Per J.P. Bengra, Vice President - This is an appeal by the assessee against the order of the CIT(A), Central-VI, Mumbai, pertaining to Block Assessment for the period from 1-4-1987 to 26-9-1997. The assessee has raised the following grounds in this appeal :

"1.The learned CIT(A) erred in holding that provisions of section 158BC of the Income-tax Act, 1961 are applicable in the case of the appellant-company.

2.The learned CIT(A) further erred in confirming the action of the Assessing Officer in computing undisclosed income of the appellant-company for the block period at Rs. 11,89,89,975 as against declared by the appellant-company for the block period at Rs. Nil.

3.(i) The learned CIT(A) further erred in confirming the action of the Assessing Officer in computing undisclosed income on account of alleged payment to M/s. National Plastics Industries Ltd. of Rs. 25 lakhs under section 69C of the Income-tax Act, 1961.

(ii) Without prejudice to the above, the learned CIT(A) further erred in holding that addition of alleged payment of Rs. 25 lakhs in cash to M/s. National Plastics Industries Ltd. for procuring large order should be made under section 69C of the Income-tax Act and no deduction of the said amount which is paid on account of interest against excess advance and cash discount should be allowed under section 37(1) of the Income-tax Act.

4.(i) The learned CIT(A) further erred in confirming the action of the Assessing Officer in computing undisclosed income on account of lease transactions with Punjab State Electricity Board (PSEB) and Rajasthan State Electricity Board (RSEB) at Rs. 11,64,89,975.

(ii) The learned CIT(A) further erred in holding that the lease transactions with Punjab State Electricity Board (PSEB) and Rajasthan State Electricity Board (RSEB) were of the nature of loan transactions with the assets purchased and leased back are mere security and the appellant was never the real owner of the assets.

(iii) The learned CIT(A) further erred in heavily relying on the Power of Attorney issued in favour of PSEB and RSEB which authorises them to sell the leased assets to any intending purchaser at a price not less than fixed in the power of attorney on the expiry of the lease period.

(iv) The learned CIT(A) further erred in concluding that the appellant-company does not enjoy any right of ownership on the leased assets as per the lease agreement.

(v) The learned CIT(A) further erred in concluding that the appellant-company did not enjoy any claim on the possession of the leased assets.

(vi) The learned CIT(A) further erred in heavily relying on the circular No. 9 (R. Dis. No. 27(4)-I.T./43) dated 23-3-1943 issued by the CBDT which deal with the issue of depreciation on assets acquired under hire-purchase agreement.

(vii) The learned CIT(A) further erred in concluding that the appellant-company did not assume any risk of ownership of the equipment purchased by them from PSEB/RSEB.

(viii) The CIT(A) further erred in confirming the finding of the Assessing Officer that all ‘such sale and lease back’ transactions where the alleged owner does not assume any risk of ownership of the assets nor entitles himself to any reward of such ownership ensures his right to recoup his investment wholly or substantially over the period of lease, the asset is purchased from the lessee only to be given back to him on lease for a whole of the useful life of the asset, and the asset is finally transferred back to the lessee, at the end of the lease period, are categorised as ‘finance lease’ transactions as distinguished from ‘operating leases’ where the lessor takes all the risk of ownership of the lease asset and entitles himself to all the rewards of ownership and over the useful life of the asset gives it on lease to more than one lessee.

(ix) The learned CIT(A) further erred in holding that lease transactions with PSEB/RSEB can at best be said to be an hire purchase agreement with the lessee ultimately acquiring the equipment at the end of the