as Rs.1,12,698. While passing the order under section 143(3) of the Income-tax Act, 1961, depreciation deductible from the petitioner's income was determined at Rs.16,22,387.

On the same controversy, the petitioner received a notice under section 154/155 of the Income-tax Act, 1961, for the assessment year 1993-94, seeking to withdraw the deduction granted to the petitioner on account of depreciation. In response to the notice received by the petitioner, he clarified to the authorities that no depreciation was claimed by the petitioner in respect of the goods sold on "hire-purchase basis". It was, however, acknowledged that depreciation was claimed, on account of goods that were leased or rented by the petitioner to its customers, as well as on other assets owned by it. On receipt of the reply to the show cause notice, the proceedings initiated against the petitioner under section 154/155 were dropped.

The petitioner received a notice under section 263 of the Income-tax Act, dated February 24, 2000, relating to the petitioner's income during the assessment year 1997-98, alleging that depreciation at a higher rate had been deducted from the petitioner's income although the petitioner was entitled to deduction at a lower rate. To the aforesaid notice dated February 24, 2000, the petitioner submitted a detailed reply dated March 6, 2000, justifying deduction on account of depreciation at the higher rate. On the receipt of the reply of the petitioner, proceedings initiated against the petitioner under section 263 E of the Income-tax Act, 1961, were also dropped.

After the entire deliberations, as noticed hereinabove, the petitioner was issued a notice under section 148 of the Income-tax Act, 1961, for the assessment year 1993-94, dated May 29, 2001, whereby the petitioner's assessment for the aforesaid year was reopened. The petitioner submitted a reply to the F notice under section 148, and enclosed therewith the order passed under section 143(3) of the Income-tax Act, 1961, whereby the Department itself had accepted the petitioner's income at Rs.1,12,698 for the said assessment year in question. The petitioner also submitted a representation dated December 14, 2001 (in response to the notice dated May 29, 2001), requesting the authorities g to furnish to the petitioner the reasons which constituted the basis of issuing the said notice. Through a communication dated December 23, 2002, the reasons on the basis of which the notice was issued to the petitioner under section 148 of the Income-tax Act, 1961, were supplied to him.

The petitioner, through the instant writ petition, has impugned the notice H issued to him under section 148 of the Income-tax Act, 1961, whereby the assessment in question has been reopened.

We have perused the reasons for initiating the proceedings to reassess the income of the petitioner for the assessment year 1993-94 expressed in the communication dated December 23, 2002. It is acknowledged in the aforesaid communication that deduction on account of depreciation can be claimed by the petitioner in respect of its own assets but not in respect of the goods sold by the petitioner on "hire-purchase basis". In other words, while the Department acknowledges the permissibility of deduction on account of depreciation ; it disputes the deduction of depreciation in respect of the business carried out by the petitioner under the "lease/rent system". The authorities desire to verify whether the vehicles which the petitioner claims, it uses in its business under the "lease/rent system" are actually owned by the petitioner. For verifying the aforesaid factual position, the Assistant Commissioner of Income-tax required the petitioner to furnish the Department with the purchase documents of vehicles for which depreciation has been claimed, i.e., the vehicles allegedly used by the petitioner for its "lease/rent" business, i.e., to determine whether these vehicles were purchased in the name of the petitioner or in the name of the lessee. The Department has also required the petitioner to furnish the bills of purchase at the time of delivery of the vehicles so as to determine whether the same have been signed by the petitioner as owner or by the lessee. The Department also desires to verify the particulars of the party who would be responsible for the damage to the vehicles during the process of delivery. The particulars of the deposits made by the lessee were also sought, in order to determine whether the deposits were made before the lease or at the time of execution of lease. Besides similar other details, the authorities also required the petitioner to furnish the registration record in respect of the vehicles used by the petitioner in its business under the "lease/rent" business, so as to determine the particulars of ownership of the said vehicles.

On the basis of the material sought from the petitioner, it is apparent that the impugned notice has been issued only in order to determine whether the vehicles which the petitioner claims, it is using in its "lease/rent" business, are actually under the ownership of the petitioner. Obviously, deduction on account of depreciation can be claimed only in respect of the vehicles and other consumer durables owned by the petitioner. From the material sought from the petitioner, the income-tax authorities would be able to determine the true factual position. In case, the vehicles under reference are actually owned by the petitioner and are actually being used for its "rent/lease" business, not only would the registration of the aforesaid vehicles be in the name of the petitioner, the petitioner would have executed all the documents sought from it by the Assistant Commissioner of Income-tax, by itself, in case, however, any of the documents sought have been executed by the lessee, the claim of ownership made by the petitioner in respect of such vehicles may not be fully justified. In the aforesaid eventuality, i.e., if the petitioner is not the owner of the vehicles used by it, in its "lease/rent" business, the deduction claimed and granted to the petitioner from its income on account of depreciation would not be justified.

In view of the above, we are satisfied that the impugned order does not suffer from any illegality and that it is based on the bona fide action of the competent authority to determine whether or not the vehicles in respect of which the petitioner has been claiming depreciation, are actually and factually owned by the petitioner.

For the reasons recorded above, we find no merit in the petition and the same is accordingly dismissed.

 

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