Praj Industries Ltd. Vs. Jt. Commissioner of Income-tax, - Court Judgment

Excerpt:
1. the assessee is in appeal against the cit (a)'s order dt 23.6.2001 confirming the penalty amounting to rs 19,05,582/- imposed by the ao under section 271(1)(c) of the act for the assessment year 94-95. 1. the ld c1t (a) erred on facts and in law in upholding penalty of rs 19,05,582/- under section 271(1)(c), on alleged furnishing of wrong particulars of income and concealment of income regarding depreciation and: related expenses on assets leased to m/s prakash industries ltd. 2. the ld cit (a) erred on facts and in law in coming to a conclusion that the assessee has failed to state the relevant facts at time of original assessment without properly appreciating the facts of the case and arguments advanced by the assessee in this regard. 3. the ld cit(a) failed to appreciate that the.....

Judgment:
1. The assessee is in appeal against the CIT (A)'s order dt 23.6.2001 confirming the penalty amounting to Rs 19,05,582/- imposed by the AO Under Section 271(1)(c) of the Act for the assessment year 94-95.

1. The ld C1T (A) erred on facts and in law in upholding penalty of Rs 19,05,582/- Under Section 271(1)(c), on alleged furnishing of wrong particulars of income and concealment of income regarding depreciation and: related expenses on assets leased to M/s Prakash Industries Ltd. 2. The ld CIT (A) erred on facts and in law in coming to a conclusion that the assessee has failed to state the relevant facts at time of original assessment without properly appreciating the facts of the case and arguments advanced by the assessee in this regard.

3. The ld CIT(A) Failed to appreciate that the assessee all along acted under a bona fide belief in the mailer. He further failed to appreciate that the penalty proceedings are separate than the regular assessment proceedings. The reasons assigned by him for upholding the penalty are wrong.

2. The AO has imposed the penalty Under Section 271(1)(c) of the Act by observing and holding as under: Original assessment in this case was completed Under Section 143(3) of the Income Tax Action 24.9.97 on a total income of Rs. 3.98.52.530/-. In this order the assessee's claim for depreciation amounting to Rs. 69,49.010/ was allowed which includes half the depreciation of Rs. 50 lakhs on forging rolls worth Rs one crores as the same has been used for a period of less than 180 days during the year under consideration. Balance depreciation has been claimed in assessment year 95-96. During the course of assessment proceeding for A.Y. 1995-96, it was found by the assessing officer that assessee's claim for deprecation on forging roll is not genuine. The assessing officer found that Forging roll have been purchased by the assessee from M/s. Prakash Industries Ltd and has been given back on lease to the same paly. The assessee has not taken any physical delivery of the asset purchased. Further the assessing officer found that during the course of assessment proceeding that in a survey conducted at the business premises of M/s. Prakash Industries Ltd at Champa, Bilaspur (M.P.) The employees of that company could not identify as to which forging roll belongs to which assessee. It may be mentioned here that M/s. Prakash Industries Ltd has entered into sale and lease baek transaction with many other persons. The survey party further found that average life of the forging roll, is 3-4 years only. Though the assessee has filed a certificate from M/s S.R. Salvckar as per which employees from M/s. S.R. Salvekar visited the premises of M/s. Prakash Industries Limited and physically verified these forging rolls but during the course of assessment proceeding Mr. Salvekar stated that his employee Mr. Prasant Deshpande could not identify the rolls belonging to M/s. Prakash Industries. On the above factual position the assessing officer came to the conclusion that the assessee is not entitled to any depreciation because of following reasons: 1. The assessee has not taken any physical delivery of forging roll and hence there is no conclusive evidence to show that the assessee has purchased any forging roll 2. The assessee could not establish that even now any forging roll belonging to it exists at the business premises of M/s. Prakash Industries Ltd or not.

3. The assessee has no evidence that these forging rolls has been used for the business. On relying upon the judgment of Supreme Court in the case of first leasing Co. v. CIT the assessing officer held that it is the assessee responsibility to prove that asset has been used for the purpose of business.

4. Depreciation is a real concept and therefore it cannot be allowed on only paper agreement.

On this basis the assessee's claim of deprecation was disallowed in A.Y. 95-96 and proceeding for 94-95 where half of the depreciation was claimed as also reopened by issue of notice Under Section 148 on 30.3.99. Reassessment proceeding was completed on 30.9.99 withdrawing the claim of deprecation of Rs. 50 lakhs already allowed to the assessee. Penalty proceedings are also initiated Under Section 271(1)(c).

During the course of proceeding for levy of penalty the assessee has filed detailed submission on 26.9.2000. The assessee has claimed that its claim for depreciation has erroneously been not allowed.

The assessee has claimed that it has purchased forging roll from M/s. Prakash Industries Ltd on 21.3.94 and given the same to the same company on lease. The assessee has claimed that in original assessment proceeding his claim for deprecation was accepted Under Section 143(3) of the Income Tax Act therefore the matter has obtained finality. The assessee has further submitted that though the assessing officer has referred the matter to DDIT(Inv), Jabalpur for inquiry about the possession and actual use of rolls but the assessee claimed that DDIT(Inv), Jabalpur only forwarded a copy of the enquiry conducted by him in anoher case who has also entered into similar transaction with RPG Telecom Ltd and not in the case of assessee. The assessee claimed that the assessing officer simply employed same yardstick in its case. The assessee claimed that its claim for deprecation has not been allowed only on the ground that transaction is not genuine and assessee could not prove the identify of the assets. The assessee has submitted that the transaction in question has been treated as sham by the department merely on the ground that there was no actual purchase or delivery of the rolls & in this regard the assessee has submitted that M/s. Prakash Industries Ltd was referred to the assessee by M/s. Tata Finance Ltd which is a well known Tata organization in the filed. M/s. Prakash Industries Limited has already purchased heavy structural rolling mills equipment with accessories from M/s TISCO, Jamshedpur on 31.3.93. The rolling mill rolls form part of the said mills and is a separate item for claming depreciation. The assessee has purchased out of these rolls, 65 rolls from M/s. Prakash Industries Limited for a sum of Rs. One crore which has been given to the same company on lease. The assessee claim that physical delivery of taking the rolls from Chamba to Pune and back was not found practically feasible in view of huge weight, and high transportation cost.

However a confirmatory letter was received from M/s. Prakash Industries Limited that they have sold the assets and taken back the same from Praj Industries Ltd on lease. The asset has also been insured in his own name. The assessee further claimed that as regards identification of rolls is concerned, a certificate was received from Chartered Engineer. In view of these facts the assessee has claimed that delivery of the goods can be taken by doing anything which the buyer and seller agreed to treat as delivery. Therefore the department cannot contend that there was no delivery. The assessqe has submitted that the company's auditor has clearly furnished a certificate that these rolls are identifiable.

The assessee further claimed that the rolls were purchased on 23.1.94. The average life of these rolls cannot be more than 2-3 years and therefore the identify of the assets cannot be looked into in 1998 when the surveys were conducted at the business premises of M/s. prakash Industries Limited. The assessee further submitted that these assets form part of heavy structural mills equipment and as it is a separate asset eligible for depreciation, the department cannot hold that the assessee is only a fraclional owner The assessee claimed that it is a full owner of the 65 rolls and therefore entitled for depreciation. The assessee has further submitted that entire money received as been shown as income and it is the case where the assessee was wronged by M/s. Prakash Industries Limited and company has lost nearly Rs. 34 lakhs in the transaction as full rental has not been paid by that party. The assessee has claimed that in view of this fact no penalty can be leviable.

I have considered the submissions of the assessee. The assessee has made claim for deprecation of Rs. 50 lakhs in the return of income furnished on 30.11.94. This depreciation claim was 50% of the value of heavy structural rolling mill rolls claimed to have been purchased by the assessee on 21.3.94 for a sum of Rs. One crore.

However the claim of thc assessee was rejected in A.Y. 95-96. In that year though assessee has filed appeal but the same was not contested as Ihe assessee has availed the benefit of KVSS scheme.

There issue could not be finally settled in that year. Even in this year though the assessee has filed appeal against orders passed Under Section 143(3) rws 147 on 30.9.99 but the same has been withdrawn. Even the assessee's application for revision Under Section 264 has been rejected by CIT-1, Pune vide order dated 4.5.2000. In this case it is found that the assessee's claim of purchase of forging rolls is not evidenced either by taking physical delivery of forging rolls or even constructive delivery of forging rolls. Further the assessee has no evidence that the forging rolls has been actually used by M/s. Prakash Industries Limited. The assessee's evidence regarding purchase of forging rolls and its use for the business is based upon the purchases bill, insurance bill as well as certificate from Shri S.R. Salvekar C.A. who claimed to have physically inspected the asset on 23.1.98. All these contentions of the assessee arc not sufficient to prove that assessee has actually purchased these assets. The purchase bill of the assessee does not identify which forging roll has been purchased by the assessee.

Similarly the assessee's claim that ils C.A. Shri S R Salvekar has actually identified the assets on 23.1.98 is not acceptable in view of the fact that during the course of assessment proceeding for A.Y. 95-96 Shri S.R. Salvekar has specifically stated that his employee Mr. Prashanl Deshmukh could not identify the assets. Further the assessee has itself admitted that forging roll has short life of 2-3 years and therefore it could not be identified in 1998. Then how is can be verified by the C.A. of the assessee on 21.3.98. The survey conducted by the DDIT(Inv), Jabalpur at the business premises of the assessee clearly shows that there is no record or any other evidence that M/s. Prakash Industries on the basis of which it could be identified as to which forging rolls belongs to which party. This conclusion was made by the DDIT(Inv). Jabalpur on the basis of statement given by Shri B.K. Gupta, Manager of Prakash Industries Limited. Unless these forging rolls are identified only then the assessee's claim for depreciation depending upon the actual use of these forging rolls can be considered and allowed. Since these forging rolls are not physically identifiable the question of proving actual its use does not arise. It is the responsibility of the assessee to prove that asset on which depreciation has been claimed is used for the purposes of business. Merely giving the asset on lease does not goes to prove that asset has actually been used for business. This has been so held by the Hon'ble Supreme Court in the case of First leasing Company v. CIT. Therefore the depreciation has been correctly disallowed in this year on these facts. The assessee claimed that assessing officer simply used a survey report against him, which has been carried out by DDIT, Jabalpur in other case has no basis because though the survey was carried out in other cases but the intention of the survey party was to look into the genuineness of all sale and lease back transaction carried out by M/s. Prakash Industries Limited. This will cover the ease of the assessee also. Further though forging rolls is eligible for deprecation separately as per provisions of I.T. Act, it is found that M/s. Prakash Industries Ltd has not purchased these assets separately. These assets which has been claimed to have been purchased by the assessee forms part of heavy structural mill equipment purchased by M/s. Prakash Industries Ltd for a sum of Rs. 2,08.00.000/- on 31.3.93. Once the purchase has been made by any party consisting of many items that are necessary for production, the assessee cannot split these assets and claim deprecation on each asset separately unless the owner has physically separated these assets and used it at different places. Therefore by purchasing a part of heavy structural mills equipments the assessee has become a fractional owner of the structural mill equipment. The assessee claim for depreciation was therefore rightly not allowed by taking alternative ground that the assessee is a fractional owner of structural mill equipment. The assessee has therefore clearly claimed false claim for deprecation on paper transaction as held by the AO in AY 95-96 and by undersigned in AY 94-95. By concealing the real transaction, the assessee has furnished wrong particulars and concealed the particulars of income by claming excess deprecation for which it is not legally entitled to. This is therefore a case where penalty Under Section 271(1) (c) is leviable.

Since the lease transaction is not genuine, the related expenses on arranging this lease also cannot be allowed. The expenses are expenses on managerial fee etc. and interest payment on borrowed capital used to purchase the alleged forging rolls. This income will also form part of the income in respect of which particulars has been concealed. The penalty on this amount of Rs. 2.08.416/- is also leviable.Tax on Income of Rs 2.27,86.273 as per 11,791,896Order Under Section 143(3) rws 147 dt 30.9.99Less Tax on Income of Rs 1.91,03,990 as per 9,886,314order Under Section 154 dated 26.3.99Tax sought to be evaded .

1,905,582Minimum penalty 100% 1,905,582Maximum Penalty 300% 5,716,746Penalty of Rs. 19,05,062 is therefore levied.

3. Being aggrieved, the assessee preferred an appeal before the CIT (A).

During the appellate proceedings before the CIT(A), the assessee stated in brief as under: During the financial year 1993-94, the company made its maiden public issue and collected a sum of Rs. 620 lakhs as share capital.

This issue was mainly for expansion of company's facilities, administrative buildings etc. Since the proposed plans were going to take some time. It was thought prudent that the funds be used in the meanwhile in best possible manner to generate further revenues. One of the ways thought was the investment in lease financing, which will also offer certain tax shield to the company. M/s Tata Finance Ltd., with whom the company had some earlier dealings in the fields of bills discounting etc. and a reputed organization in the field of financing, suggested the proposal of Prakash Industries Ltd. for a sale and lease back transaction of Rolling Mill Rolls for Rs. 100 lakhs, the said rolls carry 100% depreciation under the I.T. Rules, the proposal envisaged a sale and lease back of the Rolls from Prakash Industries for Rs. 100 lakhs for a period of 5 years. Praj was to get Rs. 134 lakhs as lease rentals in the period of 5 years.

After considering the tax advantages, the average annual return worked out to be about 16.50% after tax. The Board considered the proposal in its meeting dtd. 28 ^th February. 1994 and approved the same.

...Prakash Industries Ltd. already had purchased Heavy Structural Rolling Mill Equipment with accessories from M/s 'PISCO, Jamshedpur.

The assessee had obtained a copy of invoice by TISCO to Prakash along with relevant transportation vouchers, a copy of which is already placed on record with the A.O. and enclosed herewith (annexure '1'). The Rolling Mill Rolls form part of the said Mill and are included in accessories. These are separate items and a separate asset in itself. In fact, a separate entry for these assets exists in Appendix 'A' to I.T. Rules [entry No. III(3)(vii)]. The Act thus expressly recognizes these as separate assets. Prakash Industries Ltd., through Tata Finance, approached the assessee for sale and lease back Jinance for these rolls.... Having satisfied about the value and title, the assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/P&M/93-94 dated 23.01.1994 lor Rs.100 lakhs (annexure '4'). The assessee also settled the amount of Rs. 100 lakhs with Prakash Industries (annexure '5'). The physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of the huge weight of the assets (about 400 tons) and high transportation costs.

However, a confirmatory letter from Prakash Industries that they have sold the assets and taken back the same from Praj on lease is already on record of the department (annexure '6' & '6A'). Moreover, the assets were insured with The New India Assurance Co. Ltd. with specific mention of assessee's name on the insurance policy (annexure '7').

In A.Y. 1995-96, however, the assessee's claim for balance 50% was challenged by the department (annexure '14'). The A.O. referred the matter to D.D.I.T. (Inv.), Jabalpur, to inquire about the possession and actual use of the rolls. The D.D.I.T. (lnv.) Jabalpur, forwarded a copy of the report of inquiry conducted by him in respect of another transaction entered into by Prakash Industries Ltd. with RPG Telecom Ltd. (annexure '15'). The D.D.I.T.(lnv.), Jabalpur, reported that the transaction between Prakash Industries and RPG Telecom was a sham one. The A.O applied the same yardstick to the transaction between Prakash Industries and PIL and disallowed assessee's claim.

For the A.Y. 1995-96, the assessee chose to avail KVSS and thus finding of the department remained unchallenged. As regards A.O's contention that the transaction is a sham one, we submit that the conclusion of the A.O. is without any basis. As has been stated earlier, outside parties such as Tata Finance, Chartered Engineer, Chartered Accountant, Insurance Company etc. were involved in the transaction. The assessee has also obtained original transportation challans from Prakash Industries for purchase of Heavy Structural Rolling Mill Equipment with accessories from M/s TISCO, Jamshedpur.... The value for 65 rolls was stated to be Rs. 100 lacs by Prakash Industries which was got valued by the assessee through an independent Chartered Engineer (annexure '9') and only then proceeded in the matter.... The assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/SID/P&M/93-94 dated 23.01.1994 for Rs.100 lakhs (annexure '4'). The assessee also settled the amount of Rs.100 lakhs with Prakash Industries through cheques/DD (annexure '5'). The physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of the huge weight of the assets (about 400 tons) and high transportation costs. However, a confirmatory letter from Prakash Industries that they have sold the assets and taken back the same from Praj on lease is already on record of the department (annexure '6' & '6A').

Moreover, the assets were insured with The New India Assurance Co.

Ltd. with specific mention of assessee's name on the insurance policy (annexure '7').

Alternatively, it may also be appreciated that the assets are eligible for depreciation @ 100%. The depreciation is not being granted because the assets are in the nature of social and public welfare such as, pollution control, energy saving atc., but is being granted looking at the life of these assets. The life of these assets being basically in the nature of consumables is hardly 2-3 years. When one is looking for identity of such assets in 1998, which were purchased in 1994, it is quite possible that the asset may have ended their useful life by then. In such case, how can one possibly identify such assets. The moot point missed out by the department is that these should have been identifiable in the year in which depreciation claims were made i.e. in years 1994 and 1995.

Having failed to dc so, we respectfully submit that department does not have a case to disallow depreciation on this ground, and more so. to levy a penally on this ground. The benefit of doubt, if any, should clearly go in favour of the assessee.

It may also be appreciated that when the claim was made, the assessee had acted as any prudence man will act and under a genuine and bona fide belief that Prakash Industries was a good and creditworthy party. In fact, Prakash had entered into similar transaction with many other reputed concerned like Union Bank. Bajaj Auto Finance, Escorts. Videocon etc. and thus the assessee had no reason whatsoever to disbelieve the credentials of Prakash. It may also be appreciated that Prakash paid almost half of the lease rentals on time. It was only much later that they started defaulting on lease payments and reports started appearing in the newspapers.

On such defaulters also, we have filed criminal ease against the Prakash Industries, a copy of which is enclosed (annexure '17'). It may thus be appreciated that at the lime of making the claim, there was no such inklirg and no attempt or intention to conceal the income or furnishing inaccurate particulars was in the minds of the assessee.

4. Following further arguments were made by the assessee during the appellate proceedings before the CIT(A), which are stated by the CIT (A) in para 7 of his order: 7. During the appellate proceedings, the following arguments were made: (a) In such a situation, it is difficult to term the transaction as a non-genuine One, especially when third party institutions like Tata Finance, New India Insurance, Chartered Engineer etc, are involved.

(b) The A.O. should have appreciated that physical delivery was not practical and mode of delivery, whether actual or constructive, is not a deciding factor in determining whether sale is genuine or not.

In fact, Section 33 of the Sale of Goods Act postulates that the delivery of goods may be made by doing anything which the buyer and seller agree to treat as delivery. The A.O's contention therefore that there should have been actual delivery is wholly irrelevant in the context. Moreover, the A.O. in the assessment proceedings for A.Y. 1995-96 has slated that the assessee has taken constructive possession, which comments are repeated by the A.O. in the order Under Section 143(3) r.w.s. 147 for A.Y. 1994-95.

(c) Another contention of the A.O. both in A.Y. 1994-95 and 1995-96, is that the rolls were not separately identifiable, the contentions of the A.O. are not correct. In fact, in the first place M/s Prakash Industries have vide their letter dated 28.04.1998 have confirmed that the assets are clearly identifiable are adequately insured and are without any encumbrance. Moreover, the assessee company's auditors specifically have physically verified the assets and certified that the assets are separately identifiable and are in working condition (annexure '6' to '17'). The statement of the A.O. that the auditors specifically mentioned that assets could not be identified has remained unchallenged because of KVSS in A.Y. 1995-96 and because assessee went in for relief Under Section 264 in A.Y. 1994-95.

(d) Alternatively, it may also be appreciated that the assets are eligible for depreciation @ 100%. The depreciation of 100% is not being granted because the assets are in the nature of social and public welfare such as pollution control, energy saving etc., but is being granted looking at the life of these assets. The life of these assets, being basically in the nature of consumables is hardly 2-3 years. When one is looking for identity of such assets in 1998, which were purchased in 1994, it is quite possible that the asset may have ended their useful life by then. In such case, how can one possibly identify such assets. The moot point missed out by the department is that these should have been identifiable in the year in which depreciation claims were made i.e. in years 1994 and 1995.

I laving failed to do so, we respectfully submit that department does not have a case to disallow depreciation on this ground and more so to levy a penalty on this ground. The benefit of doubt, if any, should clearly go in favour of the assessee.

(e) The A.O's contention that only one picce of heavy structural miss equipment was purchased by Prakash Industries is also incorrect and is made without appreciating the nature of the asset. He failed to appreciate that the mill along with accessories (i.e rolls) was purchased by Prakash Industries. The rolls as stated above are separately identifiable assets and recognized as such by the Act. He failed to appreciate that as far as the assessee's claim is concerned, it is in respect of 65 rolls worth Rs. 100 lakhs, which are separate asset in itself, and these 65 rolls are owned fully by the assessee, and not fractionally.

5. After considering the submissions of the assessee and the facts and circumstances of the case, the CIT (A) sustained the penalty by the AO by saying as under: 8. I have considered rival submissions. In the first place it must be observed that the appellant's contention that it had purchased assets and leased them out and therefore it was nothing but financing the leasing business, is a contention far from reality.

There has to be a difference between financing leasing activity or 'lease financing' and 'leasing finance'. In the prior case, a concern purchases an asset as a genuine purchase and leases it out to a third party earning the income from lease rent necessarily whether with or without the benefit of incremental gain by way of higher claim of depreciation. Usually, such cases are of the nature of purchase of vehicles, heavy duty vehicles used for commercial purposes or otherwise, purchases on plant and machinery etc. and giving the same on lease. In the latter type of activity i.e.

'leasing finance', it is pure and simple activity of advancing loans under the garb of a leasing activity or in the name of placing inter-corporate deposits or acquiring debentures etc. These activities are nothing but financing loans. In the instant case, the lessee i.e. Prakash Industries Ltd. has effected purchase of total plant and machinery inclusive of rolling mill rolls which is a part of heavy structural mill equipment from TISCO, Jamshedpur, in the F.Y. 1992-93. After these assets were used for one year, the appellant claims to have purchased from Prakash Industries Ltd. i.e.

lessee 65 of such rolls on 23.01.1994 at the original price. The appellant has not obtained these rolls in its physical possession/control any time. These rolls were obviously already used by the lessees. The appellant submitted during the reassessment proceedings certificates issued by its Chartered Accountant viz.

Shri Salvekar, and also a certificate issued by Chartered Engineer from Delhi viz. Shri S. Goyal & Co. as an evidence to certify that these goods were physically identified and purchased at appropriate price by the appellant company. Whereas, in the original return of income, the appellant has not given any details whatsoever either in any statement along with the return of income or throughout the assessment proceedings. The appellant has only made a claim of depreciation @ 100% keeping the A.O. in dark about these relevant important details of such claim of purchase.

9. In the instant case, therefore, what the appellant has done is that it has parked its surplus funds with Prakash Industries Ltd. with an intention of claiming depreciation @ 100% on the investment and also gaining Rs.34 lakhs by way of lease renl in a period of five years. This is evident from the following portion of the reply dated 22.02.2001 of the appellant: During the financial year 1993-94, the company made its maiden public issue and collected a sum of Rs.620 lakhs as share capital.

This issue was mainly for expansion of company's facilities, administrative buildings etc. Since the proposed plans were going to take some time. It was thought prudent that the funds be used in the meanwhile in best possible manner to generate further revenues. One of the ways through was the investment in lease financing, which will also offer certain tax shield to the company. M/s Tata Finance Ltd., with whom the company had some earlier dealings in the fields of bills discounting etc. and a reputed organization in the field of financing, suggested the proposal of Prakash Industries Ltd. for a sale and lease back transaction of Rolling Mill Rolls for Rs. 100 lakhs, the said rolls carry 100% depreciation under the I.'I'.

Rules, the proposal envisaged a sale and lease back of the Rolls from Prakasli Industries for Rs. 100 lakhs for a period of 5 years.

Praj was lo get Rs. 134 lakhs as lease rentals in the period of 5 years. After considering the tax advantages, the average annual return worked out to be about 16.50% after tax. The Board considered the proposal in its meeting dtd. 28 ^th February, 1994, and approved the same.

...Prakash Industries Ltd. already had purchased Heavy Structural Rolling Mill Equipment with accessories from M/s PISCO, Jamshcdpur.

The assessee had obtained a copy of invoice by 'PISCO to Prakash along with relevant transportation vouchers, a copy of which is already placed on record with the A.O. and enclosed herewith (annexure '1'). The Rolling Mill Rolls form part of the said Mill and are included in accessories. These are separate items and a separate asset in itself. In fact, a separate entry for these assets exists in Appendix 'A' to I.T. Rules [entry No. III(3)(vii)]. The Act thus expressly recognizes these as separate assets. Prakash Industries Ltd., through Tata Finance, approached the assessee for sale and lease back finance for these rolls... Having satisfied about the value and title, the assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/P&M/93-94 dated 23.01.1994 for Rs.100 lakhs (annexure '4'). The assessee also settled the amount of Rs. 100 lakhs with Prakash Industries (annexure '5'). The physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of the huge weight of the assets (about 400 tons) and high transportation costs.

However, a confirmatory letter from Prakash Industries that they have sold the assets and taken back the same from Praj on lease is already on record of the department (annexure '6' & '6A'). Moreover, the assets were insured with The New India Assurance Co. Ltd. with specific mention of assessee's name on the insurance policy (annexure '7').

In A.Y. 1995-96, however, the assessee's claim for balance 50% was challenged by the department (annexure '14'). The A.O. referred the mailer to D.D.I.T. (Inv.), Jabalpur, to inquire about the possession and actual use of the rolls. The D.D.I.T. (Inv.) Jabalpur, forwarded a copy of the report of inquiry conducted by him in respect of another transaction entered into by Prakash Industries Ltd. with RPG Telecom Ltd. (annexure '15'). The D.D.I.T. (Inv.), Jabalpur reported that the transaction between Prakash Industries and RPG Telecom was a sham one. The A.O. applied the same yardstick to the transaction between Prakash Industries and PIL and disallowed assessee's claim.

For the A.Y. 1995-96, the assessee. choke to avail KVSS and thus finding of the department remained unchallenged. As regards A.O's contention that the transaction is a sham one, we submit that the conclusion of the A.O. is without any basis. As has been stated earlier, outside parties such as Tata Finance, Chartered Engineer, Chartered Accountant, Insurance Company etc. were involved in the transaction. The assessee has also obtained original transportation challans from Prakash Industries for purchase of Heavy Structural Rolling Mill Equipment with accessories from M/s TISCO, Jamshedpur....

The value for 65 rolls was stated to be Rs. 100 lacs by Prakash Industries which was got valued by the assessee through an independent Chartered Engineer (annexure '9') and only then proceeded in the matter....

The assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/SID/P&M/93-94 dated 23.01.1994 for Rs. 100 lakhs (annexure '4'). The assessee also settled the amount of Rs. 100 lakhs with Prakash Industries through cheques/DD (annexure '5'). The physical delivery to Pune and back to Champa in MP. was not found practically feasible in view of the huge weight of the assets (about 400 tons) and high transportation costs. Flowever, a confirmatory letter from Prakash Industries that they have sold the assets and taken back the same from Praj on lease is already on record of the department (annexure '6' & '6A'). Moreover, the assets were insured with The New India Assurance Co. Ltd. with specific mention of assessee's name on the insurance policy (annexure '7').

Alternatively, it may also be appreciated that the assets are eligible for depreciation @ 100%. The depreciation is not being granted because the assets are in the nature of social and public welfare such as, pollution control, energy saving etc., but is being granted looking at the life of these assets. The life of these assets being basically in the nature of consumables is hardly 2-3 years. When one is looking for identity of such assets in 1998, which were purchased in 1994, it is quite possible that the asset may have ended their useful life by them. In such case, how can one possibly identify such assets. The moot point missed out by the department is that these should have been identifiable in the year in which depreciation claims were made i.e. in years 1994 and 1995.

Having failed to do so, we respectfully submit that department does not have a case to disallow depreciation on this ground, and more so, to levy a penalty on this ground. The benefit of doubt, if any, should clearly go in favour of the assessee.

It may also be appreciated that when the claim was made, the assessee had acted as any prudence man will act and under a genuine and bona fide belief that Prakash Industries was a good and creditworthy party. In fact, Prakash had entered into similar transaction with many other reputed concerned like Union Bank. Bajaj Auto Finance, Escorts, Vidcocon etc. and thus the assessee had no reason whatsoever to disbelieve the credentials of Prakash. It may also be appreciated that Prakash paid almost half of the lease rentals on time. It was only much later that they started defaulting on lease payments and reports started appearing in the newspapers.

On such defaulters also, we have filed criminal case against the Prakash Industries, a copy of which is enclosed (annexure '17'). It may thus be appreciated that at the time of making the claim, there was no Such inkling and no attempt or intention to conceal the income or furnishing inaccurate particulars was in the minds of the assessee.

Thus, at this level, it must first be understood that the appellant is not in a leasing transaction as far as the plant and machinery is concerned; the appellant is in a transaction of a leasing finance under the garb of leasing of plant and machinery. Whereas, the appellant is entitled to have its own opinion or inference on a given set of facts, it is incumbent upon the appellant to clearly state the facts in the return of income or in the statements accompanying the return of income or even during the assessment proceedings while making a claim of depreciation. It is not the case of the appellant that even where the appellant is leasing finance and not plan and machinery, the appellant is still entitled to 100% depreciation. In other words, while claiming 100% depreciation on the value of plant and machinery, the appellant has to clearly state the facts and then only draw inference as it chocses. In the instant case, the appellant has only made a claim of 100% depreciation without stating the facts.

10. As far as necessity of identifying the rolls actually purchased by the appellant is concerned, the A.O. has addressed this issue from three different angles yiz.: (iii) the appellant could not prove the use of the actual assets claimed to have been purchased.

It would be understood clearly from the provisions of the law applicable that an assassee has to prove the above mentioned three factors before it claims allowance of depreciation as per Rules. In the instant case, the appellant presumes that it has proved these points by virtue of paper transactions. It is an admitted fact that these rolls were not identified cither by the Chartered Accountant issuing the certificate or by the Chartered Engineer issuing a similar cert ficate. In the reassessment order, the A.O. clearly states that he has examined the Chartered Accountant who confirms that it was not possible lo identify which rolls the appellant had purchased and which were actually utilized. It is an admitted fact that appellant never look the possession of the rolls physically so that it has physically obtained the capital asset on which depreciation is claimed. This factor is most relevant because the appellant company claims purchase and leasing of only 65 rolls out of 472 rolls actually earlier purchased by Prakash Industries Ltd. and used in its business, in other words, the appellant company did NOT purchase all the rolls. There were some other concerns who also claimed to have entered into similar activity causing further complications. Hence the specific need of identifying the depreciable assets allegedly purchased by the appellant company has emerged.

11. It is therefore evident that even at the level of examination relating lo the claip made by the appellant, the appellant had made a false claim of depreciation without offering any proof which is sine qua non for claiming and allowing depreciation.

12. These facts are known to the appellant and the appellant had still made the claim of depreciation which was eventually withdrawn by virtue of an offer under KVS Scheme for A.Y. 1995-96. That means, while making such offer, the appellant is convinced that the claim made by the appellant was technically and factually incorrect. The assessment for A.Y. 1994-95 has thereafter been reopened,. If the appellant were convinced that its claim was incorrect, then it should have been the natural corollary that the appellant should have offered for A.Y. 1994-95 as well at the reassessment stage to withdraw such claim which was wrongly made. Had that been case, at least it would have been difficult to attach any motive to the appellant's original claim of depreciation. The appellant instead contested its stand that its claim was correct in the reassessment and on its disallowance, the appellant filed an appeal before the C.I.T. (Appeals). The appellant has chosen to withdraw such appeal and filed a revision petition instead before the C.I.T. such revision petition has been dismissed on merit and, therefore, it has now become final that the appellant's claim of depreciation was incorect ab initio.

13. From the foregoing facts, it is clear that the appellant has willfully made wrong ab initio which could not factually be substantiated and it is found logically, not tenable. The appellant also produced during the reassessment proceedings for the first time and the certificates so as to prove that the rolling rolls were actually identified by the appellant before its purchase. Its bluff has been exposed during the reassessment proceedings when the Chartered Accountant certifying the physical identification of such rolls admitted before the A.O. that these rolls were not capable of being identified. Further, the appellant claimed in the proceedings that it is obvious that the rolls have been used and their total life was for 2-3 years, whereas the Chartered Accountant visited the site after a period of 4 years and, therefore, it was not possible to identify the rolls purehased by the appellant. At this stage, it must be mentioned that the appellant was given an opportunity to produce such Chartered Accountant and Chartered Engineer during these appellate proceedings so as to verify the correctness of this statement of the appellant. As a matter of fact, the record clearly reveals that these rolls were sold by TISCO only on weight basis and none of these rolls actually affords any identification or verification as none of these rolls bear any identification marks or identification numbers. They all look alike and functionally are identical. Their dimensions are also of standard laid down and, therefore, it is not possible to identify/differentiate one roll from the other even at the stage of manufacture itself. This factor was admitted by the representative of the appellant during the appellate proceedings and, therefore, he has chosen not to produce either the Chartered Accountant nor Chartered Engineer for examination during the appellate proceedings.

14. The total conduct of the appellant company, in producing certificates from the Chattered Accountant and the Chartered Engineer in proof of identification of the rules, clearly amounts to submission of false evidence in support of its claim of depreciation. And, therefore, in my opinion this is the fit case for levy or penalty for concealment to summarise the whole situation, it is found that the appellant did not have proper evidence in support of the depreciation claim and it is clear that it has concealed the facts relevant for the purpose of deciding the claim off depreciation. It has also produced false evidence before the A.O. during the reassessment proceedings so as to mislead the A.O. to believe that the claim of depreciation was genuine. This conduct is nothing short of contumacious conduct; The penalty levied Under Section 271(l)(c) of the Act is fully justified.

15. The appellant has objected to the report sent by the D.D.I., Investigation. IT is necessary to make such a passing remark. I do not find any necessity to rely such report. The evidence brought by the appellant itself on the record of the case is sufficient to pin down the appellant as above. The penalty levied is therefore confirmed. Appeal is dismissed.

The ld authorised representative for the assessee, in the course of his arguments, has invited our attention to the various documents and papers placed in the paper book containing 144 pages. He has reiterated the contentions and submissions that were made before the CIT (A), and in connection thereto, he invited our attention to the various submissions and contentions that were incorporated in the written submissions filed before the CIT(A). This written submission filed by the assessee before the CIT(A) is placed at pages 11 to 17 of the paper book. The contentions and submissions that were made by the assessee in his written submissions filed before the CIT(A) wera emphatically emphasized and highlighted by the Id counsel for the assessee at the time of hearing of this appeal. All those facts and contentions highlighted by the Id counsel for the assessee in the written submissions along with the Variqus documents in support there of have been taken note of very carefully by us. The assessee's written submission made before the CIT (A) has already been quoted hereinabove, and as such, we do not find it necessary to repeat the same here.

7. The ld DR, on the other hand, supported the orders of the authorities below. He contended that each and every aspect of the matter has been elaborately and meticulously discussed and analyzed by the AO as well as by the CIT(A) in their respective orders to come to a conclusion that the assessee's claim of depreciation on the alleged forging rolls was not genuine and true, but the same is based on unreliable and unsustainable evidences. The ld DR had read over the order of the AO as well as the CIT (A) and, therefore, contended that the authorities below were very much justified in imposing penalty Under Section 271(1)(c) in respect of the assessee's false claim of depreciation on alleged forging rolls. He further submitted that the assessee has not been able to establish that he has furnished all true material facts relating to the issue and has been able to discharge its burden that lay upon it under Explanation 1 to Section 217(1)(c) of thje Act. He further contended that the assessee's explanation in support of the claim of depreciation on alleged forging rolls is not at all found to be bona fide; and honest one, but, on the other hand, the assessee's claim was found to be totally false and mala fide as clearly pointed out by the AO as well as by the CIT (A) in their respective orders. The Id DR, therefore, submitted that the order of the CIT (A) in confirming the penalty imposed by the AO Under Section 271(1)(c) is deserved to be upheld.8. We have considered the rival contentions of both the parties and have carefully gone through the orders of the authorities below. We have carefully gone through the various documents and papers placed in the paper book filed by the assessee.

9. This is a case relating to the imposition of penalty Under Section 271(1)(c) of the Act. The Income-tax Appellate Tribunal, Pune Bench 'A", Pune in the case of Shri Malhotra Mukesh Satpal, Pune and Ors. in ITA No 183/PN/03 etc., constituted by the present Members, has vide its order dated 31.5.2006 has analyzed and deliberated upon the provisions of Section 271(1)(c) read with Explanation 1 thereto, and, after referring to a number of decisions of the various Court, namely,:K P Madhusudanan v. CIT has concluded and summarized the scope and effect of Section 271(1)(c) read with Explanation 1 thereto as under: 3.20. On careful reading of the afore-said provisions of Section 271(l)(c) read with Explanation thereto and in the light of judicial precedents discussed above, the law on the subject of penalty imposable Under Section 271(1)(c ) read with Explanation thereto can be spelt out in the prepositions as under: i) Wherever there is a difference between the returned and assessed income, there is a inference of concealment, as a rule of law as would be clear from Explanation 1 to Section 271(1)(c) of the Act.

However, the Explanation I to Section 271(1)(c) raises only a presumption that can be rebutted by the assessee with reference to the facts of the case.

ii) The responsibility for rebutting such inference of concealment drawn under Explanation 1 to Section 271(1)(c) is squarely on the assessee.

iii) The assessec is required to offer an explanation for the difference between the returned and assessed income.

iv) Absence of any Explanation, by itself, would attract penalty as is clear from Clause (A) of Explanation 1 to Section 271(1)(c) of the Act.

v) The explanation of the assessec, where offered, should not be found to be false, so that the penalty would not be exigible. In other words, the explanation of the assessec if found to be false would attract penalty as envisaged in Clause (A) of Explanation 1 to Section 271(1)(c) of the Act.

vi) Merely because the assessec is not able to substantiate its explanation, penalty would not automatically be attracted if (i) such explanation is found to be bona fide and (ii) all the facts relating and material to the computation of total income has been disclosed by the assessee.

vii) Where there is nothing to suggest, gross or willful neglect or fraud and the explanation offered by the assessec is found to be bona fide, the Explanation 1 to Section 271(1)(c) itself would not then help the revenue to justify the penalty.

viii) The burden placed upon the assessec to rebut the presumption raised Under Explanation 1 to Section 271(1)(c) would not be discharged by any fantastic or fanciful explanation. It is not the law that any and every explanation by the assessee must be accepted.

(x) Mere offer of income by the assessee cannot justify cancellation of penalty. Though it cannot be laid down as a principle of universal application that whenever an addition is made on a concession, penalty is not to be levied, the factual position in each case has to be considered and the background in which the agreement is made for the addition has to be taken note of.

x) Where penalty is exigible with reference to the Explanation to Section 271(1)(c), the mere fact that the AO has not specifically invoked the same would not justify cancellation of penally.

3.21. In this view of the matter, it is thus clear that so long as the assessee gives a bona fide explanation and unreservedly gives all the documents and inforrr atipn without withholding any information relating to the computation of assessee's total income, the assessee's explanation unless found to be false, would deserve acceptance for the purpose of penalty imposable Under Section 271(1)(c), so that penalty should not be exigible. In other words, if an assessee offers an explanation, which is not found to be false, he can save himself from penalty even if he were not able to substantiate his ease as long as the explanation of the assessee is bona fide and as long as he places all the relevant facts material to the compilation of his total income irrespective of the fact that the same explanation was not accepted for the purpose of assessment.

10. Having noticed above the scope and effect of the provisions of Section 271(1)(c) read with Explanation 1 thereto, we shall now revert to the facts of the present case to ascertain as to whether the assessee's explanation in support of the claim of depreciation on alleged forging rolls is found to be false by the AO, and whether the assessee's explanation was bona fide and the assessee had disclosed all material facts and information relating to the claim of depreciation on forging rolls.

11. In this case, the original assessment for the assessment year 94-95 under consideration was initially completed Under Section 143(3) on 24.9.97, where the claim of depreciation to the extent of 50% on forging rolls was allowed, inasmuch as it was claimed that the same were used for a period of less than 180 days during that year. The balance depreciation was claimed in the assessment year. 95-96, during the assessment proceedings of which it was found by the AO that the assessee's clam of depreciation on forging rolls was not genuine, as the AO found that the assessee could not establish, inter alia, that the forging rolls claimed to have been purchased from M/s Prakash Industries Ltd and given back on lease to it were actually existing at the business premises of M/s Prakash Industries Ltd. and were used for the purpose of business. The assessee's claim of balance 50% of depreciation for the assessment year 95-96 was disallowed. And, in the light of the materials and evidences found during the assessment year 95-96, the assessment for the assessment year 94-95 was reopened by issuing a notice Under Section 148 on 30.3.99. In the assessment year 95-96, though the assessee had filed an appeal against the AO's order rejecting the assessee's claim of depreciation on forging rolls, the said appeal was not contested, but was withdrawn, and the assessee had availed the benefit of KVSS Scheme. Hence, the AO's order, rejecting the assessee's claim of depreciation in the assessment year 95-96 stood concluded in favour of the Revenue. On the same analogy given by the AO in the assessment year 95-96, the claim of depreciation on forging rolls in the assessment year 94-95 was also disallowed in the reassessment order made Under Section 143(3) read with Section 147 on 30.9.99. The appeal filed by the assessee before the CIT(A) against the re assessment order was withdrawn by the assessee, and, instead, an application for revision Under Section 264 was filed before the CIT, who rejected the same, vide his order dt 4.5.2000. No further appeal or any other remedial proceedings has been preferred by the assessee for the assessment year 94-95. It is, thus, clear that in the assessment for the assessment year 94-95, the assessee's claim of depreciation on forging rolls has stood finally rejected. Since the assessee's claim of depreciation on forging rolls has been rejected resulting into a difference between the returned and assessed income, an inference of concealment as a rule of law is to be drawn, as would be clear from the provisions contained in Section 271(1)(c) read with Explanation 1 thereto. However, this presumption of concealment drawn from the language of Section 271(1)(c) read with Explanation 1 thereto can be rebutted by the assessee with reference to the facts of each case. It is also well settled that the responsibility for rebutting such inference of concealment drawn Under Section 271(1)(c) read with Explanation 1 thereto is squarely on the assessee. Thus, in the present case, the assessee is required to offer an explanation with regard to its claim of depreciaticn on the alleged forging rolls. The explanation offered by the assessee should not be found to be false for the purpose of not levying the penalty. In other words, the explanation of the assessee if found to be false, that would attract penalty as envisaged in Clause (A) of Explanation 1 to Section 271(1)(c) of the Act. It is also clear that merely because the assessee has not been able to substantiate his explanation, penalty would not automatically be attracted, if the explanation so offered by the assessee is not found to be false but is bona fide, and all the facts relating and material to the computation of the assessee's income has been truly and fully disclosed by the assessee. Therefore, in the present case, it is the assessee's burden to show that his explanation as to the claim of depreciation of forging rolls is bona fide, and all the facts relating and material to the assessee's claim of depreciation on the forging rolls has been disclosed by it. This explanation of the assessee cannot be held to be discharged by any fantastic or fanciful explanation. It is also not the law that any and every explanation of the assessee is to be accepted for the purpose of Explanation 1 to Section 271(1)(c) of the Act. In the light of this view we have taken, we have now to see as to whether the assessee has given a bona fide explanation and has unreservedly given all the documents and information without withholding any information relating to the assessee's claim of depreciation on forging rolls.

12. It is well settled that for the purpose of claiming depreciation, the assessee has to establish and prove two requisite conditions, namely, (i) that the depreciable asset is owned by the assessee, and, (ii) that it is used for the purpose of the assessee's business or profession. In order to establish that the assessee is the owner of the depreciable asset, which is used for the purpose of the assessee's business, it is pre-supposed that the assessee has to establish and prove the existence of the asset in question. It is, therefore, necessary to examine and ascertain as to whether the forging rolls claimed to have been purchased by the assessee were in existence at the premises of M/s Prakash Industries Ltd, were actually distinctly identifiable, were purchased and given back on lease by the assessee and were used for the purpose of the business of the lessee, and as to whether the assessee has furnished any bona fide explanation in support of its claim of depreciation on forging rolls.

13. It is the assessee's case that the assessee had purchased the rolls from M/s Prakash Industries vide their Invoice No PIL/SID/P&M/93-94 dt 23.1.94 for Rs 100 lakh and were given back on lease to M/s Prakash Industries. In support of this case of the assessee, the assessee has relied upon various documents, some of them having important bearing on the issue are listed below: 1. Invoice dt 23.1.94 of Prakash Industries in 26 favour of the assessee.

2. Payment of the sale consideration made 27-28 by the assessee to Prakash Industries 3. Confirmatory letter from Prakash Industries 29-30 Dt 28.4.98 6. Non-encumbrance certificate dt 17.2.94 25 given by Chartered Accountant 8. Invoice dt 31.3.93 of TISCO Ltd favouring 18-23 Praksh Inds. alongwith 5 Nos. transport 10. Lease Agreement with M/s Prakash Industries 89-107 Ltd. 11. Resolutions dt 24.01.94 and 28.1.04 adopted 118-119 by the Board of Directors.

14. It is the assessee's case that the sale and lease back transaction entered into with M/s Prakash Industries Ltd was materialized on the recommendations given by Tata Finance Ltd, which is a well known Tata organization in the field. The assessee's further case is that Prakash Industries Ltd had already purchased heavy structural mills equipment with its available accessories from M/s TISCO, Jamshedpur vide Invoice dated 31.3.93, and the forging rolling claimed to have been purchased by the assessee from M/s Prakash Industries Ltd did form part of the heavy structural mills equipment with its available accessories purchased by M/s Prakash Industries Ltd from TISCO. The assessee further stated that out of the rolling mill rolls purchased by M/s Prakash Incustries Ltd from M/s TISCO, 65 nos. of forging rolls were purchased by the assessee from M/s Prakash Industries for a sum of Rs One crore vide Invoice dt 23.1.1994, and the same were given back to the same company on lease vide Lease Agreement dt 02.02,1994.

15. On the other hand, the department's case is that the assessee has not been able to establish that the forging rolls alleged to have been purchased by the assessee from M/s Prakash Industries Ltd were existed at the business premises of M/s Prakash Industries Ltd, and the assessee has not given any conclusive evidence to show that the assessee had actually purchased any forging roll. The department's further contention is that the assessee has not been able to identify those 65 rolls claimed to have been purchased from M/s Prakash Industries Ltd, at the factory premises of M/s Prakash Industries Ltd. In support of the department's case, the department has laid emphasis on the following facts: i) The purchase bill of the assessee does not identify which forging rolls were purchased by the assessee from M/s Prakash Industries Ltd. ii) The assessee's claim that its Chartered Accountant Shri S R Salvekar had actually identified the assets on 23.198 is not correct, in the light of the fact that during the course of assessment proceedings for the assessment year 95-96 Shri S R Salvekar has specifically stated before the AO that his employee Mr Prashant Deshmukh could not identify the rolls.

iii) In the light of the enquiry conducted by the DDIT (Inv), Jabalpur, forging rolls alleged to have been installed at M/s Prakash Industries Ltd were not distinctly identified with reference to different concerns with whom Prakash Industries Ltd had allegedly entered into sale and lease back transaction.

iv) Since forging rolls were not physically and distinctly identifiable, the question of sale thereof and taken back on lease did not arise.

v) In the light of the various facts and evidences pointed out by the AO as well as the CIT (A) in their respective orders, they had thus taken a view that the assessee's claim to have entered into sale and lease back transaction is not a genuine one, but is merely a financial transaction advancing a loan to M/s Prakash Industries Ltd. 16. To ascertain as to whether the heavy structural mill equipment with its available accessories alleged to have been purchased by M/s Prakash Industries Ltd from M/s TISCO vide invoice dt 31.3.93 had actually included the very forging rolls claimed to have been purchased by the assessee and given them back on lease to M/s Prakash Industries Ltd, we have carefully perused the aforesaid invoice dt 31.3.93 of M/s TISCO raised in favour of M/s Prakash Industries Ltd. On perusal of the same, it is seen that the particulars of the items mentioned in the said invoice are stated as "Heavy Structural Mill equipments with its available accessories" and the price thereof is stated at Rs 2 Crores, whereupon CST at the rate of 4% amounting to Rs 8 lakh was also charged. The total value of the invoice is Rs. 2,08,00,000/-. This invoice dt 31.3.93 was raised in respect of the order dt 16.7.91. The list of the heavy structural mills equipment with its available accessories have not been furnished either by the assessee or by M/s Prakash Industries Ltd. This invoice does not indicate whether the "heavy structural equipment with its available accessories" were included the forging rolls. The assessee's further case is that the heavy structural equipment with its available accessories purchased by M/s Prakash Industries Ltd from M/s TISCO vide invoice dt 31.3.93 were transported from TISCO's premises situated at Jamshedpur to the site of M/s Prakash Industries Ltd by road vide 5 nos. road transport consignments dt 28.7.92 of Dharam Roadways, which are placed at pages 19 to 23 of the consolidated paper book filed by the assessee. It is, thus, the assessee's case that "heavy structural mills equipment with its available accessories" were delivered by M/s TISCO to M/s Prakash Industries Ltd by road, in support of which the assessee has relied on aforesaid transport consignment dt 28.7.92. It is further pertinent to note that from the details of delivery challans relating to the purchase of Heavy Structural Equipments supplied by M/s TISCO to M/s Prakash Industries Ltd, filed before the Additional Director of Income-tax, Range 1, Raipur, M.P., it was revealed that all these Heavy Structural Mill equipments with its available accessories were delivered by M/s TISCO upto the month of September, 1992 itself. At the same time, the assessee has also relied upon a confirmatory letter dt 28.4.98 given by M/s Prakash Industries Ltd, which is placed at pages 29 and 30 of the paper book. In this confirmatory letter given by M/s Prakash Industries Ltd, they have confirmed that heavy structural rolling mill Rolls, 65 Nos. sold by them to M/s Praj Industries Ltd, were purchased by them from M/s TISCO vide invoice dt 31.3.93 with reference to the purchase order dt 16.7.91 and they were transported by M/s TISCO through Dharam Roadways by road. They have further stated in the said letter that they had paid the cost of this heavy structural rolling mill rolls to M/s TISCO vide postal order No 729774 dt 14.7.92 for Rs one crore. Thus, the details of the payment is given only to the extent of Rs One crore, though the invoice was raised for Rs. 2,08,00,000/-. It was further stated by M/s Prakash Industries Ltd. in this confirmation letter that they had sold these assets to the assessee and obtained the very same assets on lease basis, which is technically known as 'sale and lease back transaction'. It was further stated in this confirmation letter that this heavy structural rolling mills rolls were installed and put to use on 22.3.94 at their factory at Champa, Dist. Bilaspur, Madhya Pradesh. It was also stated therein that these assets were clearly identifiable as assets belonging to the present assessee. They further stated that M/s R D Garg & Co. Chartered Accountants had issued no-encumbrance certificate certifying that these assets are from any charge or encumbrance, and the assets were also insured. It was further confirmed therein that this sale and lease back transaction was syndicated for them by M/s Tata Finance Ltd. At this stage, it is very pertinent to note that M/s Prakash Industries Ltd. has also given an another letter dt February 17, 1994 (page 31 of the paper book) to the assessee M/s Praj Industries Ltd stating therein as under: With reference to the proposal for lease finance of Rs. 1,0036,149/- we hereby confirm that we have procured the concerned assets i.e.

Steel Structure Rolling Mill Rolls is in the month of May, 1993 and these are at our factory site. Village Champa, Distt. Bislapur, (MP).

17. On perusal of this letter, dtd February 17, 1994, it is seen that M/s Praj Industries Ltd have confirmed that they had procured the concerned assets, i.e. Steel Structural Rolling Mills Rolls, in the month of May 1993 and they were at their factory site at Village Champa, Dist. Bilaspur, MP. In this letter, they have also given a reference to the proposal of the lease finance of Rs 1,00,36,149/-.

From this letter, it is thus clear that M/s Prakash Industries Ltd. has admitted in this letter that the Steel Structural Rolling Mills Rolls, in respect of which the proposal for lease finance: of Rs 1,00,36,149/-was made with M/s Praj Industries Ltd., were procured by M/s Prakash Industries Ltd in the month of May, 1993, though, on the other hand, in their letter dt 28.04.1998 they have stated that heavy structural mill equipment with its available accessories purchased from M/s TISCO vide invoice dt 31.3.93 were transported by TISCO through Dharam Roadways by road, the transport consignments of Dharam Roadways filed by the assessee are all of dated 28.7.92 meaning thereby that the alleged heavy structural equipments with its available accessories claimed to have been purchased by M/s Prakash Industries Ltd. from M/s TISCO were transported to the assessee's site vide transport consignments dt 28.7.92 of Dharam Roadways. This gives a total conflicting stand as to the procuring of the steel structural rolling mill rolls by M/s Prakash Industries Ltd. Further, the invoice of M/s TISCO raising the bill of Rs. 2 Crore does not give any details as to how the sun of Rs. 2 Crore has been quantified with reference to each and every item alleged to have been sold by the invoice dt 31.3.93. The details of the payment made by M/s Prakash Industries Ltd. to M/s TISCO as given in the letter of M/s Prakash Industries Ltd. (placed at pages 29 and 30) is only with regard to Rs One crore and, that too, by postal order dt 14.7.92. At this stage, it is pertinent to note that at one stage, the assessee in its letter dt 28.3.98 given to the A.O (Dy. CIT, Spl Range 3, Pune) during the assessment proceedings for the assessment year 95-96 has stated as "During the financial year 1993-94, we had entered into the above transaction of Sale and lease back, which was received from M/s Tata Finance Ltd. for Rs 100,00,000. The said Heavy Structural Steel Rolling Mills Rolls had been purchased by M/s Prakash Industries Ltd. from M/s TISCO, Jamshedpur vide Combined advice and invoice No. 9303-82145 dated 31.3.1993 for a total amount of Rs 2 crores, out of which 50% was financed by us by way of sale and lease back transaction." On reading this averment of the assessee, it is seen that the assessee has also made out a case that out of the total consideration of Rs 2 crores on account of purchase of the Heavy Structural Steel Rolling Mills Rolls by the assessee from M/s TISCO, vide invoice dt 31.3.93 which is related to the order dt. 16.7.91, 50% thereof was financed by the assessee by way of sale and lease back transaction. In this regard, we observe that the assessee has claimed to have entered into the transaction of sale and lease back only after getting its approval from the Board of Directors, vide Resolution dt 24.1.93 and 28.1.94 and purchased the alleged forging rolls vide invoice dt 31.3.93. It is not understood as to how the assessee had come to the picture of financing 50% of the sale consideration of the total Heavy Structural Rolling Mills Rolls with its available accessories which were purchased by M/s Prakash Industries Ltd from M/s TISCO vide invoice dt 31.3.93, the delivery thereof was also already obtained vide transport bill dt 28.7.92. From the various documents produced by the assessee, the assessee had come into the picture for the purpose of entering into sale and lease back transaction only after the alleged Heavy Structural Mill Equipment with its available accessories were acquired by M/s Prakash Industries Ltd from M/s TISCO, we fail to understand as to this stand of the assessee that 50% of Rs 2 crores being the sale consideration of heavy Structural Mill Equipment with its available accessories allegedly purchased by M/s Prakash Industries Ltd from M/s TISCO was financed by the assessee by way of sale and lease back transaction. The alleged sale and lease back transaction has been claimed to be entered into on 02.02.94 only and the question of financing towards the sale consideration of Heavy Structural Mill Equipment with its available accessories, which were already purchased by M/s Prakash Industries Ltd from M/s TISCO vide invoice dt 31.3.93 and delivery of which were already obtained in or about July, 1992 could not arise at all. In this regard, we may, therefore, say that the assessee has not come forward with clean hands to claim the depreciation on the alleged forging rolls. Therefore, it is not clear as to whether the heavy structural mill equipment with its available accessories had actually included the heavy structural rolling mills rolls alleged to have been sold by M/s Prakash Industries Ltd. to the present assessee, and whether, they were actually available at the factory premises of M/s Prakash Industries Ltd. M/s Prakash Industries Ltd. has given a conflicting and contradictory statement as to the date of acquisition of these equipments by it. Therefore, in the light of the facts discussed above, we are of the considered view that the assessee's case that M/s Prakash Industries Ltd. had already purchased heavy structural rolling mills rolls from M/s TISCO and were lying with M/s Prakash Industries Ltd. at their factory premises, is found to be an unbelievable one.

18. Further, it is pertinent to note that in its letter dt 17.2.94 (page 31 of the paper book), M/s Prakash Industries Ltd had referred to the assessee's proposal for lease finance of Rs 1,00,36,149/-, though, on the other hand, it is the assessee's claim that M/s Prakash Industries Ltd. vide its invoice dt 23.1.94 has sold the heavy structural rolling mills rolls amounting to Rs One crore only. The lease agreement is of dated 2^nd Day of February, 1994. The invoice, which is, relied on by the assessee, is raised by M/s Prakash Industries Ltd. for sale of alleged heavy structural rolling mill rolls for a sum of Rs One crore on 23.1.94. The letter dated February 17, 1994 of M/s Prakash Industries Ltd. Confirming that steel structural rolling mill rolls were procured by them in the month of May 1993 and they were at their factory site was given with reference to the proposal for lease finance of Rs 1,00,36,149/-. It is not made understood and clarified as to why a reference to a proposal of lease finance of Rs 1,00,36,149/- is made in the said letter dated February 17, 1994, when the assessee's case is that they had purchased this item for a sum of Rs One crore only vide invoice dt 23.1.94. No explanation as to the discrepancy of the amount of Rs One Crore vis-a-vis Rs 1,00,36,149/- has been given. It is the further case of the assessee that M/s R D Garg & Associates, CA has given a certificate dt 17.2.1994 that the heavy structural rolling mill rolls purchased by the assessee from M/s Prakash Industries Ltd were free from any encumbrances having no charge of bank or any financial institution. This certificate dt 17.02.1994 placed at page 25 of the paper book reads as under: We hereby certify that "Heavy Structural Rolling Mill Rolls detailed in Invoice No. PIL/SID/P&M/93-94 dated 24,08.93 of M/s Prakash Industries Limited for Rs, 1,00,36,149/- favouring M/s Praj Industries Ltd., 1216/6, Furgusson College Road. Post Box No. 831, Pune 411 004 have no charge of bank and or any financial institution.

On perusal of the aforesaid certificate, it is seen that M/s R D Garg & Associates, CA has given a certificate to the effect that the Heavy Structural Rolling Mill Rolls detailed in invoice No PIL/SID/P&M/93-94 dt 24.8.93 of M/s Prakash Industries Ltd. for Rs 1,00,36,149/- favouring M/s Praj Industries Ltd, have no charge of bank and or any financial institution. The CA has given this certificate with reference to invoice dt 24.8.93 for Rs 1,00,36,149/- of M/s Prakash Industries Ltd. favouring the present assessee. It is not the assessee's case that they purchased any Rolls from M/s Prakash Industries Ltd. vide invoice dt 24.8.93 for Rs 1,00,36,149/- and had entered into the sale and lease back transaction in respect of the assets purchased vide invoice dt 24.8.93. The assessee's case is only with reference to invoice dt 23.1.94 for Rs One crore only and not with reference to invoice dt 24.8.93 for Rs 1,00,36,149/-. No explanation or clarification either from the assessee or M/s Prakash Industries Ltd has been advanced as to how and why a reference were being made to two invoices of two different dates for two different amounts. It is pertinent to note that this certificate given by the C.A is of dated 17.2.94, which is subsequent to the date of alleged invoice dated 23.1.94 and the date of the lease agreement, which is of 2^rd Day of February 1994, but still the C. A's certificate does not give any reference to the invoice dt 23.1.94 for Rs One crore claimed to have been raised by M/s Prakash Industries Ltd. in favour of Praj Industries Ltd. This makes the assessee's case very doubtful and unbelievable. This cast a very serious doubt as to the genuineness of the invoices claimed to have been raised by M/s Prakash Industries Ltd. It is, thus, more than clear that all these documents relied upon by the assessee do not support the assessee's theory of actually having purchased the heavy structural rolling mill rolls worth of Rs One crore from M/s Prakash Industries Ltd. 19. The assessee's claim that heavy structural rolling mill rolls claimed to have been purchased by the assessee from M/s Prakash Industries Ltd. did form part of the plant and machineries of M/s Prakash Industries Ltd., who in turn had purchased the same from M/s TISCO vide invoice dt 31.3.93 may be examined from one more angle. It is the assessee's case that 65 numbers of rolling mill claimed to have been purchased from M/s Prakash Industries Ltd. were duly identified by its Chartered Accountant, who conducted physical inspection of the concerned assets leased back by the assessee to M/s Prakash Industries Ltd. vide CA's certificate dt January 30, 1998, which is placed at page 64 of the paper book. The said certificate has been carefully perused by us. It is stated therein that physical verification of the concerned assets leased out by the assessee to M/s Prakash Industries Ltd. was conducted by the C.A's representative, namely, Shri Prashant Deshpande and the assessee's representative Mr Sanjay Kulkarni jointly on 23.1.98 at 5.30 PM. It was further stated thereih that these assets were located at Champa, Dist Bilaspur (M.P) and were physically inspected by them and were found to be in working condition and separately identifiable. This certificate was given by the assessee's C.A Mr. S R Salvekar. From this certificate, it is clear that the physical verification was not claimed to be conducted by Mr Salvekar himself, but by his representative Shri Prashant Deshpande. During the course of the assessment proceedings for the AY 95-96, when this lease transaction entered into between the assessee and M/s Prakash Industries Ltd. was first examined and investigated by the AO, Shri S R Salvekar, C.A. had categorically stated that his employee Shri Prashant Deshpande could not identify the assets. In the statement made before the AO, the assessee's C A Shri S R Salvekar had confirmed that it was not possible to identify the very rolls the assessee had purchased and which were actually utilized for the purpose of business in the mill of M/s Prakash Industries Ltd. From this, it is thus clear that the certificate given by the Chartered Accountant Shri Salvekar was not a true and correct one as the C. A. himself had admitted before the AO in the course of the statement that his employee could not identify the very rolls the assessee had purchased and given them back on lease to M/s Prakash Industries Ltd. Therefore, the assessee's case that the assets alleged to have been given back on lease were actually identified and were thus used in the business of M/s Prakash Industries Ltd. is not established, but rather it is totally found to be false one. When it is firmly established and proved that the assets were not distinctly identified, it does not make any sense in the assessee's contention that since the assets were duly insured with Insurance Company with the assessee's claim therein, the assessee's claim should be accepted as true. We further observe that in the alleged lease agreement dt. 2^ndFebruary, 1994, one of the conditions specified therein is that the lessee shall affix a name plate or other mark on the Equipment identifying the sole and exclusive ownership thereof of the lessor and not allow or permit the same to be removed or defaced.

But, on an enquiry and investigation, and in the light of the discussion made above, it becomes clear that no such name plate or other mark on the alleged 65 nos. of forging rolls identifying the sole and exclusive ownership thereof of the assessee has been established.

Further, in the said lease agreement, the description of the equipment is given as "Steel Roller", which makes it clear that no detail as to the numbers and identifications of the Steel Roller alleged to be given on lease by the assessee to M/s Prakash Industries Ltd are described in the lease agreement. From this point of view also, existence of the alleged forging rolls and sale and lease back thereof by the assessee is not found to be established.

20. In the course of hearing of this appeal, the Id authorized representative for the assessee has submitted that it is because of the non-cooperation and non-helping attitude of the C.A Mr Salvekar towards the assessee, the C A stated before the AO that the assets could not be identified by his employee. It was further submitted by the authorised representative of the assessee that because of C.A's such indifferent attitude, the assessee had discontinued to avail the services of this C A. It is, thus, clear that Shri Salvekar has not been engaged any more by the assessee because of his giving statement before the AO, which statement went against the assessee's interest. In this respect, we are of the view that merely because the assessee has discontinued to avail the services any more of the said C.A, that would not by itself be sufficient to prove that whatever stated by the C A before the A.O was false and not correct one. The assessee has not produced any iota of evidence to say that whatever stated by the C A in his statement before the AO as to the fact of identification of the alleged rolls was not true state of affairs and what was stated by him in his certificate was only correct and true one. In this connection, it is submitted by the assessee that the statement of the C.A stating that the assets could not be identified had remained unchallenged because of availing K.V.S.S benefit in the assessment year 1995-96 and because the assessee went in for relief Under Section 264 in the assessment year 1994-95. But the well settled position of law is that the assessment proceedings and penalty proceedings are independent and separate one, and thus, the assessee could have at-least produced in the penalty proceedings some evidences or materials to rebut the aforesaid statement of its C.A made before the A.O. No such evidences or materials have been brought to light in these penalty proceedings. Therefore, in our considered view, it is now more than clear that the certificate dt January, 30, 1998 given by the C A is found to be false in the light of the C As own statement made before the AO to the effect that the concerned assets were not identified by his employee. Therefore, the question whether the rolling mills rolls were actually purchased by the assessee and were given back on lease to M/s Prakash Industries Ltd and were, thus, used for the purpose of business in the factory premises of; M/s Prakash Industries Ltd. is found to be an unbelievable and implausible one.

21. Furthermore, no evidences or materials or particulars whatsoever have been brought on record by the assessee to prove and establish that the very 65 Nos. of forging rolls were identified and earmarked and were physically verified by the assessee before purchasing the same vide alleged Invoice dated 23.01.1994 of M/s Prakash Industries Ltd. Though no actual physical delivery of the rolls could be possible as viewed by the assessee, it is always desirable and necessary to identify the very assets intended to be purchased before the constructive delivery thereof was taken. In order to take a constructive delivery of any property, it is desirable that the property must first be identified and its existence should be ascertained by the purchaser. In this regard, the assessee has relied upon the valuation certificate dated 04.01.94 of a Chartered Engineer and non-encumbrance certificate dated 17.2.94 of a Chartered Accountant. We have already observed above that the non-encumbrance certificate given by a Chartered Accountant is not with reference to the Invoice dated 23.1.94, but with reference to the invoice dated 24.8.93. The valuation certificate is with regard to overall rate of rolls and not with regard to the very 65 rolls alleged to have been purchased by the assessee. Thus, the assessee's case from this angle is also not found to be genuine, and it appears to be not a case of an usual transaction that one prudent businessman would normally have entered into.

22. One of the assessee's contentions in support of its case is that the transactions of purchase and lease back entered into with M/s Prakash Industries Ltd. were made under the guidance and advise of M/s Tata Finance Ltd, a well known company. This factor alone without supported by any independent sufficient ard adequate documents or materials, is in itself not sufficient to say that merely because the transactions were entered into after the same was referred to by Tata Finance Ltd, is a transaction of sale and lease back transaction and not of a mere financial transactions. M/s Tata Finance Ltd has not given any certificate or confirmatory letter nor any physical verification was made by M/s Tata Finance Ltd that the rolling mill rolls were actually in existence at the factory premises of M/s Prakash Industries Ltd. and were distinctly identifiable, Merely because finance given by the assessee to M/s Prakash Industries Ltd. were liaisoned by Tata Finance is by itself not sufficient to say that the transaction in question was of a sale and leaseback transaction. This contention of the assessee, therefore, does not support the assessee's case in any manner, inasmuch as, in the present case, it is otherwise found that the transaction entered into by the assessee has not been proved and established to be a genuine transaction of sale and lease back transaction, in the light of the various documents, papers and the evidences referred to by the AO as well as by the CIT (A) in their respective orders and as has been appreciated herein by us.

23. We may further note that in the written submission of the assessee filed before the CIT(A), the assessee has stated that "M/s Prakash Industries, through Tata Finance approached the assessee for sale and lease hack finance for these rolls. The value for 65 rolls was slated to be Rs 100 lacs by Pakash Industries. As a prudent commercial man, the assessee got these valued by an independent Chartered Engineer (annexure '2'). The assessee also obtained a certificate from a chartered accountant that the rolls were without any encumbrance (annexure '3') and only then proceeded in the matter. Having satisfied about the value and title, the assessee purchased the rolls from Prakash Industries vide their invoice No. PIL/SID/P&M/93-94 dt 23.01.94 for Rs 100 lack. (annexure '4')." On perusal of the same, it is thus clear that it is the assessee's case that having satisfied about the value and title, the assessee purchased the rolls from M/s Prakash Industries Ltd. vide their Invoice No PIL/SID/P & M/93-94 dt 23.01.94 for Rs 100 lacs. The date of purchase is claimed as 23.01.94. As already observed above, the non-encumbrance certificate of the Chartered Accountant is of dated 17.02.94, which is subsequent to 23.01.94, the date of purchase. Therefore, the question of being satisfied about the title on the date of purchase, i.e. 23 01.94, on the basis of encumbrance certificate dated 17.02.94 of the Chartered Accountant, on which the assesses has put heavy reliance could not arise at all.

24. The assessee has also made a reference to two Resolutions dated 24.1.1993 and 28.01.1994 of its Board of Directors to substantiate its case of transaction of sale and lease back transactions entered into with M/s Prakash Industries Ltd. The resolution dated 24.01.93 is with regard to accord the consent to the commencement of the business by the company, which reads-" Resolved That, the consent of the Board of Directors be and is hereby accorded to the commencement of the business by the Company as given in Sub-clauses (19) of Clauses III(c) of the Memorandum of Association; namely To carry on business as capitalist, financiers, concessionaires and merchants and to undertake and carry on and execute all kinds of financial, commercial, trading and other operations and to carry on any other business (except banking and the issuing of policies of assurance on human life) which may seem to be capable of being conveniently carried on in connection with any of these objects or calculated directly or indirectly, to enhance the value of, or facilitate the realisation of, or render profitable, any of the Company's property or rights, and also as given in Sub-clause (25) of Clause III (c) of the Memorandum of Association; namely To carry on and undertake the business of leasing and to finance lease operations of all kinds." The Chairman placed before the Board the proposal of Sale and Lease Back received from Tata Finance Limited for Rs. 10,000,000/-. The proposal envisgaes the purchasing of Steel Rolling Mill's Rolls from Prakash Industries Limited New Delhi (a 100% depreciable asset under Income Tax Act, 1961) and the same will be in turn leased out to Prakash Industries Limited. The Balance Sheet of the aforesaid Company was placed before the Board together with proposal papers received from Tata Finance Limited. After thorough discussion the Board felt that though the idea of investing in 100% depreciable assets is welcome, the Balance Sheet of Prakash Industries Limited does not enthuse confidence for such a heavy investment. The "Gearing" is already high. Therefore the company should obtain additional security like personal guarantee of Managing Director/ whole time Director of the aforesaid company. Also the company should obtain credit references from the financiers who have financed Prakash Industries Limited. After obtaining satisfactory credit reference, personal guarantee etc., the company may go ahead with the proposal. Mr. Framed Chaudhari, Chairman & Managing Director was authorised to finalise the deal only after obtaining confirmations, credit references and securities to his satisfaction in consultation with Mr. Shashishekhar Pandit.

This second resolution is with regard to the acceptance of a proposal of Sale and Lease Back received from M/s Tata Finance Ltd. for Rs. One crore, which proposal envisages the purchasing of Steel Rolling Mill's Rolls from M/s Prakash Industries Ltd, New Delhi. Here, it is interesting to note that before this proposal was even discussed and approved in its Board's meeting held on 28.01.1994, and before the consent was accorded to commence the business vide Resolution dated 24.1.93, the assessee had already purchased the Rolls in question from M/s Prakash Industries Ltd, vide their Invoice No PIL/SID/P & M/93-94 dt 23.01.1994 (which is described as delivery challan cum invoice) as would be seen from the case made out by the assessee itself. This seems to be totally improbable and impractical. All these papers and documents relied upon by the assessee do not, therefore, support the assessee's case of alleged sale and lease back of rolls to be genuine one. In the backdrop of these facts, the very transaction claimed to be a transaction of sale and lease back appears to be merely a paper work and nothing more.

25. We may further clarify that merely because the assessee's claim of depreciation was originally allowed in the assessment made under Section 143(3) on 24.9.97 for the assessment year 94-95, it does not make the assessee's claim as bona fide as because all the materials and evidences relating to the claim of depreciation on forging rolls were not unearthed or discovered or were available at that point of time. It is well settled that merely because the case of the assessee was accepted in original assessment for relevant assessment year, it does not preclude the A.O to reopen the assessment of that year on the basis of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year. In the present case before us, the assessee's claim of depreciation on forging rolls were not found to be correct on the basis of resh materials brought on record in the course of assessment of assessment year 95-96, and thus, the acceptance of assessee's claim in original assessment of assessment year 94-95, without considering the facts and materials which were unearthed and revealed later during the assessment proceedings or the assessment year 95-96 is not sufficient in itself to treat the assessee's claim as bona fide and genuine one. We further observe that where the transaction itself, on the basis of subsequent information, is found to be a bogus transaction, mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the full facts in the case. The present case is not a case of change of opinions. It is not a case where the assessee's claim was originally allowed in the assessment year 94-95 by the AO after considering and examining all those same facts and materials that were relled on and discussed in the assessment year 95-96 and in the reassessment for assessment year 94-95. Mere because a false claim of the assessee is accepted in the original assessment, that merely would not preclude the A.O to decide the issue afresh in the light of subsequent information and facts suggesting the assessee's case to be a false and unbelievable one.

26. If we look at the whole sequence of events discussed and appreciated above by us, it becomes quite clear as to how the things were managed by the assessee in the present case to give the financial transaction a colour of sale and lease back transaction with a view to claim the depreciation on forging rolls. In our considered view, and after considering the totality of the discussion made above, the assessee's claim of depreciation on the basis of sale and lease back transaction does not ring true and could not have been accepted by any reasonable person. The whole arranged story of the assessee has been unearthed by the department, and the assessee's claim of depreciation was thus disallowed, finding the same to be not correct and genuine one 27. We, therefore, hold that the explanation offered by the assessee in support of its) claim of depreciation on forging rolls is not found to be bona fide and genuine one, but rather it is otherwise found to be false. Further, the assessee has also not furnished full and true particulars relating to the claim of depreciation on forging rolls. It is, thus, clear that the assessee has not been able to discharge the burden that lay upon it under Explanation 1 to Section 271(1)(c) of the Act. We therefore, uphold the order of the CIT (A) confirming the penalty levied Under Section 271(1)(c) by the AO.