COMMISSIONER OF INCOME TAX Vs. B.L. PASSI

JUDGEMENT

(1.) THESE are three appeals filed by the revenue under Section 260A of the Income Tax Act, 1961 ('Act', for short). On 16.10.2001 this Court admitted the appeals and the following substantial questions of law were framed for adjudication: -

(2.) THE appeals relate to the assessment years 1986 -87, 1987 -88 and 1988 -89. The assessee is an individual and runs a proprietory concern under the name and style of M/s. Pasco Automobiles which deals in sale of Maruti cars on commission basis. He also derives share income from two partnership firms which were dealing in the purchase and sale of Telco trucks. Since the issue upon which questions of law have been framed is the same in all the three years and since it has been discussed in detail in the order of the Tribunal for the assessment year 1986 -87, the facts for that year may be noticed as illustrative for all the three years. In the return filed for that year, the assessee claimed depreciation of Rs.10,29,581/ - in respect of the trucks. In the course of the assessment proceedings, the AO took the view that the claim of depreciation was a mere device to reduce the tax liability arising out of the commission earnings of Rs.36.02 lakhs on sale of Maruti cars and Rs.6.5 lakhs on sale of other vehicles. He noted that there was a steep ingress in the commission income compared to the earlier year in which it was only Rs.6.50 lakhs. On further investigation he found that the trucks on which the assessee had claimed depreciation were shown to have been acquired from the sister concern of the assessee and that too in the fag end of the relevant financial year i.e. between 03.03.1986 and 15.03.1986. The trucks were also allowed to have been acquired without making any immediate payment. They were claimed to have been given on hire to M/s. Bombay Okara Cargo Ltd. and M/s. Bombay Okara Carriers and Movers (Regd.) for hire charges of Rs.300/ - and Rs.290/ - per day respectively. The total charges thus received were Rs.14,850/ -. On being asked to furnish the details regarding the purchase, registration, user and subsequent sale of the trucks early in the next financial year, the assessee furnished such details. The AO thereafter recorded the statement of the accountant of the aforesaid transport companies. On the basis of this statement and not being satisfied with the particulars submitted by the assessee, the claim of depreciation was disallowed.

(3.) PURSUANT to the directions, the AO made some inquiries and issued notices under Section 131 of the Act to the parties from whom the assessee received hire charges, but these notices came back unserved. Those parties could not be produced by the assessee. The AO accordingly repeated the disallowance.