- (1.) THE appeal has been admitted in terras of the following questions : '1. Whether the existence of 'reason to believe' which is sine quo non for validity of initiating reassessment proceedings under Section 147/148 of the Act, can be solely established by the testimony of a hostile witness examined at the back of the assessee which is contrary to the evidence on record ? 2. Whether the finding that the appellant had no materials to lease is so contradictory to the accepted position that the appellant was actually assessed on rental income for 5 years derived from the leasing of the very material, that it stands vitiated by itself ? 3. Whether the uncorroborated testimony of a person who persistently fails to substantiate his testimony and fails to get himself cross -examined or even adduce any independent evidence to rebut the statement of the party affected by such a statement, deserves to be rejected outright and cannot be used as evidence against the party affected by such an uncorroborated testimony ? 4. Whether the statement of Shri Manish Mehrotra, the alleged proprietor of M/s Longman Industrial Enterprises was admissible in evidence ? 5. Whether the Tribunal did not err in law in confirming the reassessment withdrawing the depreciation allowance of Rs. 51,75,000 allowed by the CIT(A) against the original assessment order passed by the AO under Section 143(3) of the IT Act, 1961 ?'
(2.) THE relevant assessment year is 1992 -93. The return for the assessment year has been filed on 31st Dec., 1992. The assessment under Section 143(3) was completed on 14th March, 1995. Subsequently, it is noticed that a search operation was conducted on 10th Feb., 1995 at the residential and business premises of Shri Manish Mehrotra proprietor of M/s Longman Industrial Traders, New Delhi. At the time of search, the statements of Shri Manish Mehrotra were recorded and in his statements he admitted that he never manufactured the shuttering material, nor he has sold any shuttering material to M/s Raunaq Finance Ltd. through M/s Unitech Ltd. He further stated in his statements at the time of search that he received the cheques worth Rs. 51,75,000 from M/s Raunaq Finance Ltd., but after depositing those cheques in bank account, the same was withdrawn on the same date or the next date and the cash was returned to M/s Raunaq Finance Ltd. after deducting the commission for giving the hawala entry. Thus, the shuttering transaction with M/s Raunaq Finance Ltd. was only on paper. M/s Raunaq Finance Ltd., assessee, has claimed depreciation at 100 per cent on this shuttering material in this assessment year and that has been allowed. The ITO was of the view that income assessed in the case of this assessee has escaped in this year, therefore, he issued the show -cause notice to the assessee as to why the income escaped by allowing 100 per cent depreciation on shuttering material should not be disallowed. The notice was issued after considering the statements of Shri Manish Mehrotra and managing director of Finance Corporation and also a letter from M/s Unitech Ltd., and also the material brought on record. The depreciation of Rs. 51,75,000 which was allowed in the earlier assessment order dt. 14th March, 1995, has been withdrawn and addition to that effect has been made in the assessment under Section 143(3)/148 of the IT Act.
(3.) IN appeal before the CIT(A), the CIT(A) has affirmed the view taken by the AO regarding reopening of the assessment as well as the addition of Rs. 51,75,000 which was allowed earlier in the regular assessment under Section 143(3) of the IT Act.;