C.L. Sethi, J.M. ORDER assessee is in appeal against CIT(A) s order dt. 23rd June, 2001 confirming penalty amounting to Rs. 19,05,582 imposed by AO under s. 271(1)(c) of Act for asst. yr. 1994-95. 2. assessee has taken following grounds of appeal : "1. learned CIT(A) erred on facts and in law in upholding penalty of Rs. 19,05,582 under s. 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. learned CIT(A) erred on facts and in law in coming to conclusion that assessee has failed to state relevant facts at time of original assessment without properly appreciating facts of case and arguments advanced by assessee in this regard. 3. learned CIT(A) failed to appreciate that assessee all along acted under bona fide belief in matter. He further failed to appreciate that penalty proceedings are separate than regular assessment proceedings. reasons assigned by him for upholding penalty are wrong." 3 . AO has imposed penalty under s. 271(1)(c) of Act by observing and holding as under : "Original assessment in this case was completed under s. 143(3) of IT Act on 24th Sept., 1997 on total income of Rs. 3,98,52,530. In this order assessee s claim for depreciation amounting to Rs. 69,49,010 was allowed which includes half depreciation of Rs. 50 lakhs on forging rolls worth Rs. one crores as same has been used for period of less than 180 days during year under consideration. Balance depreciation has been claimed in asst. yr. 1995-96. During course of assessment proceeding for asst. yr. 1995-96, it was found by AO that assessee s claim for deprecation on forging roll is not genuine. AO found that forging roll have been purchased by assessee from M/s Prakash Industries Ltd. and has been given back on lease to same party. assessee has not taken any physical delivery of asset purchased. Further AO found that during course of assessment proceeding that in survey conducted at business premises of M/s Prakash Industries Ltd. at Champa, Bilaspur (M.P.). 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 back transaction with many other persons. survey party further found that average life of forging roll is 3-4 years only. Though assessee has filed certificate from M/s S.R. Salvekar as per which employees from M/s S.R. Salvekar visited premises of M/s Prakash Industries Ltd. and physically verified these forging rolls but during course of assessment proceeding Mr. Salvekar stated that his employee Mr. Prasant Deshpande could not identify rolls belonging to M/s Prakash Industries. On above factual position AO came to conclusion that assessee is not entitled to any depreciation because of following reasons : 1. assessee has not taken any physical delivery of forging roll and hence there is no conclusive evidence to show that assessee has purchased any forging roll. 2. assessee could not establish that even now any forging roll belonging to it exists at business premises of M/s Prakash Industries Ltd. or not. 3. assessee has no evidence that these forging rolls has been used for business. On relying upon judgment of Supreme Court in case of First Leasing Co. vs. CIT AO held that it is assessee responsibility to prove that asset has been used for purpose of business. 4. Depreciation is real concept and therefore it cannot be allowed on only paper agreement. On this basis assessee s claim of deprecation was disallowed in asst. yr. 1995-96 and proceeding for 1994-95 where half of depreciation was claimed as also reopened by issue of notice under s. 148 on 30th March, 1999. Reassessment proceeding was completed on 30th Sept., 1999 withdrawing claim of deprecation of Rs. 50 lakhs already allowed to assessee. Penalty proceedings are also initiated under s. 271(1)(c). During course of proceeding for levy of penalty assessee has filed detailed submission on 26th Sept., 2000. assessee has claimed that its claim for depreciation has erroneously been not allowed. assessee has claimed that it has purchased forging roll from M/s Prakash Industries Ltd. on 21st March, 1994 and given same to same company on lease. assessee has claimed that in original assessment proceeding his claim for deprecation was accepted under s. 143(3) of IT Act therefore matter has obtained finality. assessee has further submitted that though AO has referred matter to Dy. Director of IT (Inv.), Jabalpur for inquiry about possession and actual use of rolls but assessee claimed that Dy. Director of IT (Inv.), Jabalpur only forwarded copy of enquiry conducted by him in another case who has also entered into similar transaction with RPG Telecom Ltd. and not in case of assessee. assessee claimed that AO simply employed same yardstick in its case. assessee claimed that its claim for deprecation has not been allowed only on ground that transaction is not genuine and assessee could not prove identify of assets. assessee has was submitted that transaction in question has been treated as sham by merely on ground that there was no actual purchase or delivery of rolls and in this regard assessee has submitted that M/s Prakash Industries Ltd. was referred to assessee by M/s Tata Finance Ltd. which is well known Tata organization in filed. M/s Prakash Industries Ltd. has already purchased heavy structural rolling mills equipment with accessories from M/s TISCO, Jamshedpur on 31st March, 1993. rolling mill rolls form part of said mills and is separate item for claming depreciation. assessee has purchased out of these rolls, 65 rolls from M/s Prakash Industries Ltd. for sum of Rs. One crore which has been given to same company on lease. assessee claim physical delivery of taking rolls from Chamba to Pune and back was not found practically feasible in view of huge weight, and high transportation cost. However confirmatory letter was received from M/s Prakash Industries Ltd. that they have sold assets and taken back same from Praj Industries Ltd. on lease. asset has also been insured in his own name. assessee further claimed that as regards identification of rolls is concerned, certificate was received from chartered engineer. In view of these facts assessee has claimed that delivery of goods can be taken by doing anything which buyer and seller agreed to treat as delivery. Therefore Department cannot contend that there was no delivery. assessee has submitted that company s auditor has clearly furnished certificate that these rolls are identifiable. assessee further claimed that rolls were purchased on 23rd Jan., 1994. average life of these rolls cannot be more than 2-3 years and therefore identify of assets cannot be looked into in 1998 when surveys were conducted at business premises of M/s Prakash Industries Ltd. assessee further submitted that these assets form part of heavy structural mills equipment and as it is separate asset eligible for depreciation, Department cannot hold that assessee is only fractional owner. assessee claimed that it is full owner of 65 rolls and therefore entitled for depreciation. assessee has further submitted that entire money received as been shown as income and it is case where assessee was wronged by M/s Prakash Industries Ltd. and company has lost nearly Rs. 34 lakhs in transaction as full rental has not been paid by that party. assessee has claimed that in view of this fact no penalty can be leviable. I have considered submissions of assessee. assessee has made claim for deprecation of Rs. 50 lakhs in return of income furnished on 30th Nov., 1994. This depreciation claim was 50 per cent of value of heavy structural rolling mill rolls claimed to have been purchased by assessee on 21st March, 1994 for sum of Rs. One crore. However claim of assessee was rejected in asst. yr. 1995-96. In that year though assessee has filed appeal but same was not contested as assessee has availed benefit of KVSS Scheme. There issue could not be finally settled in that year. Even in this year though assessee has filed appeal against orders passed under s. 143(3) r/w s. 147 on 30th Sept., 1999 but same has been withdrawn. Even assessee s application for revision under s. 264 has been rejected by CIT-I, Pune vide order dt. 4th May, 2000. In this case it is found that t h e 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 assessee has no evidence that forging rolls has been actually used by M/s Prakash Industries Ltd. assessee s evidence regarding purchase of forging rolls and its use for business is based upon purchases bill, insurance bill as well as certificate from Shri S.R. Salvekar chartered accountant who claimed to have physically inspected asset on 23rd Jan., 1998. All these contentions of assessee are not sufficient to prove that assessee has actually purchased these assets. purchase bill of assessee does not identify which forging roll has been purchased by assessee. Similarly assessee s claim that its chartered accountant, Shri S.R. Salvekar has actually identified assets on 23rd Jan., 1998 is not acceptable in view of fact that during course of assessment proceeding for asst. yr. 1995-96 Shri S.R. Salvekar has specifically stated that his employee Mr. Prashant Deshmukh could not identify assets. Further 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 chartered accountant of assessee on 21st March, 1998. survey conducted by Dy. Director of IT (Inv.), Jabalpur at business premises of assessee clearly shows that there is no record or any other evidence that M/s Prakash Industries on basis of which it could be identified as to which forging rolls belongs to which party. This conclusion was made by Dy. Director of IT (Inv.). Jabalpur on basis of statement given by Shri B.K. Gupta, Manager of Prakash Industries Ltd. Unless these forging rolls are identified only then assessee s claim for depreciation depending upon actual use of these forging rolls can be considered and allowed. Since these forging rolls are not physically identifiable, question of proving actual its use does not arise. It is responsibility of assessee to prove that asset on which depreciation has been claimed is used for purposes of business. Merely giving asset on lease does not goes to prove that asset has actually been used for business. This has been so held by Hon ble Supreme Court in case of First Leasing Co. vs. CIT. Therefore depreciation has been correctly disallowed in this year on these facts. assessee claimed that AO simply used survey report against him, which has been carried out by Dy. Director of IT, Jabalpur in other case has no basis because though survey was carried out in other cases but intention of survey party was to look into genuineness of all sale and lease back transaction carried out by M/s Prakash Industries Ltd. This will cover case of assessee also. Further though forging rolls is eligible for deprecation separately as per provisions of IT 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 assessee forms part of heavy structural mill equipment purchased by M/s Prakash Industries Ltd. for sum of Rs. 2,08,00,000 on 31st March, 1993. Once purchase has been made by any party consisting of many items that are necessary for production, assessee cannot split these assets and claim deprecation on each asset separately unless owner has physically separated these assets and used it at different places. Therefore by purchasing part of heavy structural mills equipments assessee has become fractional owner of structural mill equipment. assessee claim for depreciation was therefore rightly not allowed by taking alternative ground that assessee is fractional owner of structural mill equipment. assessee has therefore clearly claimed false claim for deprecation on paper transaction as held by AO in asst. yr. 1995-96 and by undersigned in asst. yr. 1994-95. By concealing real transaction, assessee has furnished wrong particulars and concealed particulars of income by claming excess deprecation for which it is not legally entitled to. This is therefore case where penalty under s. 271(1)(c) is leviable. Since lease transaction is not genuine, related expenses on arranging this lease also cannot be allowed. expenses arc expenses on managerial fee etc. and interest payment on borrowed capital used to purchase alleged forging rolls. This income will also form part of income in respect of which particulars has been concealed. penalty on this amount of Rs. 2,08,416 is also leviable. Penalty leviable is computed as under : Tax on income of Rs. 2,27,86,273 as per order under s. 11,791,896 143(3) r/w s. 147 dt 30th Sept., 1999 Less : Tax on income of Rs 1,91,03,990 as per order under s. 9,886,314 154 dt. 26th March, 1999 Tax sought to be evaded 1,905,582 Minimum penalty 100 per 1,905,582 cent Maximum penalty 300 per 5,716,746 cent Penalty of Rs. 19,05,062 is therefore levied. Issue requisite documents" 4. Being aggrieved, assessee preferred appeal before CIT(A). 5. During appellate proceedings before CIT(A), assessee stated in brief as under : During financial year 1993-94, company made its maiden public issue and collected sum of Rs. 620 lakhs as share capital. This issue was mainly for expansion of company s facilities, administrative buildings etc. Since proposed plans were going to take some time. It was thought prudent that funds be used in meanwhile in best possible manner to generate further Revenues. One of ways thought was investment in lease financing, which will also offer certain tax shield to company. M/s Tata Finance Ltd., w i t h whom company had some earlier dealings in fields of bills discounting etc. and reputed organization in field of financing, suggested proposal of Prakash Industries Ltd. for sale and lease back transaction of Rolling Mill Rolls for Rs. 100 lakhs, said rolls carry 100 per cent depreciation under IT Rules, proposal envisaged sale and lease back of rolls from Prakash Industries for Rs. 100 lakhs for period of 5 years. Praj was to get Rs. 134 lakhs as lease rentals in period of 5 years. After considering tax advantages, average annual return worked out to be about 16.50 per cent advantages, average annual return worked out to be about 16.50 per cent after tax. Board considered proposal in its meeting dd. 28th Feb., 1994 and approved same. Prakash Industries Ltd. already had purchased heavy structural rolling mill equipment with accessories from M/s TISCO, Jamshedpur. assessee had obtained copy of invoice by TISCO to Prakash along with relevant transportation vouchers, copy of which is already placed on record with AO and enclosed herewith (Annex. 1 ). rolling mill rolls form part of said mill and are included in accessories. These are separate items and separate asset i n itself. In fact, separate entry for these assets exists in Appendix to IT Rules [entry No. III(3)(vii)]. Act thus expressly recognizes these as separate assets. Prakash Industries Ltd., through Tata Finance, approached assessee for sale and lease back finance for these rolls....... Having satisfied about value and title, assessee purchased rolls from Prakash Industries vide their invoice No. PIL/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs. 100 lakhs (Annex. 4 ). assessee also settled amount of Rs. 100 lakhs with Prakash Industries (Annex. 5 ). physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of huge weight of assets (about 400 tons) and high transportation costs. However, confirmatory letter from Prakash Industries that they have sold assets and taken back same from Praj on lease is already on record of Department (Annex. 6 and 6A ). Moreover, assets were insured with New India Assurance Co. Ltd. with specific mention of assessee s name on insurance policy (Annex. 7 ). In asst. yr. 1995-96, however, assessee s claim for balance 50 per cent was challenged by Department (Annex. 14 ). AO referred matter to Dy. Director of IT (Inv.), Jabalpur, to inquire about possession and actual use of rolls. Dy. Director of IT (Inv.) Jabalpur, forwarded copy of report of inquiry conducted by him in respect of another transaction entered into by Prakash Industries Ltd. with RPG Telecom Ltd. (Annex. 15 ). Dy. Director of IT (Inv.), Jabalpur, reported that transaction between Prakash Industries and RPG Telecom was sham one. AO applied same yardstick to transaction between Prakash Industries and PIL and disallowed assessee s claim. For asst. yr. 1995-96, assessee chose to avail KVSS and thus finding of Department remained unchallenged. As regards AO s contention that transaction is sham one, we submit that conclusion of AO 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 transaction. 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....... value for 65 rolls was slated to be Rs. 100 lacs by Prakash Industries which was got valued by assessee through independent chartered engineer (Annex. 9 ) and only then proceeded in matter.... assessee; purchased rolls from Prakash Industries vide their invoice No. PIL/SID/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs. 100 lakhs (Annex. 4 ). assessee also settled amount of Rs. 100 lakhs with Prakash Industries through cheques/DD (Annex. 5 ). physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of huge weight of assets (about 400 tons) and high transportation costs. However, confirmatory letter from Prakash Industries that they have sold assets and taken back same from Praj on lease is already on record of Department (Annex. 6 and 6A ). Moreover, assets were insured with New India Assurance Co. Ltd. with specific mention of assessee s name on insurance policy (Annex. 7 ). Alternatively, it may also be appreciated that assets are eligible for depreciation @ 100 per cent depreciation is not being granted because assets are in nature of social and public welfare such as, pollution control, energy saving etc., but is being granted looking at life of these assets. life of these assets being basically in 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 asset may have ended their useful life by then. In such case, how can one possibly identify such assets. moot point missed out by Department is that these should have been identifiable in 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 case to disallow depreciation on this ground, and more so to levy penalty on this ground. benefit of doubt, if any, should clearly go in favour of assessee. It may also be appreciated that when claim was made, assessee had acted as any prudence man will act and under genuine and bona fide belief that Prakash Industries was 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 assessee had no reason whatsoever to disbelieve credentials of Prakash. It may also be appreciated that Prakash paid almost half of lease rentals on time. It was only much later that they started defaulting on lease payments and reports started appearing in newspapers. On such defaulters also, we have filed criminal case against Prakash Industries, copy of which is enclosed (Annex. 17 ). It may thus be appreciated that at time of making claim, there was no such inkling and no attempt or intention to conceal income or furnishing inaccurate particulars was in minds of assessee". 6 . Following further arguments were made by assessee during appellate proceedings before CIT(A), which are stated by CIT(A) in para 7 of his order : "7. During appellate proceedings, following arguments were made : (a) In such situation, it is difficult to term transaction as non- genuine one, especially when third party institutions like Tata Finance, New India Insurance, Chartered Engineer etc. are involved. (b) AO should have appreciated that physical delivery was not practical and mode of delivery, whether actual or constructive, is not deciding factor in determining whether sale is genuine or not. In fact, s. 33 of Sale of Goods Act postulates that delivery of goods may be made by doing anything which buyer and seller agree to treat as delivery. AO s contention therefore that there should have been actual delivery is wholly irrelevant in context. Moreover, AO in assessment proceedings for asst. yr. 1995-96 has stated that assessee has taken constructive possession, which comments arc repeated by AO in order under s. 143(3) r/w s. 147 for asst. yr. 1994-95. (c) Another contention of AO both in asst. yrs. 1994-95 and 1995-96, is that rolls were not separately identifiable, contentions of AO are not correct. In fact, in first place M/s Prakash Industries have vide their letter dt. 28th April, 1998 have confirmed that assets arc clearly identifiable are adequately insured and arc without any encumbrance. Moreover, assessee company s auditors specifically have physically verified assets and certified that assets are separately identifiable and are in working condition (Annexs. 6 to 17 ). statement of AO that auditors specifically mentioned that assets could not be identified has remained unchallenged because of KVSS in asst. yr. 1995-96 and because assessee went in for relief under s. 264 in asst. yr. 1994-95. (d) Alternatively, it may also be appreciated that assets are eligible for depreciation @ 100 per cent depreciation of 100 per cent is not being granted because assets are in nature of social and public welfare such as pollution control, energy saving etc., but is being granted looking at life of these assets. life of these assets, being basically in 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 asset may have ended their useful life by then. In such case, how can one possibly identify such assets. moot point missed out by Department is that these should have been identifiable in 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 case to disallow depreciation on this ground and more so to levy penalty on this ground. benefit of doubt, if any, should clearly go in favour of assessee. (e) AO s contention that only one piece of heavy structural miss equipment was purchased by Prakash Industries is also incorrect and is made without appreciating nature of asset. He failed to appreciate that mill along with accessories (i.e., rolls) was purchased by Prakash Industries. rolls as stated above are separately identifiable assets and recognized as such by Act. He failed to appreciate that as far as 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 assessee, and not fractionally." 7 . After considering submissions of assessee and facts and circumstances of case, CIT(A) sustained penalty by AO by saying as under : "8. I have considered rival submissions. In first place it must be observed that appellant s contention that it had purchased assets and leased them out and therefore it was nothing but financing leasing business, is contention far from reality. There has to be difference between financing leasing activity or lease financing and leasing finance . In prior case, concern purchases asset as genuine purchase and leases it out to third party earning income from lease rent necessarily whether with or without benefit of incremental gain by way of higher claim of depreciation. Usually, such cases are of nature of purchase of vehicles, heavy duty vehicles used for commercial purposes or otherwise, purchases on plant and machinery etc. and giving same on lease. In latter type of activity i.e., leasing finance , it is pure and simple activity of advancing loans under garb of leasing activity or in name of placing inter-corporate deposits or acquiring debentures etc. These activities are nothing but financing loans. In instant case, lessee i.e., Prakash Industries Ltd. has effected; purchase of total plant and machinery inclusive of rolling mill rolls which is part of heavy structural mill equipment from TISCO, Jamshedpur, in financial year 1992-93. After these assets were used for one year, appellant claims to have purchased from Prakash Industries Ltd. i.e., lessee 65 of such rolls on 23rd Jan., 1994 at original price. appellant has not obtained these rolls in its physical possession/control any time. These rolls were obviously already used by lessees. appellant submitted during reassessment proceedings certificates issued by its chartered accountant viz. Shri Salvekar, and also certificate issued by chartered engineer from Delhi viz. Shri S. Goyal & Co. as evidence to certify that these goods were physically identified and purchased at appropriate price by appellant company. Whereas, in original return of income, appellant has not given any details whatsoever either in any income, appellant has not given any details whatsoever either in any statement along with return of income or throughout assessment proceedings. appellant has only made claim of depreciation @ 100 per cent keeping AO in dark about these relevant important details of such claim of purchase. 9. In instant case, therefore, what appellant has done is that it has depreciation @ 100 per cent on investment and also gaining Rs. 34 lakhs by way of lease rent in period of five years. This is evident from following portion of reply dt. 22nd Feb., 2001 of appellant : "During financial year 1993-94, company made its maiden public issue and collected sum of Rs. 620 lakhs as share capital. This issue was mainly for expansion of company s facilities, administrative buildings etc. Since proposed plans were going to take some time. It was thought prudent that funds be used in meanwhile in best possible manner to generate further revenues. One of ways through was investment in lease financing, which will also offer certain tax shield to company. M/s Tata Finance Ltd., with whom company had some earlier dealings in fields of bills discounting etc. and reputed organization in field of financing, suggested proposal of Prakash Industries Ltd. for sale and lease back transaction of Rolling Mill Rolls for Rs. 100 lakhs, said rolls carry 100 per cent depreciation under IT Rules, proposal envisaged sale and lease back of Rolls from Prakash Industries for Rs. 100 lakhs for period of 5 years. Praj was to get Rs. 134 lakhs as lease rentals in period of 5 years. After considering tax advantages, average annual return worked out to be about 16.50 per cent after tax. Board considered proposal in its meeting dt. 28th Feb., 1994, and approved same. ...... Prakash Industries Ltd. already had purchased heavy structural rolling mill equipment with accessories from M/s TISCO, Jamshedpur. assessee h d obtained copy of invoice by TISCO to Prakash along with relevant transportation vouchers, copy of which is already placed on record with AO and enclosed herewith (Annex. 1 ). rolling mill rolls form part of said mill and are included in accessories. These are separate items and separate asset in itself. In fact, separate entry for these assets exists in Appendix to IT Rules [entry No. III(3)(vii)]. Act thus expressly recognizes these as separate assets. Prakash Industries Ltd. through Tata Finance, approached assessee for sale and lease back finance for these rolls.......Having satisfied about value and title, assessee purchased rolls from Prakash Industries vide their invoice No. PIL/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs. 100 lakhs (Annex. 4 ). assessee also settled amount of Rs. 100 lakhs with Prakash Industries (Annex. 5 ). physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of huge weight of assets (about 400 tons) and high transportation costs. However, confirmatory letter from Prakash Industries that they have sold assets and taken back same from Praj on lease is already on record of Department (Annex. 6 and 6A ). Moreover, assets were insured with New India Assurance Co. Ltd. with specific mention of assessee s name on insurance policy (Annex. 7 ). In asst. yr. 1995-96, however, assessee s claim for balance 50 per cent was challenged by Department (Annex. 14 ). AO referred matter to Dy. Director of IT (Inv.), Jabalpur, to inquire about possession and actual use of rolls. Dy. Director of IT (Inv.) Jabalpur, forwarded copy of report of inquiry conducted by him in respect of another transaction entered into by Prakash Industries Ltd. with RPG Telecom Ltd. (Annex. 15 ). Dy. Director of IT (Inv.), Jabalpur, reported that transaction between Prakash Industries and RPG Telecom was sham one. AO applied same yardstick to transaction between Prakash Industries and PIL and disallowed assessee s claim. For asst. yr. 1995-96, assessee chose to avail KVSS and thus finding of Department remained unchallenged. As regards AO s contention that transaction is sham one, we submit that conclusion of AO 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 transaction. 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....... value for 65 rolls was slated to be Rs. 100 lacs by Prakash Industries which was got valued by assessee through independent chartered which was got valued by assessee through independent chartered engineer (Annex. 9 ) and only then proceeded in matter. assessee purchased rolls from Prakash Industries vide their invoice No. PIL/SID/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs.100 lakhs (Annex. 4 ). assessee also settled amount of Rs. 100 lakhs with Prakash Industries through cheques/DD (Annex. 5 ). physical delivery to Pune and back to Champa in M.P. was not found practically feasible in view of huge weight of assets (about 400 tons) and high transportation costs. However, confirmatory letter from Prakash Industries that they have sold assets and taken back same from Praj on lease is already on record of Department (Annex. 6 and 6A ). Moreover, assets were insured with New India Assurance Co. Ltd. with specific mention of assessee s name on insurance policy (Annex. 7 ). Alternatively it may also be appreciated that assets are eligible for depreciation @ 100 per cent. depreciation is not being granted because assets are in nature of social and public welfare such as, pollution control, energy saving etc., but is being granted looking at life of these assets. life of these assets being basically in 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 asset may have ended their useful life by them. In such case, how can one possibly identify such assets. moot point missed out by Department is that these should have been identifiable in 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 case to disallow depreciation on this ground and moreso, to levy penalty on this ground. benefit of doubt, if any, should clearly go in favour of assessee. It may also be appreciated that when claim was made, assessee had acted as any prudence man will act and under genuine and bona fide belief that Prakash Industries was 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 assessee had no reason whatsoever to disbelieve credentials of Prakash. It may also be appreciated that Prakash paid almost half of lease rentals on time. It was only much later that they started defaulting on lease payments and reports started appearing in newspapers. On such defaulters also, we have filed criminal case against Prakash Industries, copy of which is enclosed (Annex. 17 ). It may thus be appreciated that at time of making claim, there was no such inkling and no attempt or intention to conceal income or furnishing inaccurate particulars was in minds of assessee". Thus, at this level, it must first be understood that appellant is not in leasing transaction as far as plant and machinery is concerned; appellant is in transaction of leasing finance under garb of leasing of plant and machinery. Whereas, appellant is entitled to have its own opinion or inference on given set of facts, it is incumbent upon appellant to clearly state facts in return of income or in statements accompanying return of income or even during assessment proceedings while making claim of depreciation, it is not case of appellant that even where appellant is leasing finance and not plant and machinery, appellant is still entitled to 100 per cent depreciation. In other words, while claiming 100 per cent depreciation on value of plant and machinery, appellant has to clearly state facts and then only draw inference as it chooses. In instant case, appellant has only made claim of 100 per cent depreciation without stating facts. 10. As far as necessity of identifying rolls actually purchased by appellant is concerned, AO has addressed this issue from three different angles viz. : (i) purchase of appellant were effected only on paper, (ii) quantity purchased by appellant was not identified. (iii) appellant could not prove use of actual assets claimed to have been purchased. It would be understood clearly from provisions of law applicable that assessee has to prove above mentioned three factors before it claims allowance of depreciation as per Rules. In instant case, appellant presumes that it has proved these points by virtue of paper transactions. It is admitted fact that these rolls were not identified either by chartered accountant issuing certificate or by chartered engineer issuing similar certificate. In reassessment order, AO clearly slates that he has examined chartered accountant who confirms that it was not possible to identify which rolls appellant had purchased and which were actually utilized. It is admitted fact that appellant never took possession of rolls physically so that it has physically obtained capital asset on which depreciation is claimed. This factor is most relevant because 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, appellant company did not purchase all rolls. There were some other concerns who also claimed to have entered into similar activity causing further complications. Hence specific need of identifying depreciable assets allegedly purchased by appellant company has emerged. 11. It is therefore evident that even at level of examination relating to claim made by appellant, appellant had made false claim of depreciation without offering any proof which is sine qua non for claiming and allowing depreciation. 12. These facts are known to appellant and appellant had still made claim of depreciation which was eventually withdrawn by virtue of offer under scheme for asst. yr. 1995-96. That means, while making such offer, appellant is convinced that claim made by appellant was technically and factually incorrect. assessment for asst. yr. 1994-95 has thereafter been reopened. If appellant were convinced that its claim was incorrect, then it should have been natural corollary that appellant should have offered for asst. yr. 1994-95 as well at 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 appellant s original claim of depreciation. appellant instead contested its stand that its claim was correct in reassessment and. on its disallowance, appellant filed appeal before CIT(A). appellant has chosen to withdraw such appeal and filed revision CIT(A). appellant has chosen to withdraw such appeal and filed revision petition instead before CIT such revision petition has been dismissed on merit and. therefore, it has now become final that appellant s claim of depreciation was incorrect ab initio. 13. From foregoing facts, it is clear that appellant has willfully made wrong ab initio which could not factually be substantiated and it is found logically, not tenable. appellant also produced during reassessment proceedings for first time and certificates so as to prove that rolling rolls were actually identified by appellant before its purchase. Its bluff has been exposed during reassessment proceedings when chartered accountant certifying physical identification of such rolls admitted before AO that these rolls were not capable of being identified. Further, appellant claimed fin proceedings that it is obvious that rolls have been used and their total life was for 2-3 years, whereas chartered accountant visited site after period of 4 years and, therefore, it was not possible to identify rolls purchased by appellant. At this stage it must be mentioned that appellant was given opportunity to produce such chartered accountant and chartered engineer during these appellate proceedings so as to verify correctness of this statement of appellant. As matter of fact, 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 other even at stage of manufacture itself. This factor was admitted by representative of appellant during appellate proceedings and, therefore, he has chosen not to produce either chartered accountant nor chartered engineer for examination during appellate proceedings. 14. total conduct of appellant company, in producing certificates from chartered accountant and chartered engineer in proof of identification of rules, clearly amounts to submission of false evidence in support of its claim of depreciation. And, therefore, in my opinion this is fit case for levy or penalty for concealment to summarise whole situation, it is found that appellant did not have proper evidence in support of depreciation claim and it is clear that it has concealed facts relevant for purpose of deciding claim of depreciation. It has also produced false evidence before AO during reassessment proceedings so as to mislead AO to believe that claim of depreciation was genuine. This conduct is nothing short of contumacious conduct. penalty levied under s. 271(1)(c) of Act is fully justified. 15. appellant has objected to report sent by Dy. Director of IT, Investigation. It is necessary to make such passing remark. I do not find any necessity to rely such report. evidence brought by appellant itself on record of case is sufficient to pin down appellant as above. penalty levied is therefore confirmed. Appeal is dismissed." 8. Still aggrieved, assessee is in appeal before us. 9. learned authorised representative for assessee, in course of his arguments, has invited our attention to various documents and papers placed in paper book containing 144 pages. He has reiterated contentions and submissions that were made before CIT(A), and in connection thereto, he invited our attention to various submissions and contentions that were incorporated in written submissions filed before CIT(A). This written submission filed by assessee before CIT(A) is placed at pp. 11 to 17 of paper book. contentions and submissions that were made by assessee in his written submissions filed before CIT(A) were emphatically emphasized and highlighted by learned counsel for assessee at time of hearing of this appeal. All those facts and contentions highlighted by learned counsel for assessee in written submissions along with various documents in support there of have been taken note of very carefully by us. assessee s written submission made before CIT(A) has already been quoted hereinabove, and as such, we do not find it necessary to repeat same here. 1 0 . learned Departmental Representative, on other hand, supported orders of authorities below. He contended that each and every aspect of matter has been elaborately and meticulously discussed and analyzed by AO as well as by CIT(A) in their respective orders to come to conclusion that assessee s claim of depreciation on alleged forging rolls was not genuine and true, but same is based on unreliable and unsustainable evidences. learned Departmental Representative had read over order of AO as well as CIT(A) and, therefore, contended that authorities below were very much justified in imposing penalty under s. 271(1)(c) in respect of assessee s false claim of depreciation on alleged forging rolls. He further submitted that assessee has not been able to establish that he has furnished all true material facts relating to issue and has been able to discharge its burden that lay upon it under Expln. 1 to s. 217(1)(c) of Act. He further contended that assessee s explanation in support of claim of depreciation on alleged forging rolls is not at all found to be bona fide and honest one, but, on other hand, assessee s claim was found to be totally false and mala fide as clearly pointed out by AO as well as by CIT(A) in their respective orders. learned Departmental Representative, therefore, submitted that CIT(A) in confirming penalty imposed by AO under s. 271(1)(c) is be upheld. 11. We have considered rival contentions of both parties and have carefully gone through orders of authorities below. We have carefully gone through various documents and papers placed in paper assessee. 12. This is case relating to imposition of penalty under s. 271(1)(c) of Tribunal, Pune Bench , Pune in case of Shri Malhotra Mukesh Satpal, Pune & others in ITA No. 183/Pn/2003 etc., constituted by present Members, has vide its order dt. 31st May, 2006 [reported as Asstt. CIT vs. Malhotra Mukesh Satpal etc. (2008) 113 TTJ (Pune) 404 Ed.] has analyzed and deliberated upon provisions of s. 271(1)(c) r/w Expln. 1 thereto, and, after referring to number of decisions of various Court, namely, (1) B.A. Balasubramaniam & Bros. Co. vs. CIT (1999) 157 CTR (SC) 556 : (1999) 236 ITR 977 (SC); (2) CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC); (3) CIT vs. K.R. Sadayappan (1990) 86 CTR (SC) 120 : (1990) 185 ITR 49 (SC); (4) Addl. CIT vs. Jeevan Lal Sah (1994) 117 CTR (SC) 130 : (1994) 205 ITR 244 (SC); (5) K.P. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC), and (6) Raghuvir Soni vs. Asstt. CIT (2002) 172 CTR (Raj) 105 : (2002) 258 ITR 239 (Raj), has concluded and summarized scope and effect of s. 271(1)(c) r/w Expln. 1 thereto as under : "3.20 On careful reading of aforesaid provisions of s. 271(1)(c) r/w Expln. 1 thereto and in light of judicial precedents discussed above, law on subject of penalty imposable under s. 271(1)(c) r/w Explanation thereto can be spelt out in prepositions as under : (i) Wherever there is difference between returned and assessed income, there is inference of concealment, as rule of law as would be clear from Expln. 1 to s. 271(1)(c) of Act. However, Expln. 1 to s. 271(1)(c) raises only presumption that can be rebutted by assessee with reference to facts of case. (ii) responsibility for rebutting such inference of concealment drawn under Expln. 1 to s. 271(1)(c) is squarely on assessee. (iii) assessee is required to offer explanation for difference between returned and assessed income. (iv) Absence of any explanation, by itself, would attract penalty as is clear from cl. (A) of Expln. 1 to s. 271(1)(c) of Act. (v) explanation of assessee, where offered, should not be found to b e false, so that penalty would not be exigible. In other words, explanation of assessee if found to be false would attract penalty as envisaged in cl. (A) of Expln. 1 to s. 271(1)(c) of Act. (vi) Merely because assessee 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 facts relating and material to computation of total income has been disclosed by assessee. (vii) Where there is nothing to suggest, gross or willful neglect or fraud and explanation offered by assessee is found to be bona fide, Expln. 1 to s. 271(1)(c) itself would not then help Revenue to justify penalty. (viii) burden placed upon assessee to rebut presumption raised under Expln. 1 to s. 271(1)(c) would not be discharged by any fantastic or fanciful explanation. It is not law that any and every explanation by assessee must be accepted. (ix) Mere offer of income by assessee cannot justify cancellation of penalty. Though it cannot be laid down as principle of universal application that whenever addition is made on concession, penalty is not to be levied, factual position in each case has to be considered and background in which agreement is made for addition has to be taken note of. (x) Where penalty is exigible with reference to Explanation to s. 271(1)(c), mere fact that AO has not specifically invoked same would not justify cancellation of penalty. 3.21. In this view of matter, it is thus clear that so long as assessee gives bona fide explanation and unreservedly gives all documents and information without withholding any information relating to computation of assessee s total income, assessee s explanation unless found to be false, would deserve acceptance for purpose of penalty imposable under s. 271(1)(c), so that penalty should not be exigible. In other words if assessee offers explanation, which is not found to be false, he can save himself from penalty even if he were not able to substantiate his case as long as explanation of assessee is bona fide and as long as he places all relevant facts material to compilation of his total income irrespective of fact that same explanation was not accepted for purpose of assessment." 1 3 . Having noticed above scope and effect of provisions of s. 271(1)(c) r/w Expln. 1 thereto, we shall now revert to facts of present case to ascertain as to whether assessee s explanation in support of claim of depreciation on alleged forging rolls is found to be false by AO, and whether assessee s explanation was bona fide and assessee had disclosed all material facts and information relating to claim of depreciation on forging rolls. 14. In this case, original assessment for asst. yr. 1994-95 under consideration was initially completed under s. 143(3) on 24th Sept., 1997, where claim of depreciation to extent of 50 per cent on forging rolls was allowed, inasmuch as it was claimed that same were used for period of less than 180 days during that year. balance depreciation was claimed in asst. yr. 1995-96, during assessment proceedings of which it was found b y AO that assessee s clam of depreciation on forging rolls was not genuine, as AO found that assessee could not establish, inter alia, that forging rolls claimed to have been purchased from M/s Prakash Industries Ltd. and given back on lease to it were actually existing at business premises of M/s Prakash Industries Ltd. and were used for purpose of business. assessee s claim of balance 50 per cent of depreciation for asst. yr. 1995-96 was disallowed. And, in light of materials and evidences found during asst. yr. 1995-96, assessment for asst. yr. 1994-95 was reopened by issuing notice under s. 148 on 30th March, 1999. In asst. yr. 1995-96, though assessee had filed appeal against AO s order rejecting assessee s claim of depreciation on forging rolls, said appeal was not contested, but was withdrawn, and assessee had availed benefit of KVSS Scheme. Hence, AO s order rejecting assessee s claim of depreciation in asst. yr. 1995-96 stood concluded in favour of Revenue. On same analogy given by AO in asst. yr. 1995-96, claim of depreciation on forging rolls in asst. yr. 1994-95 was also disallowed in depreciation on forging rolls in asst. yr. 1994-95 was also disallowed in reassessment order made under s. 143(3) r/w s. 147 on 30th Sept., 1999. appeal filed by assessee before CIT(A) against reassessment order was withdrawn by assessee, and, instead, application for revision under s. 264 was filed before CIT, who rejected same, vide his order dt 4th May, 2000. No further appeal or any other remedial proceedings has been preferred by assessee for asst. yr. 1994-95. It is, thus, clear that in assessment for year 1994-95, assessee s claim of depreciation on forging rolls has rejected. Since assessee s claim of depreciation on forging rolls has been rejected resulting into difference between returned and assessed inference of concealment as rule of law is to be drawn, as would be provisions contained in s. 271(1)(c) r/w Expln. 1 thereto. However, this presumption of concealment drawn from language of s. 271(1)(c) r/w Expln. 1 thereto can be rebutted by assessee with reference to facts of each case. It is also well settled that responsibility for rebutting such inference of concealment drawn under s. 271(1)(c) r/w Expln. 1 thereto is squarely on assessee. Thus, in present case, assessee is required to offer explanation with regard to its claim of depreciation on alleged forging rolls. explanation offered by assessee should not be found to be false for purpose of not levying penalty. In other words, explanation of assessee if found to be false, that would attract penalty as envisaged in cl. (A) of Expln. 1 to s. 271(1)(c) of Act. It is also clear that merely because assessee has not been able to substantiate his explanation, penalty would not automatically be attracted if explanation so offered by assessee is not found to be false but is bona fide, and all facts relating and material to computation of assessee s income has been truly and fully disclosed by assessee. Therefore, in present case, it is assessee s burden to show that his explanation as to claim of depreciation of forging rolls is bona fide, and all facts relating and material to assessee s claim of depreciation on forging rolls has been disclosed by it. This explanation of assessee cannot be held to be discharged by any fantastic or fanciful explanation. It is also not law that any and every explanation of assessee is to be accepted for purpose of Expln. 1 to s. 271(1)(c) of Act. In light of this view we have taken, we have now to see as to whether assessee has given bona fide explanation and has unreservedly given all documents and information without withholding any information relating to assessee s claim of depreciation on forging rolls. 1 5 . It is well settled that for purpose of claiming depreciation, assessee has to establish and prove two requisite conditions, namely, (i) that depreciable asset is owned by assessee, and, (ii) that it is used for purpose of assessee s business or profession. In order to establish that assessee is owner of depreciable asset, which is used for purpose of assessee s business, it is presupposed that assessee has to establish and prove existence of asset in question. It is, therefore, necessary to examine and ascertain as to whether forging rolls claimed to have been purchased by assessee were in existence at premises of M/s Prakash Industries Ltd., were actually distinctly identifiable, were purchased and given back on lease by assessee and were used for purpose of business of lessee, and as to whether assessee has furnished any bona fide explanation in support of its claim of depreciation on forging rolls. 16. It is assessee s case that assessee had purchased rolls from M/s Prakash Industries vide their invoice No. PIL/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs. 100 lakh and were given back on lease to M/s Prakash Industries. In support of this case of assessee, assessee has relied upon various documents, some of them having important bearing on issue are listed below : Page No. of paper book Invoice dt. 23rd Jan., 1994 of Prakash 1. 26 Industries in favour of assessee. Payment of sale consideration made 27- 2. by assessee to Prakash Industries 28 Confirmatory letter from Prakash 29- 3. Industries dt. 28th April, 1998 30 Letter from M/s Prakash Industries dt. 4. 31 17th Feb., 1994 5. Insurance Policy 32 Non-encumbrance certificate dt. 17th 6. 25 Feb., 1994 given by chartered accountant 7. Valuation by chartered engineer 24 Invoice dt. 31st March, 1993 of TISCO 18- 8. Ltd. favouring Prakash Inds. alongwith 5 Nos. 23 transport receipts of Dharam Roadways Letter from Tata Finance for 9. 33 documentation Lease agreement with M/s Prakash 89- 10. Industries Ltd. 107 Resolutions dt. 24th Jan., 1994 and 28th 118 - 11. Jan., 2004 adopted by Board of Directors. 119 1 7 . It is assessee s case that sale and lease back transaction entered into with M/s Prakash Industries Ltd. was materialized on recommendations given by Tata Finance Ltd., which is well known Tata Organization in field. 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 dt. 31st March, 1993, and forging rolling claimed to have been purchased by assessee from M/s Prakash Industries Ltd. did form part of heavy structural mills equipment with its available accessories purchased by M/s Prakash Industries Ltd. from TISCO. assessee further stated that out of rolling mill rolls purchased by M/s Prakash Industries Ltd. from M/s TISCO, 65 Nos. of forging rolls were purchased by assessee from M/s Prakash Industries for sum of Rs. One crore vide invoice dt. 23rd Jan., 1994, and same were given back to same company on lease vide Lease Agreement dt. 2nd Feb., 1994. 18. On other hand, Department s case is that assessee has not been able to establish that forging rolls alleged to have been purchased by assessee from M/s Prakash Industries Ltd. were existed at business premises of M/s Prakash Industries Ltd., and assessee has not given any conclusive evidence to show that assessee had actually purchased any forging roll. Department s further contention is that assessee has not been able to identify those 65 rolls claimed to have been purchased from M/s Prakash Industries Ltd., at factory premises of M/s Prakash Industries Ltd. In support of Department s case, Department has laid emphasis on following facts : (i) purchase bill of assessee does not identify which forging rolls were purchased by assessee from M/s Prakash Industries Ltd. (ii) assessee s claim that its chartered accountant Shri S.R. Salvekar had actually identified assets on 23rd Jan., 1998 is not correct, in light of fact that daring course of assessment proceedings for asst. yr. 1995- 96 Shri S.R. Salvekar has specifically stated before AO that his employee Mr. Prashant Deshmukh could not identify rolls. (iii) In light of enquiry conducted by Dy. Director of IT (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, question of sale thereof and taken back on lease did not arise (v) In light of various facts and evidences pointed out by AO as well as CIT(A) in their respective orders, they had thus taken view that assessee s claim to have entered into sale and lease back transaction is not genuine one, but is merely financial transaction advancing loan to M/s Prakash Industries Ltd. 19. To ascertain as to whether 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. 31st March, 1993 had actually included very forging rolls claimed to have been purchased by assessee and given them back on lease to M/s Prakash Industries Ltd., we have carefully perused aforesaid invoice dt. 31st March, 1993 of M/s TISCO raised in favour of M/s Prakash Industries Ltd. On perusal of same, it is seen that particulars of items mentioned in said invoice are stated as "heavy structural mill equipments with its available accessories" and price thereof is stated at Rs. 2 crores, whereupon CST at rate of 4 per cent amounting to Rs. 8 lakh was also charged. total value of invoice is Rs. 2,08,00,000. This invoice dt. 31st March, 1993 was raised in respect of order dt. 16th July, 1991. list of heavy structural mills equipment with its available accessories have not been furnished either by assessee or by M/s Prakash Industries Ltd. This invoice does not indicate whether "heavy structural equipment with its available accessories" were included forging rolls. assessee s further case is that heavy structural equipment with its available accessories purchased by M/s Prakash Industries Ltd. from M/s TISCO vide invoice dt. 31st March, 1993 were transported from TISCO s premises situated at Jamshedpur to site of M/s Prakash Industries Ltd. by road vide 5 nos. road transport consignments dt. 28th July, 1992 of Dharam Roadways, which are placed at pp. 19 to 23 of consolidated paper book filed by assessee. It is, thus, 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 assessee has relied on aforesaid transport consignments dt. 28th July, 1992. It is further pertinent to note that from details of delivery challans relating to purchase of heavy structural equipments supplied by M/s TISCO to M/s Prakash Industries Ltd., filed before Addl. Director of IT, 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 month of September, 1992 itself. At same time, assessee has also relied upon confirmatory letter dt. 28th April, 1998 given by M/s Prakash Industries Ltd., which is placed at pp. 29 and 30 of 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. 31st March, 1993 with reference to purchase order dt. 16th July, 1991 and they were transported by M/s TISCO through Dharam Roadways by road. They have further stated in said letter that they had paid cost of this heavy structural rolling mill rolls to M/s TISCO vide postal order No. 729774 dt. 14th July, 1992 for Rs. One crore. Thus, details of payment is given only to extent of Rs. One crore, though 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 assessee and obtained 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 22nd March, 1994 at their factory at Champa, Dist. Bilaspur, Madhya Pradesh. It was also stated therein that these assets were clearly identifiable as assets belonging to present assessee. They further stated that M/s R.D. Garg & Co. chartered accountants had issued no- encumbrance certificate certifying that these assets are (free) from any charge or encumbrance, and 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 another letter dt. 17th Feb., 1994 (p. 31 of paper book) to assessee M/s Praj Industries Ltd. stating therein as under : " 17th Feb., 1994 M/s Praj Industries Ltd., 1216/6, Furgusson College Road, Pune 411004. Dear Sir, With reference to proposal for lease Finance of Rs. 1,00,36,149 we hereby confirm that we have procured concerned assets i.e., Steel Structure Rolling Mill Rolls in month of May, 1993 and these are at our factory site, Village Champa, Distt. Bislapur, (MP). Thanking you, Yours faithfully For Prakash Industries Ltd. Sd (Authorised Signatory)" 20. On perusal of this letter, dt. 17th Feb., 1994, it is seen that M/s Praj Industries Ltd. have confirmed that they had procured concerned assets, i.e., steel structural rolling mills rolls, in month of May, 1993 and they were at their factory site at Village Champa, Dist. Bilaspur, M.P. In this letter, they have also given reference to proposal of 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 steel structural rolling mills rolls, in respect of which 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 month of May, 1993 though, on other hand, in their letter dt. 28th April, 1998 they have stated that heavy structural mill equipment with its available accessories purchased from M/s TISCO vide invoice dt. 31st March, 1993 were transported by TISCO through Dharam Roadways by road, transport consignments of Dharam Roadways filed by assessee are all of dt. 28th July, 1992 meaning thereby that 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 assessee s site vide transport consignments dt. 28th July, 1992 of Dharam Roadways. This gives total conflicting stand as to procuring of steel structural rolling mill rolls by M/s Prakash Industries Ltd. Further, invoice of M/s TISCO raising bill of Rs. 2 crore does not give any details as to how sum of Rs. 2 crore has been quantified with reference to each and every item alleged to have been sold by invoice dt. 31st March, 1993. details of payment made by M/s Prakash Industries Ltd. to M/s TISCO as given in letter of M/s Prakash Industries Ltd. (placed at pp. 29 and 30) is only with regard to Rs. One crore and, that too, by postal order dt. 14th July, 1992. At this stage, it is pertinent to note that at one stage, assessee in its letter dt. 28th March, 1998 given to AO (Dy. CIT, Spl. Range 3, Pune) during assessment proceedings for asst. yr. 1995-96 has stated as "During financial year 1993-94, we had entered into above transaction of sale and lease back. which was received from M/s Tata Finance Ltd. for Rs. 100,00,000. 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 dt. 31st March, 1993 for total amount of Rs. 2 crores, out of which 50 per cent was financed by us by way of sale and lease back transaction." On reading this averment of assessee, it is seen that assessee has also made out case that out of total consideration of Rs. 2 crores on account of purchase of heavy structural steel rolling mills rolls by assessee from M/s TISCO, vide invoice dt. 31st March, 1993 which is related to order dt. 16th July, 1991, 50 per cent thereof was financed by assessee by way of sale and lease back transaction. In this regard, we observe that assessee has claimed to have entered into transaction of sale and lease back only after getting its approval from Board of Directors, vide resolution dt. 24th Jan., 1993 and 28th Jan., 1994 and purchased alleged forging rolls vide invoice dt. 31st March, 1993. It is not understood as to how assessee had come to picture of financing 50 per cent of sale consideration of 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. 31st March, 1993, delivery thereof was also already obtained vide transport bill dt. 28th July, 1992. From various documents produced by assessee, assessee had come into picture for purpose of entering into sale and lease back transaction only after 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 assessee that 50 per cent of Rs. 2 crores being 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 assessee by way of sale and lease back transaction. alleged sale and lease back transaction has been claimed to be entered into on 2nd Feb., 1994 only and question of financing towards 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. 31st March, 1993 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 assessee has not come forward with clean hands to claim depreciation on alleged forging rolls. Therefore, it is not clear as to whether heavy structural mill equipment with its available accessories had actually included heavy structural rolling mills rolls alleged to have been sold by M/s Prakash Industries Ltd. to present assessee, and whether, they were actually available at factory premises of M/s Prakash Industries Ltd. M/s Prakash Industries Ltd. has given conflicting and contradictory statement as to date of acquisition of these equipments by it. Therefore, in light of facts discussed above, we are of considered view that 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 unbelievable one. 21. Further, it is pertinent to note that in its letter dt. 17th Feb., 1994 (p. 31 of paper book), M/s Prakash Industries Ltd. had referred to assessee s proposal for lease finance of Rs. 1,00,36,149, though, on other hand, it is assessee s claim that M/s Prakash Industries Ltd. vide its invoice dt. 23rd Jan., 1994 has sold heavy structural rolling mills rolls amounting to Rs. One crore only. lease agreement is of dt. 2 day of February, 1994. invoice, which is, relied on by assessee, is raised by M/s Prakash Industries Ltd. for sale of alleged heavy structural rolling mill rolls for sum of Rs. One crore on 23rd Jan., 1994. letter dt. 17th Feb., 1994 of M/s Prakash Industries Ltd. confirming that steel structural rolling mill rolls were procured by them in month of May, 1993 and they were at their factory site was given with reference to proposal for lease finance of Rs. 1,00,36,149. It is not made understood and clarified as to why reference to proposal of lease finance of Rs. 1,00,36,149 is made in said letter dt. 17th Feb., 1994, when assessee s case is that they had purchased this item for sum of Rs. One crore only vide invoice dt. 23rd Jan., 1994. No explanation as to discrepancy of amount of Rs. One crore vis- a-vis Rs. 1,00,36,149 has been given. It is further case of assessee that M/s R.D. Garg & Associates, chartered accountant has given certificate dt. 17th Feb., 1994 that heavy structural rolling mill rolls purchased by assessee from M/s Prakash Industries Ltd. were free from any encumbrances having no charge of bank or any financial institution. This certificate dt. 17th Feb., 1994 placed at p. 25 of paper book reads as under : " To Whom It May Concern : We hereby certify that "heavy structural rolling mill rolls detailed in invoice No. PIL/SID/P&M/1993-94 dt. 24th Aug., 1993 of M/s Prakash Industries Ltd. for Rs. 1,00,36,149 favouring M/s Praj Industries Ltd. 1216/6, Furgusson College Road, Post Box No. 831, Pune 411004 have no charge of bank and or any financial institution. For R.D. Garg & Associates Chartered Accountants Sd/- Proprietor Place : Delhi Dt. : 17th Feb., 1994." On perusal of aforesaid certificate, it is seen that M/s R.D. Garg & Associates, chartered accountant has given certificate to effect that heavy structural rolling mill rolls detailed in invoice No. PIL/SID/P&M/1993-94 dt. 24th Aug., 1993 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. chartered accountant has given this certificate with reference to invoice dt. 24th Aug., 1993 for Rs. 1,00,36,149 of M/s Prakash Industries Ltd. favouring present assessee. It is not assessee s case that they purchased any rolls from M/s Prakash Industries Ltd. vide invoice dt. 24th Aug., 1993 for Rs. 1,00,36,149 and had entered into sale and lease back transaction in respect of assets purchased vide invoice dt. 24th Aug., 1993. assessee s case is only with reference to invoice dt. 23rd Jan., 1994 for Rs. One crore only and not with reference to invoice dt. 24th Aug., 1993 for Rs. 1,00,36,149. No explanation or clarification either from assessee or M/s Prakash Industries Ltd. has been advanced as to how and why references were being made to two invoices of two different dates for two different amounts. It is pertinent to note that this certificate given by chartered accountant is of dt. 17th Feb., 1994, which is subsequent to date of alleged invoice dt. 23rd Jan., 1994 and date of lease agreement, which is of 2nd Day of February 1994, but still chartered accountant s certificate does not give any reference to invoice dt. 23rd Jan., 1994 for Rs. One crore claimed to have been raised by M/s Prakash Industries Ltd. in favour of Praj Industries Ltd. This makes assessee s case very doubtful and unbelievable. This cast very serious doubt as to genuineness of 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 assessee do not support assessee s theory of actually having purchased heavy structural rolling mill rolls worth of Rs. One crore from M/s Prakash Industries Ltd. 22. assessee s claim that heavy structural rolling mill rolls claimed to have been purchased by assessee from M/s Prakash Industries Ltd. did form part of plant and machineries of M/s Prakash Industries Ltd., who in turn had purchased same from M/s TISCO vide invoice dt. 31st March, 1993 may be examined from one more angle. It is 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 concerned assets leased back by assessee to M/s Prakash Industries Ltd., vide chartered accountant s certificate dt. 30th Jan., 1998, which is placed at p. 64 of paper book. said certificate has been carefully perused by us. it is stated therein that physical verification of concerned assets leased out by assessee to M/s Prakash Industries Ltd. was conducted by chartered accountant s representative, namely, Shri Prashant Deshpande and assessee s representative Mr. Sanjay Kulkarni jointly on 23rd Jan., 1998 at 5.30 PM. It was further stated therein that these assets were located at Champa, Dist Bilaspur (MP) and were physically inspected by them and were found to be in working condition and separately identifiable. This certificate was given by assessee s chartered accountant Mr. S.R. Salvekar. From this certificate, it is clear that physical verification was not claimed to be conducted by Mr. Salvekar himself, but by his representative Shri Prashant Deshpande. During course of assessment proceedings for asst. yr. 1995-96, when this lease transaction entered into between assessee and M/s Prakash Industries Ltd. was first examined and investigated by AO, Shri S.R. Salvekar, chartered accountant had categorically stated that his employee Shri Prashant Deshpande could not identify assets. In statement made before AO, assessees chartered accountant Shri S.R. Salvekar had confirmed that it was not possible to identify very rolls assessee had purchased and which were actually utilized for purpose of business in mill of M/s Prakash Industries Ltd. From this, it is thus clear that certificate given by chartered accountant Shri Salvekar was not true and correct one as chartered accountant himself had admitted before AO in course of statement that his employee could not identify very rolls assessee had purchased and given them back on lease to M/s Prakash Industries Ltd. Therefore, assessee s case that assets alleged to have been given back on lease were actually identified and were thus used in 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 assets were not distinctly identified, it does not make any sense in assessee s contention that since assets were duly insured with insurance company with assessee s claim therein, assessee s claim should be accepted as true. We further observe that in alleged lease agreement dt. 2nd Feb., 1994, one of conditions specified therein is that lessee shall affix name plate or other mark on equipment identifying sole and exclusive ownership thereof of lessor and not allow or permit same to be removed or defaced. But, on enquiry and investigation, and in light of discussion made above, it becomes clear that no such name plate or other mark on alleged 65 Nos. of forging rolls identifying sole and exclusive ownership thereof of assessee has been established. Further, in said lease agreement, description of equipment is given as "Steel Roller", which makes it clear that no detail as to numbers and identifications of steel roller alleged to be given on lease by assessee to M/s Prakash Industries Ltd. are described in lease agreement. From this point of view also, existence of alleged forging rolls and sale and lease back thereof by assessee is not found to be established. 2 3 . In course of hearing of this appeal, learned Authorised Representative for assessee has submitted that it is because of non co- operation and non-helping attitude of chartered accountant Mr. Salvekar towards assessee, chartered accountant stated before AO that assets could not be identified by his employee. It was further submitted by Authorised Representative of assessee that because of chartered accountant s such indifferent attitude, assessee had discontinued to avail services of this chartered accountant. It is, thus, clear that Shri Salvekar has not been engaged any more by assessee because of his giving statement before AO, which statement went against assessee s interest. In this respect, we are of view that merely because assessee has discontinued to avail services any more of said chartered accountant, that would not by itself be sufficient to prove that whatever stated by chartered accountant before A.O was false and not correct one. assessee has not produced any iota of evidence to say that whatever stated by chartered accountant in his statement before AO as to fact of identification of 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 assessee that statement of chartered accountant stating that assets could not be identified had remained unchallenged because of availing KVSS benefit in asst. yr. 1995-96 and because assessee went in for relief under s. 264 in asst. yr. 1994-95. But well settled position of law is that assessment proceedings and penalty proceedings are independent and separate one, and thus, assessee could have at least produced in penalty proceedings some evidences or materials to rebut aforesaid statement of its chartered accountant made before AO. 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 certificate dt. 30th Jan., 1998 given by chartered accountant is found to be false in light of chartered accountant s own statement made before AO to effect that concerned assets were not identified by his employee. Therefore, question whether rolling mills rolls were actually purchased by assessee and were given back on lease to M/s Prakash Industries Ltd. and were, thus, used for purpose of business in factory premises of M/s Prakash Industries Ltd. is found to be unbelievable and implausible one. 24. Furthermore, no evidences or materials or particulars whatsoever have been brought on record by assessee to prove and establish that very 65 Nos. of forging rolls were identified and earmarked and were physically verified by assessee before purchasing same vide alleged invoice dt. 23rd Jan., 1994 of M/s Prakash Industries Ltd. Though no actual physical delivery of rolls could be possible as viewed by assessee, it is always desirable and necessary to identify very assets intended to be purchased before constructive delivery thereof was taken. In order to take constructive delivery of any property, it is desirable that property must first be identified and Its existence should be ascertained by purchaser. In this regard, assessee has relied upon valuation certificate dt. 4th Jan., 1994 of chartered engineer and non-encumbrance certificate dt. 17th Feb., 1994 of chartered accountant. We have already observed above that non-encumbrance certificate given by chartered accountant is not with reference to invoice dt. 23rd Jan., 1994, but with reference to invoice dt. 24th Aug., 1993. valuation certificate is with regard to i overall rate of rolls and not with regard to very 65 rolls alleged to have been purchased by assessee. Thus, assessee s case from this angle is also not found to be genuine, and it appears to be not case of usual transaction that one prudent businessman would normally have entered into. 25. One of assessee s contentions in support of its case is that transactions of purchase and lease back entered into with M/s Prakash Industries Ltd. were made under guidance and advise of M/s Tata Finance Ltd., well known company. This factor alone without supported by any independent sufficient and adequate documents or materials, is in itself not sufficient to say that merely because transactions were entered into after same was referred to by Tata Finance Ltd., is transaction of sale and lease back transaction and not of mere financial transactions. M/s Tata Finance Ltd. has not given any certificate or confirmatory letter nor any physical verification has not given any certificate or confirmatory letter nor any physical verification was made by M/s Tata Finance Ltd. that rolling mill rolls were actually in existence at factory premises of M/s Prakash Industries Ltd. and were distinctly identifiable. Merely because finance given by assessee to M/s Prakash Industries Ltd. were liaisoned by Tata Finance is by itself not sufficient to say that transaction in question was of sale and leaseback transaction. This contention of assessee, therefore, does not support assessee s case in any manner, inasmuch as, in present case, it is otherwise found that transaction entered into by assessee has not been proved and established to be genuine transaction of sale and lease back transaction, in light of various documents, papers and evidences referred to by AO as well as by CIT(A) in their respective orders and as has been appreciated herein by us. 26. We may further note that in written submission of assessee filed before CIT(A), assessee has stated that "M/s Prakash Industries, through Tata Finance approached assessee for sale and lease back finance for these rolls. value for 65 rolls was stated to be Rs. 100 lacs by Prakash Industries. As prudent commercial man, assessee got these valued by independent chartered engineer (Annex. 2 ). assessee also obtained certificate from chartered accountant that rolls were without any encumbrance (Annex. 3 ) and only then proceeded in matter. Having satisfied about value and title, assessee purchased rolls from Prakash Industries vide their invoice No. ITL/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs. 100 lads, (Annex. 4 )." On perusal of same, it is thus clear that it is assessee s case that having satisfied about value and title, assessee purchased rolls from M/s Prakash Industries Ltd. vide their invoice No. PIL/SID/P&M/1993-94 dt. 23rd Jan., 1994 for Rs. 100 lacs. date of purchase is claimed as 23rd Jan., 1994. As already observed above, non- encumbrance certificate of chartered accountant is of dt. 17th Feb., 1994, which is subsequent to 23rd Jan., 1994, date of purchase. Therefore, question of being satisfied about title on date of purchase, i.e., 23rd Jan., 1994, on basis of encumbrance certificate dt. 17th Feb., 1994 of chartered accountant, on which assessee has put heavy reliance could not arise at all. 27. assessee has also made reference to two resolutions dt. 24th Jan., 1993 and 28th Jan., 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. resolution dt. 24th Jan., 1993 is with regard to accord consent to commencement of business by company, which reads "Resolved that, consent of Board of Directors be and is hereby accorded to commencement of business by company as given in sub-cl. (19) of cl. III(e). of 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 issuing of policies of assurance on human life) which may seem to be capable of being conveniently carried on in connection with any of theses objects or calculated directly or indirectly, to enhance value of, or facilitate realisation of, or render profitable, any of company s properly or rights, and also as given in sub-cl. (25) of cl. III(c) of Memorandum of Association; namely to carry on and undertake business of leasing and to finance lease operations of all kinds." second resolution dt. 28th Jan., 1994 reads as under : "The Chairman placed before Board proposal of sale and lease b c k received from Tata Finance Ltd. for Rs. 10,000,000. proposal envisgaes purchasing of steel rolling mill s rolls from Prakash Industries Ltd., New Delhi (a 100 per cent depreciable asset under IT Act, 1961) and same will be in turn leased out to Prakash Industries Ltd. balance sheet of aforesaid company was placed before Board together with proposal papers received from Tata Finance Ltd. After thorough discussion Board felt that though idea of investing in 100 per cent depreciable assets is welcome, balance sheet of Prakash Industries Ltd. does not enthuse confidence for such heavy investment. "GEARING" is already high. Therefore company should obtain additional security like personal guarantee of Managing Director/whole time Director of aforesaid company. Also company should obtain credit references from financiers who have financed Prakash Industries Ltd. After obtaining satisfactory credit reference, personal guarantee etc., company may go ahead with proposal. Mr. Pramod Chaudhari, Chairman and Managing Director was authorised to finalise 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 acceptance of proposal of sale and lease back received from M/s Tata Finance Ltd. for Rs. One crore, which proposal envisages 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 28th Jan., 1994, land before consent was accorded to commence business vide resolution dt. 24th Jan., 1993, assessee had already purchased rolls in question from M/s Prakash Industries Ltd., vide their invoice No. PIL/SID/P&M/1993-94 dt. 23rd Jan., 1994 (which is described as delivery challan cum invoice) as would be seen from case made out by assessee itself. This seems to be totally improbable and impractical. All these papers and documents relied upon by assessee do not, therefore, support assessees case of alleged sale and lease back of rolls to be genuine one. In backdrop of these facts, very transaction claimed to be transaction of sale and lease back appears to be merely paper work and nothing more. 28. We may further clarify that merely because assessee s claim of depreciation was originally allowed in assessment made under s. 143(3) on 24th Sept., 1997 for asst. yr. 1994-95, it does not make assessee s claim as bona fide as because all materials and evidences relating to 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 case of assessee was accepted in original assessment for relevant assessment year, it does not preclude AO to reopen assessment of that year on basis of his findings of fact made on basis of fresh materials in course of assessment of next assessment year. In present case before us, assessee s claim of depreciation on forging rolls were not found to be correct on basis of fresh materials brought on record in course of assessment of asst. yr. 1995-96, and thus, acceptance of assessee s claim in original asst. yr. 1995-96, and thus, acceptance of assessee s claim in original assessment of asst. yr. 1994-95, without considering facts and materials which were unearthed and revealed later during assessment proceedings for asst. yr. 1995-96 is not sufficient in itself to treat assessee s claim as bona fide and genuine one. We further observe that where transaction itself, on basis of subsequent information, is found to be bogus transaction, mere disclosure of that transaction at time of original assessment proceedings cannot be said to be disclosure of full facts in case. present case is not case of change of opinions. It is not case where assessee s claim was originally allowed in asst. yr. 1994-95 by AO after considering and examining all those same facts and materials that were relied on and discussed in asst. yr. 1995-96 and in reassessment for asst. yr. 1994-95. Mere because false claim of assessee is accepted in original assessment, that merely would not preclude AO to decide facts suggesting assessee s case to be false and unbelievable one. 29. If we look at whole sequence of events discussed and appreciated above by us, it becomes quite clear as to how things were managed by assessee in present case to give financial transaction colour of sale and lease back transaction with view to claim depreciation on forging rolls. In our considered view, and after considering totality of discussion made above, assessee s claim of depreciation on basis of sale and lease back transaction does not ring true and could not have been accepted by any reasonable person. whole arranged story of assessee has been unearthed by Department, and assessee s claim of depreciation was thus disallowed, finding same to be not correct and genuine one. 30. We, therefore, hold that explanation offered by 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, assessee has also not furnished full and true particulars relating to claim of depreciation on forging rolls. It is, thus, clear that assessee has not been able to discharge burden that lay upon it under Expln. 1 to s. 271(1)(c) of Act. We therefore, uphold order of CIT(A) confirming penalty levied under s. 271(1)(c) by AO. 31. In result, appeal filed by assessee is dismissed. *** PRAJ INDUSTRIES LTD. v. JOINT COMMISSIONER OF INCOME TAX